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Cognizant Adds Diversity to Board, But Problems Linger
Posted by: GMI Ratings (IP Logged)
Date: September 20, 2012 10:08AM


Cognizant Technology Solutions Corp. (CTSH) has taken the positive step of adding to the diversity of its management, but the New Jersey outsourcing firm still has more room for improvement on its corporate governance.

The company said September 18 that it elected Leo S. Mackay Jr. to its board, which now has ten people. Cognizant had recently increased its board's size to nine members from eight on July 9, when it appointed Michael Patsalos-Fox as an additional director.

In a world where boards typically consist of white men, Cognizant stands out and will benefit from Mr. Mackay’s perspective as an African American. Mr. Mackay, who has served as the deputy secretary and COO of the U.S. Department of Veterans Affairs, as well as in general management positions at Lockheed Martin, ACS State Healthcare, and Bell Helicopter, can help Cognizant better anticipate the needs of staffers and clients who come from various backgrounds.

That said, both of Cognizant’s new directors have time consuming jobs, making it tougher for them to devote the amount of attention necessary to fulfill their duties. Mr. Mackay will serve on Cognizant’s audit committee, and he oversees the ethics and corporate sustainability programs at the defense firm Lockheed Martin Corp. as a vice president and elected corporate officer there. Meanwhile Mr. Patsalos-Fox is a senior partner at the management consulting firm McKinsey & Co.

These changes could mitigate some of Cognizant’s corporate governance problems, but more linger. The members Thomas M. Wendel, Robert W. Howe, Robert E. Weissman, and John E. Klein have all been directors for at least ten years, and while experience has its merits, long familiarity interferes with the objectivity required for adequate supervision. Moreover, Wendel chairs the audit committee, Weissman the nominating and corporate governance committee, and Klein the compensation committee in addition to his role as board chairman.

The company's policies also continue to interfere with shareholders' rights to input. Its directors get three-year terms; while Cognizant says this provides “enhanced independence from management or from special interest groups who may have an agenda contrary to the long-term interests of all stockholders,” it also prevents investors from having a say each year.

In part due to such red flags, Cognizant’s financial data gives it an AGR ® score of 33, indicating higher accounting and governance risk than 67% of comparable companies.



Region: North America

Country: United States

Sector: Technology

Industry: IT Services / Consulting

Market Cap: $ 20,063.6 mm (Large Cap)

ESG Rating: B

AGR Rating: Aggressive (33)




Stocks Discussed: CTSH,
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