Cognizant Technology Solutions: How I Voted – Proxy Score 57

Better late than never. Cognizant Technology Solutions (CTSH) ($CTSH) is one of the stocks in my portfolio. Their annual meeting is coming up on 6/5/2012. Voting already ended on Moxy Vote’s proxy voting platform, which had 5 recommendations “from good causes,” including 2 consolidations, when I checked and voted on 6/24. had 6 funds voting.  I voted with management 57% of the time.

I generally vote against pay packages where NEOs were paid above median in the previous year but make exceptions where something obviously warrants different treatment. According to Bebchuk, Lucian A. and Grinstein, Yaniv (The Growth of Executive Pay, Oxford Review of Economic Policy, Vol. 21, Issue 2, pp. 283-303, 2005), aggregate compensation by public companies to NEO increased from 5 percent in 1993-1995 to about 10 percent in 2001-2003.

Few firms want to admit to having average executives. They survey executive compensation at corporations and then set compensation packages that are above average for their “peer group,” which is often chosen aspirationally. While the “Lake Woebegone effect” may be nice in fictional towns, “where all the children are above average,” it doesn’t work well for society to have all CEOs considered above average and their collective pay spiraling out of control. We need to slow the pace of money going to the 1% if our economy is not to become third-world.

CTSH’s SummaryCompensation Table shows Francisco D’Souza, CEO/Chair, was the highest paid named executive officer (NEO) at about $11.8M in 2011. I’m using Yahoo! Finance to determine market cap and  Wikipedia’s rule of thumb regarding classification. According to those sources, at about $17B WMT is a large-cap company. According to the United States Proxy Exchange (USPX) guidelines (pages 9&10), using data from Equilar, the median CEO compensation at mid-cap corporations was $10.8 million in 2010, so CTSH’s pay is well above that median.

On that basis, I voted against the pay plan and compensation committee members:  Fox, Howe, Klein and Weissman. Unfortunately, with a classified board, I was denied that opportunity but withheld my vote from the only director running, Fox.

With regard to the shareowner proposals, I voted in favor of the proposal to declassify the board. The Harvard Law School Shareholder Rights Project represented and advised the Los Angeles County Employees Retirement Association in connection with this resolution.  According to, only about 20% of the S&P 500 have classified boards. I also voted in favor of management’s proposal to amend and restate our Amended and Restated By-laws, as amended, to provide holders of 25% of the Company’s outstanding shares to call a special meeting, although I’d like to see that lowered to 10%.

In all other matters, I voted as recommended by management.

Mark your calendars; here’s the deadline for proposals by shareowners for next year:

Stockholders who intend to have a proposal considered for inclusion in our proxy materials for presentation at our 2013 Annual Meeting of Stockholders pursuant to Rule 14a-8 under the Exchange Act must submit the proposal to our Secretary at our offices at Glenpointe Centre West, 500 Frank W. Burr Blvd., Teaneck, New Jersey 07666, in writing not later than December 20, 2012.

 Looking at the Netflix at, here are some areas where governance could be improved:

  • As mentioned above only 20% of S&P 500 and less than half of mid-caps have classified boards.
  • No action can be taken without a meeting by written consent.
  • Supermajority vote requirement (66.67%) to amend certain charter and all bylaw provisions.

Here’s how I actually voted.

Proxy Items

1Elect Director Francisco D’Souza yes
2Elect Director John N. Fox, Jr. no
3Elect Director Thomas M. Wendel yes
4Advisory Vote to Ratify Named Executive Officers’ Compensation no
5Provide Right to Call Special Meeting yes
6Ratify Auditors yes
7Declassify the Board of Directors yes

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