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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the
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Cognizant Technology Solutions Corporation

(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

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Table of Contents











2018
Proxy Statement
& Notice of Annual Meeting







Table of Contents

NOTICE OF 2018 ANNUAL MEETING
 
01 PROXY STATEMENT SUMMARY
 
10 CORPORATE GOVERNANCE
10  Proposal 1  – Election of Directors*
14 Board Composition
16 Board Leadership Structure
17 Board Role in Risk Oversight
18 Committees of the Board
19 Director Attendance
20 Director Compensation
23 Other Board and Corporate Governance Information
 
24 STOCK OWNERSHIP
24 Common Stock and Total Stock-Based Holdings Table
25 Section 16(a) Beneficial Ownership Reporting Compliance
          
26 COMPENSATION
26  Proposal 2  – Advisory Vote on Executive Compensation (Say-on-Pay)*
27 Compensation Discussion and Analysis
27      Overview of Executive Compensation Program
28 Role of Stockholder Say-on-Pay Votes
28 The Compensation-Setting Process
29 Direct Compensation of Named Executive Officers
34 Other Elements of Compensation
36 Compensation Committee
37 Executive Compensation Tables and Pay Ratio
42 Potential Payments Upon Termination or Change in Control
 
44 AUDIT MATTERS
44  Proposal 3  – Ratification of Appointment of Independent Registered Public Accounting Firm
45 Audit Committee Report
46 Independent Registered Public Accounting Firm Fees and Other Matters
          
47 ADDITIONAL PROPOSALS
47 Company Proposals
47  Proposal 4  – Approval of Amendment and Restatement of 2004 Employee Stock Purchase Plan*
52  Proposals 5(a), (b) and (c)  – Approval of Three Separate Proposals to Eliminate the Supermajority Voting Requirements in the Company's Certificate of Incorporation*
56 Stockholder Proposals
56  Proposal 6  – Stockholder Proposal Regarding Stockholder Action by Written Consent*
58  Proposal 7  – Stockholder Proposal to Lower the Ownership Threshold for Stockholders to Call a Special Meeting*
60 Stockholder Proposals and Nominees for the 2019 Annual Meeting
 
61 ADDITIONAL INFORMATION
61 Proxy Statement and Proxy Solicitation
62 Annual Meeting Q&A
65 Cognizant’s Annual Report on Form 10-K
65 Non-GAAP Financial Measures and Forward-Looking Statements
 
68 APPENDIX A – Cognizant Technology Solutions Corporation 2004 Employee Stock Purchase Plan
 
74 HELPFUL RESOURCES

* To be voted on at the meeting

Cognizant Technology Solutions Corporation


Table of Contents

To Our Stockholders:

We cordially invite you to attend our 2018 Annual Meeting of Stockholders, which will be held at the Teaneck Marriott at Glenpointe, 100 Frank W. Burr Blvd., Teaneck, New Jersey 07666, on Tuesday, June 5, 2018, at 8:30 a.m. Eastern Time.

The digital marketplace is evolving quickly, with both exponential technical progress and an ever increasing rate of change. This context underscores why it is so important for Cognizant to have a diverse, fully engaged, and forward-looking board whose members bring deep knowledge of the many disciplines that are central to the company’s long-term growth. We have made a point of significantly refreshing our board, adding five independent directors over the last three years. These individuals are providing expertise in key enabling digital technologies, healthcare, corporate governance, and other areas.

Our newest director, Joseph M. Velli, joined the board last December. Mr. Velli served previously as Senior Executive Vice President and a member of the Senior Policy Committee of The Bank of New York (now BNY Mellon). His significant experience in creating, building and leading large-scale, technology and software platform businesses in the financial services industry is highly relevant to the company’s continuing expansion of digital services and solutions for banking and other clients.

We extend our deep gratitude to Robert E. Weissman, who retired from the board last December after 16 years of service to the company, its employees and stockholders. Instrumental in Cognizant’s formation, Mr. Weissman not only made our board stronger, he also helped to lead the company at every stage of its evolution through its current position of market leadership.

Cognizant operates with a commitment to align pay with performance to motivate and reward achievement of sustained strong financial and operational results. To that end, Cognizant’s executive officer total direct compensation packages, which consist of base salary, an annual cash incentive, and stock-based awards, reflect our strategic plan to drive higher levels of profitability while maintaining continued revenue growth. Accordingly, in 2017 the Compensation Committee shifted the weighting of non-GAAP EPS1 as a performance measure to 50% for performance stock unit awards, with revenue accounting for the other 50%. (In 2016 the weighting was 25% non-GAAP EPS/75% revenue.)

Cognizant seeks to be a responsible and engaged corporate citizen, including in the communities in which it operates. We believe that the digital marketplace should create opportunities for all. Recognizing how often technological progress leaves some people behind, Cognizant has long believed that it has an obligation to enable a broader range of people to have the science, technology, engineering, and math (STEM) education and skills they need to thrive in today’s digital era. To augment its global STEM education efforts, which go back more than a decade, in February 2018 the company announced its intent to form Cognizant U.S. Foundation. This 501(c)(3) non-profit organization, to be established with an initial grant of $100 million, will support STEM and digital education and skills training for U.S. workers and students. This initiative is but one example of the company’s resolve to perform with purpose.

We encourage you to read the enclosed Notice of 2018 Annual Meeting and Proxy Statement, which include instructions on how to vote your shares by proxy and/or attend the meeting and vote in person.

We thank you for your continued support.

Sincerely,

             
John E. Klein

Francisco D’Souza

Chairman of the
Board of Directors

Chief Executive Officer


1 See “Non-GAAP Financial Measures and Forward-Looking Statements” on page 65 of the Proxy Statement.

2018 Proxy Statement


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To Our Stockholders:

You are invited to attend the 2018 Annual Meeting of Stockholders (the “Annual Meeting”) of Cognizant Technology Solutions Corporation (“Cognizant” or the “Company”). This notice includes important information about the meeting.

Agenda

Elect Zein Abdalla, Betsy S. Akins, Maureen Breakiron-Evans, Jonathan Chadwick, John M. Dineen, Francisco D’Souza, John N. Fox, Jr., John E. Klein, Leo S. Mackay, Jr., Michael Patsalos-Fox and Joseph M. Velli as Directors to serve until the 2019 Annual Meeting of Stockholders.     

The Board recommends a vote FOR each Director nominee.

 See page 10.

Approve, on an advisory (non-binding) basis, the compensation of the Company’s named executive officers.

The Board recommends a vote FOR this proposal.

 See page 26.

Ratify the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2018.

The Board recommends a vote FOR this proposal.

 See page 44.

Approve an amendment and restatement of the Company’s 2004 Employee Stock Purchase Plan.

The Board recommends a vote FOR this proposal.

 See page 47.

Approve three separate proposals to eliminate the supermajority voting requirements in the Company’s Certificate of Incorporation with respect to:

The Board recommends a vote FOR each of these proposals.

 See page 52.

(a)   Amending the Company’s By-laws;
(b) Removing directors; and
(c) Amending certain provisions of the Company’s Certificate of Incorporation.
Consider a stockholder proposal requesting that the Board of Directors take the steps necessary to permit stockholder action by written consent (if properly presented).

The Board recommends a vote AGAINST this proposal.

 See page 56.

Consider a stockholder proposal requesting that the Board of Directors take the steps necessary to lower the ownership threshold for stockholders to call a special meeting (if properly presented).

The Board recommends a vote AGAINST this proposal.

 See page 58.

Stockholders also will transact such other business as may properly come before the Annual Meeting.

Logistics

Date: Tuesday, June 5, 2018
Time: 8:30 a.m. Eastern Time
Place: Teaneck Marriott at Glenpointe
100 Frank W. Burr Blvd.
Teaneck, New Jersey 07666

How To Vote

Your vote is very important. You may vote using any one of the following methods:

Use the Internet
Vote over the Internet at www.proxyvote.com.
 
Call Toll-Free
Vote by telephone by calling
800-690-6903.
 
Mail Your Proxy Card
Vote by signing, dating and returning the proxy card.
 
In Person
Follow the advance registration
instructions under “Who can attend the Annual Meeting” on page 63.

Q&A

Who can vote at the Annual Meeting?
Stockholders as of our record date, April 9, 2018.

How many shares are entitled to vote?
585,898,388 shares of common stock.

May I change my vote? Yes, by delivering a new proxy with a later date, revoking your proxy, or voting in person at the Annual Meeting.

How many votes do I get? One vote on each proposal for each share you held as of April 9, 2018.

Where can I find more information?
See “Additional Information” on page 61.

Our Proxy Statement and 2017 Annual Report are available at www.proxyvote.com.

By Order of the Board of Directors,

Matthew W. Friedrich
Secretary
Teaneck, New Jersey
April 20, 2018

Cognizant Technology Solutions Corporation


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This summary highlights certain information in this proxy statement. Please read the entire proxy statement carefully before voting. We intend to make this proxy statement available to our stockholders on or about April 20, 2018.

CORPORATE GOVERNANCE



Proposal 1

Election of Directors

Elect the 11 Director nominees named below to serve as Directors until the 2019 Annual Meeting.
Our nominees are experienced professionals who have the right mix of skills, qualifications and business acumen to lead the Company.
The Board recommends a vote FOR each Director nominee named below. See page 10 for further information

Director Nominees

Name and Primary Occupation       Director
Since
      Other Public
Company Boards
      Committee
Membership

Zein Abdalla

2015


The TJX Companies

AC

CC

FPC

GC

Former President of PepsiCo

Betsy S. Atkins

2017

 

Schneider Electric AC CC FPC GC

CEO and Founder of Baja Corp.

SL Green Realty

Wynn Resorts

Maureen Breakiron-Evans

2009


Ally Financial

$ AC

CC FPC GC

Former CFO of Towers Perrin

Cubic Corporation

Jonathan Chadwick

2016


F5 Networks

$ AC

CC FPC GC

Former CFO and COO of VMware

ServiceNow
John M. Dineen 2017

Merrimack
Pharmaceuticals

AC CC FPC GC
Former President and CEO of GE Healthcare

Francisco D’Souza

2007

General Electric

AC CC FPC GC

CEO of Cognizant

John N. Fox, Jr.

2007


VASCO Data Security
International
AC CC

FPC

GC

Former Vice Chairman of Deloitte & Touche and
Global Director, Strategic Clients of Deloitte Consulting

John E. Klein

1998
AC CC

FPC

GC

Chairman of Cognizant and President and CEO of Polarex

Leo S. Mackay, Jr.

2012


AC CC

FPC

GC

SVP, Internal Audit, Ethics and Sustainability of
Lockheed Martin Corporation

Michael Patsalos-Fox

2012

 

AC CC FPC GC
Former CEO of Stroz Friedberg and Former Chairman, the
Americas and Senior Partner of McKinsey & Company

Joseph M. Velli

2017 Computershare AC CC FPC GC

Former Senior EVP of The Bank of New York

Paychex
AC Audit Committee FPC Financial Policy Committee                                     Committee Chair
CC Compensation Committee GC Governance Committee                                     Committee Member
$ AC Financial Expert

 
Leadership Global Business Experience Tech/Consulting Services Technology Financial Operational

2018 Proxy Statement   1


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Proxy Statement Summary

Board Snapshot

Director Nominee Experience

Leadership 11 (100%)

Global Business Experience 11 (100%)

Tech/Consulting Services 4 (36%)

Technology 10 (91%)

Financial 11 (100%)

Operational 10 (91%)


Cognizant Policy: Create an experienced Board with expertise in areas relevant to the Company.

Strong Director Engagement

Director Nominee Tenure

Board Refreshment
Average Director nominee attendance at 2017 meetings
Board 100%
Audit Committee 98%
Compensation Committee 100%
Financial Policy Committee 100%
Governance Committee 100%
0-2 Years
3-5 Years
 Median: 5 
6-10 Years
>10 Years
 

Cognizant Policy: Director nominees must be committed to regularly attend and participate in meetings of the Board and its committees.

Cognizant Policy: Have a balanced mix of both deep Company and industry knowledge and fresh perspective.

Cognizant Policy: Annually review each director’s continuation on the Board and seek out new director candidates as needed to ensure that the backgrounds, qualifications and diversity of the Directors as a group provide a significant breadth of experience, knowledge and abilities.

 
Corporate Governance Highlights
 
 
Strategy and Risk 
Board actively reviews the development and execution of Company strategy, financial risks and risks related to security, including with respect to data / cyber security, and executive leadership development and succession planning, including an emergency succession plan for the CEO
Audit Committee oversees overall risk management framework and processes, risks related to accounting and internal controls and various enterprise risks, including supporting the full Board with respect to security risks
Compensation Committee oversees risks related to compensation policies and practices
Financial Policy Committee oversees risks related to operating margins and the execution of the Company’s margin improvement plan, capital structure and allocation
Governance Committee oversees risks related to the Board governance structure and processes and supports the full Board with respect to executive leadership development and succession planning, including an emergency succession plan for the CEO
Board of Directors
Majority of independent directors (10 of 11) 
Separate Chairman and CEO positions since 2003 
Majority voting in director elections 
Directors limited to service on no more than 4 other public company boards (2 in the case of a public company CEO)
Annual review of skills, expertise and characteristics of individual Board members as part of overall analysis of Board composition 
A director who experiences a material change in job responsibilities (other than retirement) is required to offer to resign 
Regular executive sessions of independent directors 
Annual Board and committee self-assessments 
Consideration of Board diversity in director selection
Stockholder Rights and Engagement 
Annual director elections / no classified board
Proxy access
Stockholders right to call special meeting 
Annual vote to ratify selection of independent registered public accounting firm 
No poison pill

2   Cognizant Technology Solutions Corporation


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Proxy Statement Summary

COMPENSATION



Proposal 2

Advisory Vote on Executive Compensation (Say-on-Pay)

Our executive compensation program is designed to incentivize management to achieve the Company’s objectives of revenue growth, profitability, cash flow and total return to stockholders.
The Board unanimously recommends a vote FOR the approval, on an advisory (non-binding) basis, of our executive compensation. See page 26 for further information

Executive Compensation Program Highlights

Key Program Features

What We Do                                                                                                               What We Don’t Do
  Pay for performance, with high percentages of performance-based and long-term equity compensation
See page 29
  No hedging or speculation with respect to Cognizant securities
See page 35
  Use appropriate peer groups and market data when establishing compensation
See page 28
  No short sales of Cognizant securities
See page 35
  Retain an independent external compensation consultant
See page 28
  No margin accounts with Cognizant securities
See page 35
  Set significant stock ownership requirements for executives
See page 34
  No pledging of Cognizant securities
See page 35
  Maintain a strong clawback policy
See page 35
  No tax “gross ups” on severance benefits
See page 36
  Utilize “double trigger” change in control provisions in plans
See page 42    

Program Objectives

The Compensation Committee has designed the executive compensation program to meet the following objectives:

Ensure executive compensation is aligned with our corporate strategies and business objectives and that potential realizable compensation is set relative to each executive’s level of responsibility and potential impact on our performance;
Tie a substantial portion of executive officer compensation to achieving both short-term and long-term performance objectives that enhance stockholder value;
Reinforce the importance of meeting and exceeding identifiable and measurable goals through superior awards for superior performance;
Provide total direct compensation that is competitive in markets in which we compete for management talent in order to attract, retain and motivate the best possible executive talent;
Provide an incentive for long-term continued employment with our Company; and
Reinforce our desired culture and unique corporate environment by fostering a sense of ownership, urgency and overall entrepreneurial spirit.
Company Performance and Impact on Compensation Program
The Compensation Committee set 2017 executive compensation in March 2017, except with respect to Mr. Friedrich, who joined the Company in May 2017. The Compensation Committee’s decisions with respect to 2017 executive compensation were primarily based on:
The Company’s performance during 2017, 2016 and in previous years, including relative to its industry;
Anticipated and desired Company performance for 2017 and 2018 based on Company and industry projections and Company goals;
Individual executive performance and responsibility; and
The market for executive talent.
The Compensation Committee believes that the design of the compensation program, including having the appropriate mix of compensation elements and performance metrics and targets, has a significant impact on driving Company performance.
The performance by the Company in 2015, 2016 and 2017 across the performance metrics and targets selected by the Compensation Committee is set forth under “Aligning Pay with Performance.”
 See page 6 for further information
Details of the compensation elements and performance by the Company in 2015, 2016 and 2017 against each of the performance-based compensation elements is set forth under “2017 Compensation Structure.”
 See page 4 for further information

2018 Proxy Statement   3


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Proxy Statement Summary

2017 Compensation Structure

The Compensation Committee makes decisions on executive compensation from a total direct compensation perspective. Each element is considered by the committee in meeting one or more compensation program objectives. The following chart illustrates the balance of elements of 2017 target total direct compensation for our CEO and other NEOs, as described in this proxy statement.

Base Salary

Stable source of cash income at competitive levels


Annual Cash Incentive (ACI)

Annual cash incentive to motivate and reward achievement of Company financial and operational objectives

Measurement Period Target Compensation
1 year (2017) 85% of base salary
Payout Range

Historical ACI award achievements by year

2015 2016 2017
142.0% 79.8% 114.8%

Performance Stock Units (PSUs)

Annual grant of performance stock units that reward achievement of Company financial objectives, continued service and long-term performance of our common stock

Measurement Period Vesting
2 years (2017-2018) 1/3rd at 30 months
2/3rds at 36 months
Vesting Range

Historical PSU achievements by performance measurement period

20151 20162 2016/172
122.9% 38.2% 85.5%

Restricted Stock Units (RSUs)

Grants of restricted stock units to reward continued service and long-term performance of our common stock

Grants Annually for Mr. D’Souza (CEO), Mr. Mehta and Ms. McLoughlin; every 3 years for Mr. Chintamaneni and Mr. Friedrich

Vesting Quarterly over 3 years

2017 Target Annual Compensation Mix


Note: The above presentation seeks to provide a view of 2017 total direct compensation as reviewed by the Compensation Committee. As such, it uses grant date share prices for RSUs and PSUs and the target level of achievement for the ACI and PSUs. The above presentation excludes additional grants of RSUs and PSUs to Mr. Mehta and Mr. Chintamaneni made in connection with the expansion of their roles in 2016 and the signing bonus and grants of RSUs and PSUs to Mr. Friedrich upon his joining the Company in 2017.

1 Weighting was 100% revenue for the 2015 performance measurement period.
2 Weighting was 75% revenue and 25% non-GAAP EPS for the 2016 and 2016/17 performance periods.

4   Cognizant Technology Solutions Corporation


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Proxy Statement Summary

2017 Target Direct Compensation of Our Named Executive Officers

Francisco D’Souza  CEO

Committee Assessment

3% overall increase in target direct compensation vs. 2016 to reflect general market trends

Compensation Decisions for 2017

Target Direct Compensation – $12,232,013

Set close to median but weighted more heavily towards equity compensation vs. Company peer group, providing the opportunity for higher realized compensation based on Company performance
~0% change in base salary or annual cash incentive from 2016
Annual PSU and RSU grants increased by 3% from 2016

Rajeev Mehta  President

   

Committee Assessment

3% overall increase in target direct compensation vs. 2016 annual target direct compensation after a 14% increase upon his promotion to President in September 2016

     

Compensation Decisions for 2017

Target Direct Compensation – $6,816,724

No changes in base salary or annual cash incentive from September 2016
Annual PSU and RSU grants increased by 3% and 4%, respectively, from 2016

Additional grants of PSUs ($898,775) and RSUs ($599,160), not included in target direct compensation, made in 2017 in connection with his promotion to President in 2016

Karen McLoughlin  CFO

Committee Assessment

8% overall increase in target direct compensation for 2017 to align compensation to market

Compensation Decisions for 2017

Target Direct Compensation – $3,930,130

Base salary and annual cash incentive increased by 17% from 2016
Annual PSU and RSU grants increased by 5% and 6%, respectively, from 2016

Ramakrishna Prasad Chintamaneni  EVP and President, Global Industries and Consulting

Committee Assessment

Target direct compensation increased 31% at the time of his promotion to his current role in December 2016; no further changes made in 2017

Compensation Decisions for 2017

Target Direct Compensation – $3,099,236

No changes in base salary and annual cash incentive from December 2016
Annual grant of PSUs ($1,041,603)
RSUs – $1,178,883 in grant date fair value targeted to vest annually; grants made in multiple once-every-three-year reloads

Matthew W. Friedrich  EVP, General Counsel, Chief Corporate Affairs Officer and Secretary

Committee Assessment

Overall compensation package based on market data for public company general counsels; signing bonus and equity grants provided additional incentives for joining the Company in May 2017

Compensation Decisions for 2017

Target Direct Compensation – $2,723,968

Base salary of $525,000 and annual cash incentive of 85% of base salary
Annual grant of PSUs ($751,166)
RSUs – $1,001,552 in grant date fair value targeted to vest annually as part of a once-every-three year grant

Signing bonus ($500,000) and grants of PSUs ($500,778) and RSUs ($1,251,941), not included in target direct compensation, made upon his joining the Company

2017 Compensation
(in thousands)

Name and Principal Position     Year      Salary       Cash
Bonus
      Annual
Cash
Incentive
      PSU       RSU      All Other
Pension and
Deferred
Comp.
      All
Other
Comp.
      SEC
Total
      Adjusted
SEC
Total
1 
Francisco D’Souza
CEO
2017 $ 669         $ 648 $  7,220 $  3,774    $  167 $  12,478    $  12,478
2016 $ 664 $ 450 $ 7,019 1  $ 123 $ 8,257 $ 12,031
Rajeev Mehta
President
2017 $ 630 $ 615 $ 4,604 $ 2,545 $ 56 $ 8,450 $ 8,450
2016 $ 574 $ 389 $ 3,584 1  $ 6 $ 4,554 $ 7,099
Karen McLoughlin
CFO
2017 $ 500 $ 488 $ 1,967 $ 1,038 $ 8 $ 4,001 $ 4,001
2016 $ 427 $ 289 $ 1,876 1  $ 8 $ 2,599 $ 3,638
Ramakrishna Prasad
Chintamaneni

EVP and President, Global
Industries and Consulting
2017 $ 475 $ 463 $ 1,042 $ 1,897 $ 8 $ 3,885 $ 3,885
2016 $ 417 $ 566 $ 831 $ 1,615 $ 8 $ 3,437 $ 3,437
 
Matthew W. Friedrich
EVP, General Counsel,
Chief Corporate Affairs Officer
and Secretary
2017 2 $ 330 $ 500 $ 512 $ 1,252 $ 4,257 $ 132 $ 6,983 $ 6,983
1

The Company moved the timing of annual RSU grants for certain NEOs from the fourth quarter of 2016 to the first quarter of 2017 to align with the timing of the Company’s other annual equity grants and other annual compensation decisions by the Compensation Committee. To provide stockholders annual compensation numbers that are more comparable year-to-year, an Adjusted SEC Total is presented, which total includes the SEC Total plus, for 2016, an amount equal to the target value of the RSU grants made in the first quarter of 2017 (using a March 2, 2017 grant date fair value) to Mr. D’Souza ($3,774), Mr. Mehta ($2,545) and Ms. McLoughlin ($1,038). The same RSU grants are also included for 2017. The amounts in Adjusted SEC Total are not a substitute for the amounts reported under SEC Total.

2

Mr. Friedrich joined the Company in 2017.

2018 Proxy Statement   5


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Proxy Statement Summary

Aligning Pay with Performance

The following graphs show Company performance across revenue, profitability and cash flow metrics for the last three years as compared to the performance targets for the annual cash incentives (ACIs) and PSUs with performance measurement periods covering such years. In addition, the Company’s share price performance, which impacts the performance of long-term equity grants and holdings of our common stock, is set forth below for the last five years.

Revenue

Revenue
 

(in billions)


Continued strong, consistent revenue growth remains a key Company objective

Appropriate targets and significant weighting have helped drive revenue growth


        Target
Increase2
    Weighting     Payout Range
2015 ACI 19.0% 50%
2016 ACI 11.0% 50%
2017 ACI 9.0% 50%
2015 PSUs 19.1% 100%
2016 PSUs 12.0% 75%
2016/17 PSUs 11.0% 75%

Reduced revenue weighting in 2017 awards of 2017/18 PSUs (from 75% to 50%) as weighting of non-GAAP EPS increased (from 25% to 50%) to reflect focus on profitability

PSUs awarded in 2017 (2017/18 PSUs) not shown as their 2-year performance period is ongoing


Profitability

Non-GAAP Operating Margin3
 

Historical 19-20% target for non-GAAP Operating Margin, with the ACI targets for non-GAAP Income from Operations (40% weighting) increased each year to maintain margin target while revenue growth was encouraged

2019 goal of 22% that the Company plans to achieve by accelerating the pursuit of high-value digital transformation work, driving leverage in the cost structure, executing on opportunities to improve operational efficiency and aggressively employing automation to optimize traditional services3,4

2018 ACI targets for non-GAAP Income from Operations designed to incentivize an increase in non-GAAP Operating Margin during 2018 towards the 2019 goal



Non-GAAP Income from Operations3
 

(in millions)


Historically increased in line with revenue target increases to maintain non-GAAP Operating Margin in the 19-20% range


        Target
Increase2
    Weighting     Payout Range
2015 ACI 14.8% 40%
2016 ACI 9.8% 40%
2017 ACI 8.9% 40%

2018 ACI targets for non-GAAP Income from Operations designed to incentivize an increase in non-GAAP Operating Margin during 2018 towards the 2019 goal of 22% non-GAAP Operating Margin3,4



1

2016/17 PSU targets were based on combined performance of the Company for 2016 and 2017. The combined target was allocated between 2016 and 2017 in the graph in the same proportion as actual revenue in such years such that the same level of achievement is reflected in both years.

2

Increase in target (compound annual growth for 2017/18 PSUs) vs. prior year actual Company performance.

3

See “Non-GAAP Financial Measures and Forward-Looking Statements” on page 65.

4

2019 goal excludes any changes to the regulatory environment, including with respect to immigration and taxes. See our 2017 Annual Report for these and other risk factors that may impact our ability to achieve this goal.

6   Cognizant Technology Solutions Corporation


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Proxy Statement Summary

Non-GAAP Diluted Earnings Per Share (EPS)1
 

PSU metric added in 2016 to incentivize increased profitability

Appropriate targets and significant weighting


        Target
Increase3
   Weighting     Payout Range
2015 PSUs
2016 PSUs 10.4% 25%
2016/17 PSUs 10.7% 25%

Increased non-GAAP EPS weighting in 2017 awards of 2017/18 PSUs (from 25% to 50%) as weighting of revenue reduced (from 75% to 50%) to reflect increased Company focus on profitability

2017/18 PSU targets for non-GAAP EPS aligned with 2019 goal of 22% non-GAAP Operating Margin1,4

PSUs awarded in 2017 (2017/18 PSUs) not shown as their 2-year performance period is ongoing



Cash Flow
Days Sales Outstanding (DSO)
 

Timely collection of receivables from customers incentivized by this ACI performance metric

DSO target set at a level the Compensation Committee believes is healthy for the business

DSO has remained steady over the past three years


   Weighting     Payout Range
2015 ACI 10%
2016 ACI 10%
2017 ACI 10%


Stockholder Return
5-Year Cumulative Total Stockholder Return5
 

14.1% compound annual growth rate in share price over the last 5 years (2013 – 2017)

Substantial portion of executive compensation in the form of long-term equity compensation (RSUs and PSUs), aligning management incentives with those of stockholders

Stock ownership guidelines further align executive incentives with those of stockholders (see “Executive Stock Ownership Guidelines” on page 34)



1 See “Non-GAAP Financial Measures and Forward-Looking Statements” on page 65.
2 2016/17 PSU targets were based on combined performance of the Company for 2016 and 2017. The combined target was allocated between 2016 and 2017 in the graph in the same proportion as actual non-GAAP EPS in such years such that the same level of achievement is reflected in both years.
3 Increase in target (compound annual growth for 2017/18 PSUs) vs. prior year actual Company performance.
4 2019 goal excludes any changes to the regulatory environment, including with respect to immigration and taxes. See our 2017 Annual Report for these and other risk factors that may impact our ability to achieve this goal.
5 Comparison assumes $100 was invested, from December 31, 2012 through December 31, 2017, in Cognizant common stock, the S&P 500 Index, the Nasdaq 100 Index and our peer group (capitalization weighted), and that all dividends were reinvested.
6 Consists of the following information technology consulting firms: Accenture plc, DXC Technology (previously Computer Sciences Corporation), ExlService Holdings Inc., Genpact Limited, Infosys Limited, Syntel, Inc., Wipro Limited and WNS (Holdings) Limited. Historically also included Computer Task Group, Inc. (old peer group not presented separately as it is not materially different from the above).

2018 Proxy Statement   7


Table of Contents

Proxy Statement Summary

AUDIT



Proposal 3

Ratify the Appointment of PricewaterhouseCoopers LLP as the Company’s Independent Registered Public Accounting Firm for 2018

The Audit Committee believes that the engagement of PricewaterhouseCoopers LLP is in the best interests of the Company and its stockholders.
The Board unanimously recommends a vote FOR the Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2018. See page 44 for further information

ADDITIONAL PROPOSALS

Company Proposals



Proposal 4

Approve an Amendment and Restatement of the Company’s 2004 Employee Stock Purchase Plan

An amendment and restatement of the Company’s ESPP is proposed to increase the number of authorized shares by 12,000,000, providing a share reserve sufficient for the next 4 to 5 years.
The Amended and Restated ESPP also provides additional flexibility for the Compensation Committee to make adjustments upon various corporate events to maintain intended benefits of awards under the plan.
The Board unanimously recommends a vote FOR the Amendment and Restatement of the Company’s 2004 Employee Stock Purchase Plan. See page 47 for further information



Proposals 5(a), (b) and (c)

Approve Three Separate Proposals to Eliminate the Supermajority Voting Requirements in the Company’s Certificate of Incorporation

At the 2017 Annual Meeting, stockholders voted overwhelmingly (99.8% of the votes cast) in favor of a stockholder proposal requesting that the Board take the steps necessary to eliminate the supermajority voting provisions in the Company’s Certificate of Incorporation and By-laws. The Board supported this proposal.
To implement the intent of the 2017 proposal, stockholders are requested to approve the following three separate proposals to eliminate the supermajority voting requirements in the Company’s Certificate of Incorporation with respect to:
(a)Amending the Company’s By-laws;
(b)Removing directors; and
(c)Amending certain provisions of the Company’s Certificate of Incorporation.
The Board unanimously recommends a vote FOR each of these proposals. See page 52 for further information

8   Cognizant Technology Solutions Corporation


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Proxy Statement Summary

Stockholder Proposals



Proposal 6
Consider a Stockholder Proposal Requesting that the Board take the Steps Necessary to Permit Stockholder Action by Written Consent
The Board unanimously recommends a vote AGAINST this proposal. See page 56 for further information        



Proposal 7
Consider a Stockholder Proposal Requesting that the Board take the Steps Necessary to Lower the Ownership Threshold for Stockholders to Call a Special Meeting
The Board unanimously recommends a vote AGAINST this proposal. See page 58 for further information        

2018 Proxy Statement   9


Table of Contents



Proposal 1
Election of Directors
What are you voting on?
At the Annual Meeting, 11 Directors are to be elected to hold office until the 2019 Annual Meeting and until their successors have been duly elected and qualified. All nominees are current Directors and all except Mr. Velli were elected by stockholders at the 2017 Annual Meeting.
The Board unanimously recommends a vote FOR all the Director nominees listed below.        

Director Nominees

Zein Abdalla Former President of PepsiCo, Inc.
   
Independent
Director Since 2015
Age 59
Birthplace Sudan
   
Committees
AC  GC
Skills and Qualifications
Career Highlights
President of PepsiCo, Inc., a multinational food, snack and beverage company (2012 – 2014)
Executive positions with PepsiCo Europe Region
CEO (2009 – 2012)
President (2006 – 2009)
Various senior positions with PepsiCo (1995 – 2006)
 
Current Public Company Boards
The TJX Companies, Inc., a retailer of apparel and home fashions (since 2012)
Select Other Positions
Member of the Board of Directors of Mastercard Foundation
Member of the Board of Directors of Kuwait Food Company (Americana) K.S.C.P.
Member of the Imperial College Business School Advisory Board
Board Advisor, Mars, Incorporated
Education
B.S., Imperial College, London University

Betsy S. Atkins CEO and Founder of Baja Corp.
   
Independent
Director Since 2017
Age 64
Birthplace United States
   
Committees
CC  FPC
Skills and Qualifications
Career Highlights
CEO and Founder of Baja Corp., a venture capital investment firm (since 1994)
CEO of Clear Standards, Inc., a provider of energy management and sustainability software and solutions (2009 – 2010)
Chair and CEO of NCI, Inc., a nutraceutical functional food company (1991 – 1993)
Co-Founder of Ascend Communications, Inc., a manufacturer of communications equipment, and Director (1989 – 1999)
EVP of Sales Marketing, Professional Services and International Operations
 
Current Public Company Boards
Schneider Electric SE, a manufacturer of energy management systems (since 2011)
SL Green Realty Corporation, a fully integrated real estate investment trust (REIT) (since 2015)
Wynn Resorts, Limited, a destination casino resorts company (since 2018)
Select Other Positions
Member of the Board of Directors of privately-held Volvo Car AB, an automobile manufacturer
Select Past Director Positions
Ascend Communications, Inc.
Chico’s FAS, Inc.
Clear Standards, Inc.
Darden Restaurants, Inc.
HD Supply Holdings, Inc.
Nasdaq LLC
Polycom, Inc.
Education
B.A., University of Massachusetts, Amherst

 
Leadership Global Business Experience Tech/Consulting Services Technology Financial Operational
AC Audit Committee FPC Financial Policy Committee                                     Committee Chair
CC Compensation Committee GC Governance Committee                                     Committee Member
$ AC Financial Expert

10   Cognizant Technology Solutions Corporation


Table of Contents

Maureen Breakiron-Evans Former CFO of Towers Perrin
   
Independent
Director Since 2009
Age 63
Birthplace United States
   
Committees
$  AC  GC 
Skills and Qualifications
Career Highlights
CFO of Towers Perrin, a global professional services company (2007 – 2008)
VP and General Auditor of CIGNA Corporation, a health services organization (2005 – 2006)
EVP and CFO of Inovant, LLC, VISA’s captive technology development and transaction processing company (2001 – 2004)
16 years in public accounting, ultimately as a partner at Arthur Andersen LLP through 1994
 
Current Public Company Boards
Ally Financial Inc., an Internet bank (since 2015)
Cubic Corporation, a provider of systems and services to transportation and defense markets worldwide (since 2017)
Select Past Director Positions
Federal Home Loan Bank of Pittsburgh, a private government-sponsored enterprise
Heartland Payment Systems, Inc., a provider of payment processing services
ING Direct, an Internet bank
Education
B.B.A., Stetson University
M.B.A., Harvard Business School
M.L.A., Stanford University
Certifications
CPA in California

Jonathan Chadwick Former CFO and COO of VMware, Inc.
   
Independent
Director Since 2016
Age 52
Birthplace United Kingdom
   
Committees
$  AC
Skills and Qualifications
Career Highlights
Executive positions with VMware, Inc., a virtualization and cloud infrastructure solutions company
COO (2014 – 2016)
EVP and CFO (2012 – 2016)
CFO of Skype Technologies S.A., an Internet communications company, and Corporate VP of Microsoft Corporation (2011 – 2012)
EVP and CFO of McAfee, Inc., a security technology company (2010 – 2011)
 
Various executive positions with Cisco Systems, Inc., a developer and manufacturer of networking and telecommunications equipment (1997 – 2010)
Various positions with Coopers & Lybrand, an accounting firm (1993 – 1997)
Current Public Company Boards
F5 Networks, Inc., a technology company that specializes in application delivery networking (since 2011)
ServiceNow, Inc., a cloud computing company (since 2016)
Education
B.Sc., University of Bath, U.K.
Certifications
Chartered Accountant in England and Wales

John M. Dineen Former President and CEO of GE Healthcare
   
Independent
Director Since 2017
Age 55
Birthplace United States
   
Committees
FPC  GC 
Skills and Qualifications
Career Highlights
Operating Advisor of Clayton, Dubilier & Rice LLC, an investment firm (since 2015)
Executive positions with General Electric Company, a global digital industrial company
CEO, GE Healthcare (2008 – 2014)
CEO, GE Transportation (2005 – 2008)
Other leadership positions (1986 – 2005)
 
Current Public Company Boards
Merrimack Pharmaceuticals, Inc., a pharmaceutical company specializing in the development of drugs for the treatment of cancer (since 2015)
Education
B.S., University of Vermont

 
Leadership Global Business Experience Tech/Consulting Services Technology Financial Operational
AC Audit Committee FPC Financial Policy Committee                                     Committee Chair
CC Compensation Committee GC Governance Committee                                     Committee Member
$ AC Financial Expert

2018 Proxy Statement   11


Table of Contents

Francisco D’Souza CEO of Cognizant
   
Director Since 2007
Age 49
Birthplace Kenya
   
Committees
FPC
Skills and Qualifications
Career Highlights
Executive positions at Cognizant
CEO (since 2007)
President (2007 – 2012)
COO (2003 – 2006)
SVP, North American Operations and Business Development (1999 – 2003)
VP, North American Operations and Business Development (1998 – 1999)
Director - North American Operations and Business Development (1997 – 1998)
Joined Cognizant as a co-founder in 1994, the year it was started as a division of The Dun & Bradstreet Corporation
 
Current Public Company Boards
General Electric Company (since 2013)
Select Other Positions
Member of the Board of Trustees of Carnegie Mellon University
Co-Chair of the Board of Trustees of The New York Hall of Science
Education
B.B.A., University of Macau (formerly University of East Asia)
M.B.A., Carnegie Mellon University

John N. Fox, Jr. Former Vice Chairman of Deloitte & Touche LLP and Global Director, Strategic Clients of Deloitte Consulting
   
Independent
Director Since 2007
Age 75
Birthplace United States
   
Committees
CC  GC
Skills and Qualifications
Career Highlights
Vice Chairman of Deloitte & Touche LLP, a global professional services firm, and Global Director, Strategic Clients for Deloitte Consulting (1998 – 2003)
Member of Deloitte Touche Tohmatsu Board of Directors and the Board’s Governance (Executive) Committee (1998 – 2003)
Various senior positions with Deloitte Consulting (1968 – 2003)
 
Current Public Company Boards
VASCO Data Security International, Inc., an information technology security company (since 2005)
Select Other Positions
Trustee for Steppenwolf Theatre Company
Trustee for Wabash College
Education
B.A., Wabash College
M.B.A., University of Michigan

John E. Klein Chairman of Cognizant and President and CEO of Polarex, Inc.
   
Independent
Director Since 1998
Age 76
Birthplace United States
   
Committees
AC  CC  GC
Skills and Qualifications
Career Highlights
Chairman of Cognizant (since 2003)
President and CEO of Polarex, Inc., a technology consulting firm (employed since 1994)
Previously President and CEO of MDIS Group, PLC, a UK listed software and services company
 
VP at International Business Machines Corporation, or IBM, a multinational technology company
VP at Digital Equipment Corporation, a worldwide computer hardware and software company
Education
B.S., U.S. Merchant Marine Academy
M.B.A., New York University

 
Leadership Global Business Experience Tech/Consulting Services Technology Financial Operational
AC Audit Committee FPC Financial Policy Committee                                     Committee Chair
CC Compensation Committee GC Governance Committee                                     Committee Member
$ AC Financial Expert

12   Cognizant Technology Solutions Corporation


Table of Contents

Leo S. Mackay, Jr. SVP, Internal Audit, Ethics and Sustainability of Lockheed Martin Corporation
   
Independent
Director Since 2012
Age 56
Birthplace United States
   
Committees
AC
Skills and Qualifications
Career Highlights
Executive positions at Lockheed Martin Corporation, a global security and aerospace company
SVP, Internal Audit, Ethics and Sustainability (since 2016)
VP, Ethics and Sustainability (2011 – 2016)
VP, Corporate Business Development and various other positions (2007 – 2011)
President, Integrated Coast Guard Systems LLC and VP and General Manager, Coast Guard Systems (2005 – 2007)
 
Chief Operations Officer of ACS State Healthcare LLC, a services company serving the healthcare industry (2003 – 2005)
Various positions with Bell Helicopter, a helicopter and tiltrotor craft manufacturer
Select Other Positions
Director of USAA Federal Savings Bank
Select Past Director Positions
Chair of the Board of Visitors of the Graduate School of Public Affairs at the University of Maryland
Center for a New American Security
Education
B.S., United States Naval Academy
M.P.P., Harvard University
Ph.D., Harvard University

Michael Patsalos-Fox Former CEO of Stroz Friedberg and Former Chairman, the Americas and Senior Partner of McKinsey & Company
   
Independent
Director Since 2012
Age 65
Birthplace Cyprus
   
Committees
CC  FPC  GC 
Skills and Qualifications
Career Highlights
CEO of Stroz Friedberg, a global investigation and cyber security firm (2013 – 2016)
Senior Partner and various other positions with McKinsey & Company, a global management consulting company (1981 – 2013)
Board of Directors (1998 – 2010)
Chairman, the Americas (2003 – 2009)
 
Member of Operating Committee
Managing Partner of New York and New Jersey offices, North American Corporate Finance and Strategy practice and European Telecoms practice
Leader of new business growth opportunities around data, analytics and software
Education
B.S., University of Sydney
M.B.A., International Institute for Management Development

Joseph M. Velli Former Senior Executive Vice President of The Bank of New York
   
Independent
Director Since 2017
Age 60
Birthplace United States
   
Committees
AC 
Skills and Qualifications
Career Highlights
Senior Advisor of Lovell Minnick Partners, LLC, private equity firm (since 2016)
Chairman and Chief Executive Officer of Convergex Group, LLC, a provider of software platforms and technology-enabled brokerage services (2006 – 2013)
Executive positions with The Bank of New York (now BNY Mellon), a worldwide banking and financial services company
Senior Executive Vice President and member of the Senior Policy Committee (1998 – 2006)
Executive Vice President (1992 – 1998)
Other leadership positions (1984 – 1992)
 
Current Public Company Boards
Computershare Limited, a global provider of corporate trust, stock transfer, employee share plan and mortgage servicing services (since 2014)
Paychex, Inc., a provider of payroll, human resource and benefits outsourcing services (since 2007)
Select Past Director Positions
E*Trade Bank
E*Trade Financial Corporation
Education
B.A., William Paterson University
M.B.A., Fairleigh Dickinson University

 
Leadership Global Business Experience Tech/Consulting Services Technology Financial Operational
AC Audit Committee FPC Financial Policy Committee                                     Committee Chair
CC Compensation Committee GC Governance Committee                                     Committee Member
$ AC Financial Expert

2018 Proxy Statement   13


Table of Contents

Board Composition

Director Independence

Board Member Independence

10 of 11
Directors
Nominees
are
Independent

        Each of our Director nominees, other than our CEO, Mr. D’Souza, has been determined by the Board to be an “independent director” under our Corporate Governance Guidelines and the rules of The Nasdaq Stock Market LLC (“Nasdaq”), which require that, in the opinion of the Board, such person not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a Director.

Committee Member Independence

100% Independent
Directors on Audit,
Compensation
and Governance
Committees

       

The Board has determined that all of the members of the Audit Committee, Compensation Committee and Governance Committee are independent as defined under Nasdaq rules and, where applicable, also satisfy the committee-specific requirements set forth below.


Additional Audit and Compensation Committee Independence Standards

Audit Committee

All members of the Audit Committee are required to satisfy the independence requirements contemplated by Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Nasdaq rules, which require that Audit Committee members:

May not accept any direct or indirect consulting, advisory or other compensatory fee from the Company or any of its subsidiaries, except for their compensation for Board service; and
May not be affiliated with the Company or any of its subsidiaries.

Compensation Committee

Under Nasdaq rules, the Board must affirmatively determine the independence of each member of the Compensation Committee after considering:

All sources of compensation of the director, including any consulting, advisory or other compensation paid by the Company or any of its subsidiaries; and
Whether the Compensation Committee member is affiliated with the Company or any of its subsidiaries.

Director Recruitment and Selection Process

Director Candidate Identification

Independent search firm, independent directors, management, stockholders and others may recommend potential candidates for election to the Company’s Board
A subset of directors may be tasked by the Governance Committee with leading a search process for director candidates

Governance Committee

Develops criteria for any director search process, including any specific desired skills, experiences or qualifications
Discusses, assesses and interviews candidates
Evaluates the candidates, including with respect to
Integrity
Business acumen
Experience
Diligence
Independence / absence of conflicts of interest
Capacity to serve in light of other commitments
Diversity
  

No specific weighting is given to any of the criteria, nor is any a prerequisite

Recommends nominees to the Board

Board

Discusses and interviews candidates
Analyzes independence
Appoints directors to the Board
Recommends nominees for stockholder vote at the next annual meeting

Stockholders

Vote on nominees at annual meeting
 

Objective: Maintain an engaged, independent Board with broad and diverse experience and judgment that is committed to representing the long-term interests of our stockholders

In 2016 and 2017, the Company engaged a third party director search firm to assist the Governance Committee in identifying and evaluating director candidates. In February 2017, the Company and Elliott Management agreed to each identify and propose one new independent director for election to the Board, subject to the consent of the other, prior to the filing of the proxy statement for the 2017 Annual Meeting. Ms. Atkins and Mr. Dineen were elected to the Board in April 2017 through this process. As part of the February 2017 agreement, the Company and Elliott also agreed that the Company would propose one additional new independent director for election to the Board, subject to the consent of Elliott, prior to the filing of the proxy statement for the 2018 Annual Meeting. Mr. Velli was identified by the Company, consented to by Elliott and joined the Board in December 2017.

14   Cognizant Technology Solutions Corporation


Table of Contents

Important Factors in Assessing Board Composition

The Governance Committee strives to maintain an independent board with broad and diverse experience and judgment that is committed to representing the long-term interests of our stockholders. The committee considers a wide range of factors when selecting and recruiting director candidates, including:

Ensuring an experienced, qualified Board with expertise in areas relevant to the Company. We seek directors who have held significant leadership positions and have global business experience, especially in the consulting and technology industries in which we compete. In addition, we seek directors with the financial reporting, operational, corporate governance and compliance experience appropriate for a large, global, publicly traded company.


Leadership


11 (100%)

     

We believe that directors who have held “C-suite” leadership positions over an extended period possess the ability to identify and develop leadership qualities in others. Such Directors demonstrate a practical understanding of organizations, processes, strategy and risk management, and know how to drive change and growth.

Global Business
Experience


11 (100%)

With 23% of our revenue currently coming from, and our continued success dependent, in part, on continued growth in, our business outside the United States, and with the extensive international aspects of our business operations, we believe that global business experience is an important quality for many of our Directors to possess.

Technology and
Consulting
Services


4 (36%)

Technology and consulting services, including as to technology, strategy, business and operations, is one of our key areas of business focus. It is an important component of the continuing growth of our business and permeates other important growth areas for us. As technology and consulting services are a critical component of our efforts to develop ever more strategic relationships with clients, it is important to have directors with experience in providing such services to clients.

Technology

10 (91%)

Developing and investing in new technologies and ideas is at the heart of our business. Our current investments include building capabilities to enable clients to drive digital transformation at scale and create next generation information technology infrastructures, and building platform-based solutions and industry utilities to enable clients to achieve new levels of efficiency. In addition, strong data / cyber security is also essential for our business. As such, having directors with technology experience is as important as ever.

Financial

11 (100%)

We use a broad set of financial metrics to measure our operating and strategic performance and stockholder value creation. Accurate financial reporting and strong internal controls are also critical to our success. It is therefore important for us to have directors with an understanding of financial statements and financial reporting processes and a track record of stockholder value creation.

Operational


10 (91%)

We consider operational experience to be a valuable trait. Directors with this experience provide insight into best practices for the efficient administration and operation of a complex business to achieve growth and margin objectives.


Enhancing the Board’s diversity. Our Corporate Governance Guidelines provide that the value of director diversity, including as to race, gender, age, national origin and cultural background, should be considered in the selection of directors. The Governance Committee seeks out qualified women and individuals from minority groups to include in the pool from which Board nominees are chosen. 

 

Achieving a balanced mix of tenures. The Governance Committee believes it is important that the Board have an appropriately balanced mix of experienced directors with a deep understanding of the Company and its industry and new directors who bring a fresh perspective and valuable new experience and insights.

 

Maintaining Director engagement. The Governance Committee considers each Director’s continuation on the Board on an annual basis. As part of the process, the committee evaluates the Director’s other positions and obligations in order to assess the Director’s ability to continue to devote sufficient time to Company matters. Any Director who experiences a change in employment status or job responsibilities, other than retirement, is required to notify the Chairman and the Governance Committee and offer to resign from the Board. 

 

Avoiding conflicts of interest. The Governance Committee looks at other positions a director candidate has held or holds (including other board memberships) and any potential conflicts of interest to ensure the continued independence of the Board and its committees. There are no family relationships among any of our executive officers, directors and key employees.

2018 Proxy Statement   15


Table of Contents

As part of the Governance Committee’s annual self-assessment process, it assesses its performance as to all aspects of the selection and nomination process for directors, including diversity.

Based on the experience, qualifications, attributes and skills of our Director nominees as highlighted herein, our Governance Committee has concluded that such Director nominees should continue to serve on the Board.

Majority Voting Standard in Director Elections

Our By-laws provide that the voting standard for the election of directors in uncontested elections is a majority of votes cast. Any Director who does not receive a majority of the votes cast for their election must tender an irrevocable resignation that will become effective upon acceptance by the Board. The Governance Committee will recommend to the Board whether to accept the Director’s resignation within 90 days following the certification of the stockholder vote. The Board will promptly disclose whether it has accepted or rejected the Director’s resignation, and the reasons for its decision, in a Form 8-K. The Governance Committee and the Board may consider any factors they deem relevant in deciding whether to accept a Director’s resignation. Our Corporate Governance Guidelines contain additional specifics regarding our Director resignation policy. See “Helpful Resources” on page 74.

How Stockholders Can Propose Director Candidates

Recommendations to Governance Committee


Stockholder sends to the Company’s Secretary:

Name(s) of proposed director candidate(s)
Appropriate biographical information and background materials
Statement as to whether the stockholder or group of stockholders making the recommendation has beneficially owned more than 5% of the Company’s common stock for at least a year 

 

Governance Committee evaluates stockholder-proposed director candidates in substantially the same manner, including both process and criteria, as it follows for candidates submitted by others. See “Director Recruitment and Selection Process” on page 14.

Nominations by Proxy Access


3% for 3 years
One or more stockholders holding at least 3% of the Company’s common stock for at least 3 years may submit director nominees to include in the Company’s proxy statement.


25% of the Board
Stockholder-submitted nominees may be submitted via proxy access for up to 25% of the Board or 2 directors, whichever is greater.


Stockholder-submitted nominations that satisfy the requirements in the Company’s By-laws are included in the Company’s proxy statement. See “Director Nominees via Proxy Access” on page 60.

Board Leadership Structure

Separate Chairman and CEO

       

The Company’s board leadership structure has separated the Chairman and CEO roles since December 2003. Currently, Mr. Klein serves as Chairman and Mr. D’Souza as CEO. The Board evaluates its leadership structure on an ongoing basis based on factors such as the experience of the applicable individuals and the current business environment of the Company. After considering these factors, the Board, at its meeting following the 2017 Annual Meeting, determined that continuing to separate the positions of Chairman and CEO was the appropriate board leadership structure.

16   Cognizant Technology Solutions Corporation


Table of Contents

Board Role in Risk Oversight

Our business faces various risks, including strategic, financial, legal, regulatory, operational, accounting, data / cyber security and reputational risks. The Board exercises its oversight responsibility for risk management both directly and through its committees. We believe this division of responsibilities optimizes the Board’s ability to address risks in a focused and proactive manner, assess interrelationships among the various risks we face and make informed cost-benefit decisions. In addition, we believe this division allows our independent Directors, through our fully independent Audit Committee, Compensation Committee and Governance Committee and our majority independent Financial Policy Committee, to exercise effective oversight of the actions of management in identifying risks and implementing effective risk management policies and controls. Management provides regular updates to the Board or relevant committees on risk exposures and mitigation efforts.

                Board of Directors
The Board is kept informed of its committees’ risk oversight and other activities through reports of the committee chairs to the full Board. These reports are presented at regular Board meetings.
In addition to addressing risk topics referred to it by its committees, the Board addresses certain risk topics directly, including the following:
Business strategy, including with respect to growth both organically and through acquisitions.
Security, including physical and data / cyber security (with support from the Audit Committee).
Executive leadership development and succession planning, including an emergency succession plan for the CEO (with support from the Governance Committee).
Financial risk, including Treasury matters such as incurrence of indebtedness and hedging.
               
   
   
   
 
 
       
       
         
                                                             
     
               
         
     
Audit Committee
Oversees the following risk topics:
Overall risk management framework and processes, including through oversight of our Enterprise Risk Management (ERM) program. The Company’s Chief Internal Auditor manages the ERM program and helps ensure that ERM is integrated into the Company’s strategic and operational planning process. The committee’s meetings throughout the year include discussions of individual risk areas and quarterly updates on the overall ERM process.
Accounting and internal controls, with quarterly reports from and private sessions with our independent registered public accounting firm and Chief Internal Auditor.
Compliance, including with respect to our Code of Ethics and whistleblower / hotline procedures.
Security risks, including physical and data / cyber security (supports the full Board).
Operational risks, including infrastructure, talent supply chain, business continuity and scalability of our processes and systems.
Legal and regulatory risks, including third party contractual risks, intellectual property matters and compliance with data privacy laws.
Geopolitical risks, including changes in laws and regulations.
Compensation Committee
Oversees the Company’s compensation policies and practices, including a review, as part of its annual process of determining executive compensation, of the incentives created by the Company’s incentive compensation programs to ensure that such incentives are appropriate and do not encourage undue risk taking, and that the compensation policies and practices as a whole are not reasonably likely to have a material adverse effect on the Company.
Financial Policy Committee
Oversees the following risk topics:
Operating margins and execution of the Company’s margin improvement plan.
Capital structure and allocation.
Governance Committee
Oversees the following risk topics:
Board governance structure and processes.
Succession planning, including an emergency succession plan for the CEO (supports the full Board).

   
       
       
   
         
       
         
         
         
       
       
       
       
       
       
       
       
       
       
       
        
       
       
     
         
               
     
             
           
   
Management
Management is responsible for the day-to-day management of the various risks facing the Company, and provides regular updates to the Board or relevant committees on risk exposures and mitigation efforts. These updates include regular reports from executives with responsibility for various aspects of the Company’s business or functions. The Board is informed of major or notable developments that could affect the Company’s risk profile or other aspects of the business.
    
       
   
 
   
         

2018 Proxy Statement   17


Table of Contents

Committees of the Board

The Board has four standing committees — the Audit Committee, Compensation Committee, Financial Policy Committee and Governance Committee — each of which operates under a charter that has been approved by the Board. See “Helpful Resources” on page 74.

Audit Committee    
 AC 
Key Responsibilities
Directly overseeing our independent registered public accounting firm, including appointment, termination, qualifications and independence, and pre-approval of the scope and fees of the annual audit and any other services, including review, attest and non-audit services;
Reviewing and discussing the contents of our quarterly and annual consolidated financial statements and earnings releases with management and the independent registered public accounting firm;
Recommending to the Board inclusion of our audited financial statements in our Annual Report on Form 10-K;
Monitoring our internal control over financial reporting, disclosure controls and procedures, and Code of Ethics;
Reviewing and discussing the internal audit process, scope of activities and audit results with our internal audit department;
Reviewing and discussing with management our risk management framework and processes, including through oversight of our ERM program;
Supporting the Board in the oversight of security risks, including physical and data / cyber security, which oversight includes the receipt and review of periodic evaluations of the Company’s security processes and procedures from independent experts; and
Overseeing a number of additional risk topics, including compliance, operational, legal, regulatory and geopolitical risks.
Maureen Breakiron-Evans (Chair)
Other Members
Zein Abdalla
Jonathan Chadwick
John E. Klein
Leo S. Mackay, Jr.
Joseph M. Velli
No. of Meetings in 2017: 11
Audit Committee Financial Experts
The Board has determined that each of Ms. Breakiron-Evans and Mr. Chadwick is an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K.

Compensation Committee    
 CC 
Key Responsibilities
Making recommendations to the Board with respect to the compensation of our CEO;
Reviewing and approving, or making recommendations to the Board with respect to, the compensation of our other executive officers;
Overseeing evaluations of our senior executives;
Reviewing and making recommendations to the Board with respect to our incentive compensation arrangements, including an annual review to ensure that such compensation arrangements do not encourage unnecessary risk taking;
Reviewing and making recommendations to the Board with respect to Director compensation; and
Assisting the Board in the discharge of any other responsibilities relating to the compensation of our executive officers.
John N. Fox, Jr. (Chair)
Other Members
Betsy S. Atkins
John E. Klein
Michael Patsalos-Fox
No. of Meetings in 2017: 5

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Financial Policy Committee    
 FPC 
Key Responsibilities
Evaluating the Company’s operating margins;
Assisting and advising the Board on the development of and potential revisions to the Company’s long-term margin improvement plan;
Monitoring and evaluating the implementation of such margin improvement plan; and
Evaluating and providing the Board with recommendations regarding the Company’s capital structure and capital allocation policies and strategy.
Francisco D’Souza (Chair)
Other Members
Betsy S. Atkins
John M. Dineen
Michael Patsalos-Fox
No. of Meetings in 2017: 3

Governance Committee    
 GC 
Key Responsibilities
Recommending to the Board the persons to be nominated for election as Directors and to be appointed to each of the Board’s committees;
Reviewing the Directors’ other positions and obligations annually to ensure they have sufficient time to devote to Company matters;
Assisting the Board in succession planning for the CEO (including emergency succession plans), other senior executives and Board positions;
Developing and recommending to the Board revisions to our Corporate Governance Guidelines; and
Overseeing an annual evaluation of the Board.
Michael Patsalos-Fox (Chair)
Other Members
Zein Abdalla
Maureen Breakiron-Evans
John M. Dineen
John N. Fox, Jr.
John E. Klein
No. of Meetings in 2017: 5

Director Attendance

There were 9 meetings of the Board during 2017. Each Director standing for election at the Annual Meeting attended at least 95% of the aggregate of (i) all meetings of the Board held during the period in which he or she served as a Director and (ii) the total number of meetings held by the committees on which he or she served during the period, if applicable.

Our Corporate Governance Guidelines provide that Directors are expected to attend the annual meeting of stockholders. For the 2017 Annual Meeting, Mr. D’Souza acted as Chairman and all but two of the 11 then current Directors attended (participating by teleconference).

Strong Director Engagement

Average Director nominee attendance at 2017 meetings

Board 100% Audit Committee 98% Financial Policy Committee 100%
Compensation Committee 100% Governance Committee 100%

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Director Compensation

Discussion and Analysis

The Company uses cash and stock-based compensation to attract and retain qualified individuals to serve on the Board. The Company sets compensation for Directors who are not our employees or the employees of any of our subsidiaries (“non-employee Directors”) taking into account the time commitment and experience level expected of its Directors. A Director who is an employee of the Company or any of its subsidiaries receives no cash or stock-based compensation for serving as a Director.

Engagement of Compensation Consultant

For purposes of establishing non-employee Director compensation, the Compensation Committee engaged Pay Governance, LLC (“Pay Governance”), an independent executive compensation advisory firm, in 2017 to review all elements of non-employee Director compensation, benchmark such compensation in relation to other comparable companies with which we compete for Board talent and provide recommendations to ensure that our non-employee Director compensation program remains competitive. Pay Governance benchmarked our non-employee Director compensation against the same group of technology-related firms used by Pay Governance in preparing its recommendations to the Compensation Committee in determining stock-based awards for executive officers. See “Compensation Committee and Engagement of Compensation Consultant” and “Peer Group and Market Data” on page 28.

Director Compensation Analysis and Changes for 2017

The Compensation Committee considered the benchmarking data and recommendations of Pay Governance in setting the cash and stock-based compensation of non-employee Directors that became effective following the 2017 Annual Meeting.

Analysis Compensation Actions for 2017

Company total Director compensation at the 50th percentile vs. Company peer group

       

No change to total Director
compensation
vs. 2016

 

Company mix of 50% stock options and 50% RSUs differed from peer group companies, which predominantly issued equity in the form of full value shares or RSUs

 

Stock-based compensation issued
100% in RSUs (no stock options)

 
Company vesting provisions of stock-based compensation significantly longer than at peer group companies

Company-issued options vested over 2 years and RSUs vested over 3 years
Peer group companies split between immediate (full value shares issued) and 100% vesting on the first anniversary of the grant date
 

RSUs issued provide for 100% vesting
on the first anniversary of the
grant date

 

The additional annual Board and committee chair retainers, provided to certain of the chairs in recognition of the increased workload and responsibilities associated with the positions, and the meeting fees were left unchanged in 2017. Both the retainers and meeting fees were analyzed by Pay Governance and, in the case of the retainers, revised in 2016.

2017 Director Compensation Structure

Annual Non-Employee
Director Compensation
1
      Additional Annual Board and
Committee Chair Retainers1
      Meeting Fees for
Non-Employee Directors
Annual Cash Retainer $90,000 Board $150,000 Board
Meetings
No meeting fees
RSUs $210,000 Audit $25,000
Fair market value on
grant date
100% vesting on the first
anniversary of the grant date
Compensation $15,000 Committee
Meetings
$1,500 per meeting
(excluding telephonic
meetings of 30 minutes
or less)
Financial Policy
Governance $15,000
Total $300,000
1

Paid in advance following annual meeting of stockholders. Directors joining mid-year receive pro-rated amounts.

Upon a Director’s retirement while in good standing, the Board’s intent is to utilize its discretion to accelerate the vesting of such Director’s outstanding stock-based awards.

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Director Stock Ownership Guidelines


Directors
5x annual cash retainer

($450,000 in shares
of common stock)
The Company adopted revised stock ownership guidelines in March 2017 to further align Director interests with those of stockholders. Under the revised guidelines, each non-employee Director is required over time to hold a number of shares with a value, measured as of the time the revised guidelines were put in place or, for later joining Directors, the time a Director joins the Board, equal to five times the annual cash retainer received by non-employee Directors (i.e., $450,000 in shares of common stock). Compliance with the guidelines is required within five years of a Director joining the Board.

Hedging, Short Sale, Margin Account and Pledging Prohibitions

All Directors are subject to the same insider trading policies of the Company that apply to employees that provide for:

No hedging or speculation with respect to Cognizant securities;
No short sales of Cognizant securities;
No margin accounts with Cognizant securities; and
No pledging of Cognizant securities.

See “Hedging, Short Sale, Margin Account and Pledging Prohibitions” on page 35 for additional information on these restrictions.

Deferral of Restricted Stock Units

Non-employee Directors may on a yearly basis elect to defer settlement of RSUs that are granted in the subsequent year. The following table sets forth the two deferral options available, and the Directors that elected such deferral options, for 2017.

RSUs Deferred Until Earliest to Occur of

Company
Change in Control
Director’s Death or
Permanent Disability
Director Leaves the Board Directors Electing Option
Option 1 100% settles on next July 1 Atkins, Dineen, Weissman
Option 2 1/3rd settles on each of next three July 1sts     Breakiron-Evans, Fox, Klein, Wendel
= immediate settlement

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Director Tables

The following tables set forth certain information regarding the compensation of each of our Directors who served during 2017 and the aggregate number of stock awards and the aggregate number of stock options held by each of our Directors at December 31, 2017.

2017 Director Compensation Director Stock and Option
Awards Outstanding
Name Fees Earned
or
Paid in Cash
   Stock
Awards
1
   Option
Awards1
   All Other
Compensation
   Total    Aggregate
Number of
Stock Awards2
   Aggregate
Number of
Stock Options
Zein Abdalla      $ 108,000 $  209,987 $ 317,987 4,707 11,294
Betsy S. Atkins $ 112,993 $ 233,795 $ 23,863 $ 370,651 3,536 1,827
Maureen Breakiron-Evans $ 133,000 $ 209,987 $ 342,987 23,391 73,324
Jonathan Chadwick $ 102,000 $ 209,987 $ 311,987 4,482 7,924
John M. Dineen $ 112,993 $ 233,795 $ 23,863 $ 370,651 3,536 1,827
John N. Fox, Jr. $ 118,500 $ 209,987 $  328,487 5,430 33,324
John E. Klein $ 265,500 $ 209,987 $ 475,487 11,641 21,764
Leo S. Mackay, Jr. $ 100,500 $ 209,987 $ 310,487 9,350 13,297
Lakshmi Narayanan3 $ 154,639 $ 152,171 $ 306,809
Michael Patsalos-Fox $ 123,000 $ 209,987 $ 332,987 10,422 53,324
Joseph M. Velli $ 43,397 $ 101,245 $ 144,642 1,417
Robert E. Weissman4 $ 100,500 $ 557,763 $ 65,589 $ 723,852 11,641 21,764
Thomas M. Wendel3 $ 7,500 $ 154,639 $  152,171 $ 314,309 5,671
1 Represents the aggregate grant date fair value of RSUs and stock options granted in the 2017 fiscal year under the 2009 Plan and the 2017 Plan, determined in accordance with FASB ASC Topic 718. All Directors listed received an award of 3,136 RSUs with a grant date fair value of $66.96 per share, except for Messrs. Narayanan and Wendel, who did not stand for reelection to the Board at the 2017 Annual Meeting, and Mr. Velli, who received an award of 1,417 RSUs with a grant date fair value of $71.45 per share upon his joining the Board on December 12, 2017 (representing a pro-rated equity award for the portion of the year that he is expected serve prior to the 2018 Annual Meeting). Ms. Atkins and Ms. Dineen also received additional awards of 400 RSUs with a grant date fair value of $59.52 per share and 1,827 stock options with a grant date fair value of $13.06 per share upon their election to the Board on April 1, 2017 (representing pro-rated equity awards for the portion of the year they served prior to the 2017 Annual Meeting). The reported dollar amounts do not take into account any estimated forfeitures related to continued service vesting requirements. For information regarding assumptions underlying the valuation of equity awards, see Note 16 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.
2 Includes the RSUs granted in 2016 and 2017 with respect to which the settlement has been deferred for some Directors, as described above. Also includes deferred RSUs granted in prior years held by Ms. Breakiron-Evans (18,547), Mr. Fox (586), Mr. Klein (6,797), Mr. Mackay, Jr. (4,506) and Mr. Patsalos-Fox (5,578) to be settled upon the Director’s termination of service on the Board. For Mr. Weissman, is comprised of 11,641 RSUs that will be settled on July 1, 2018. For Mr. Wendel, is comprised of 5,671 RSUs that will be settled in equal parts on July 1, 2018 and July 1, 2019.
3 Messrs. Narayanan and Wendel did not stand for re-election as Directors at the 2017 Annual Meeting held on June 6, 2017. The amounts shown under “Stock Awards” and “Option Awards” reflect the fair market value of unvested RSUs and stock options, respectively, held by Messrs. Narayanan and Wendel the vesting of which the Board, in its discretion, determined to accelerate immediately prior to the 2017 Annual Meeting.
4 Mr. Weissman retired from the Board on December 14, 2017. The amounts shown under “Stock Awards” and “Option Awards” include the fair market value of unvested RSUs ($347,776, reflected under “Stock Awards”) and stock options ($65,589, reflected under “Option Awards”) held by Mr. Weissman the vesting of which the Board, in its discretion, determined to accelerate upon his retirement.

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Other Board and Corporate Governance Information

Corporate Governance Policies and Practices

Corporate Governance Guidelines

The Board has adopted Corporate Governance Guidelines to assist it in the exercise of its duties and responsibilities to the Company and its stockholders. The guidelines provide a framework for the conduct of the Board’s business and are integral to an effective corporate governance program. See “Helpful Resources” on page 74.

Code of Ethics

We have a Code of Ethics that applies to all of our Directors, officers and employees. See “Helpful Resources” on page 74. We will post on our website all disclosures that are required by law or Nasdaq listing standards concerning any amendments to, or waivers from, any provision of our Code of Ethics.

Limits on Director Service on Other Public Company Boards

Under our Corporate Governance Guidelines, service by Directors on public company boards is limited to no more than four, not including the Cognizant Board. For any Director who is also a public company CEO, the limit is two, not including the Cognizant Board. This practice is to ensure that our Directors have sufficient time to devote to Cognizant matters.

Certain Relationships and Related Person Transactions

Review of Related Person Transactions

The Audit Committee is responsible for reviewing and approving all transactions between the Company and any related person that are required to be disclosed pursuant to Item 404 of Regulation S-K. Related persons can include any of our Directors or executive officers, certain of our stockholders, and any of their immediate family members. The Audit Committee will approve a related person transaction when, in its good faith judgment, the transaction is in the best interests of the Company. The Company’s legal staff is primarily responsible for monitoring and obtaining information from our Directors and executive officers with respect to potential related person transactions, and for then determining, based on the facts and circumstances, whether the related person has a direct or indirect material interest in any transaction with us. Each year, to help our legal staff identify related person transactions, we require each of our Directors, Director nominees and executive officers to complete a disclosure questionnaire identifying any transactions with us in which the officer or Director or their family members have an interest.

In addition, our Code of Ethics requires all Directors, officers and employees who may have a potential or apparent conflict of interest to, in the case of employees, notify our Chief Compliance Officer or General Counsel, or in the case of Directors and executive officers, notify our General Counsel or the Board. See “Helpful Resources” on page 74.

2017 Transactions with Related Persons

Brackett B. Denniston III, who served as our Interim General Counsel and an executive officer of the Company from December 2, 2016 until May 15, 2017, is, and was during such period, a Senior Counsel at the law firm of Goodwin Procter LLP (“Goodwin”). During the fiscal year ended December 31, 2017, Goodwin performed legal services for the Company for which it was paid approximately $4.3 million in the aggregate. Fees for the services of Goodwin attorneys, including Mr. Denniston, were paid by us at rates that were generally consistent with rates regularly charged by the firm to other clients. Mr. Denniston did not have a direct interest in the payment of such fees, but had an indirect interest in such fees as an employee of the law firm. Mr. Denniston did not review or approve any invoices for payments to Goodwin. The provision of legal services by Goodwin was reviewed and approved by the Audit Committee.

Other than the matter described above and such other matters disclosed herein under “Compensation” starting on page 26, there have been no related person transactions since January 1, 2017.

Communications to the Board from Stockholders

How you can communicate concerns to our Directors

       

Under procedures approved by a majority of our independent Directors, our Chairman and our General Counsel and Secretary are primarily responsible for monitoring communications from stockholders and, if they relate to important substantive matters and include suggestions or comments that our Chairman and General Counsel and Secretary consider to be important for the Directors to know, providing copies or summaries to the other Directors. In general, communications relating to corporate governance and long-term corporate strategy are more likely to be forwarded than communications relating to ordinary business affairs, personal grievances and matters as to which we tend to receive repetitive or duplicative communications.

The Board will give appropriate attention to written communications that are submitted by stockholders, and will respond if and as appropriate. Stockholders who wish to send communications on any topic to the Board should address such communications to the Board or our General Counsel and Secretary. See “Helpful Resources” on page 74.

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Common Stock and Total Stock-Based Holdings Table

The following table sets forth the Cognizant stock-based holdings of our Directors, NEOs, and Directors and executive officers as a group as of March 31, 2018, as well as the stock-based holdings of beneficial owners of more than 5% of our common stock as of December 31, 2017. Unless otherwise indicated, the address for the individuals below is our address.

Common Stock
Directors     Stock     Options     Total     % Outstanding
Zein Abdalla 967 7,831 16,968 *
Betsy S. Atkins 913 5,363 *
Maureen Breakiron-Evans 255 29,861 56,970 *
Jonathan Chadwick 758 4,461 13,078 *
John M. Dineen 913 5,363 *
John N. Fox, Jr. 35,590 18,301 62,784 *
John E. Klein 597,859 18,301 631,264 *
Leo S. Mackay, Jr. 6,797 9,834 29,444 *
Michael Patsalos-Fox 16,797 49,861 80,543 *
Joseph M. Velli 2,500 3,917 *
Total 661,523 140,276 905,694 *
 
Common Stock
Named Executive Officers Stock Options Total % Outstanding
Francisco D’Souza 462,425 918,999 *
Rajeev Mehta 30,875 286,040 *
Karen McLoughlin 43,070 170,779 *
Ramakrishna Prasad Chintamaneni 19,430 105,456 *
Matthew W. Friedrich 78,226 *
Total 555,800 1,559,500 *
 
Common Stock
Current Directors and Executive Officers Stock Options Total % Outstanding
As a group (28 people) 1,652,222 160,276 3,514,644 *

5% Beneficial Owners Common Stock    % Outstanding
The Vanguard Group 42,032,743 7.1%
BlackRock, Inc. 36,121,482 6.1%
*

Less than 1% of the total outstanding shares of our common stock.

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Common Stock. This column shows beneficial ownership of our common stock as calculated under SEC rules. Except to the extent noted below, everyone included in the table has sole voting and investment power over the shares reported. None of the shares is pledged as security by the named person, although standard brokerage accounts may include non-negotiable provisions regarding set-offs or similar rights. The Stock subcolumn includes shares directly or indirectly held and shares underlying RSUs that will vest within 60 days. The Options subcolumn includes shares that may be acquired under stock options that are currently exercisable or will become exercisable within 60 days.

Total. This column shows the individual’s total Cognizant stock-based holdings, including securities shown in the Common Stock column (as described above), plus non-voting interests that cannot be converted into shares of Cognizant common stock within 60 days, including, as appropriate, PSUs, RSUs and stock options.

Common Stock and Total. Both columns include the following shares over which the named individual has shared voting and investment power through family trusts or other accounts: Klein (137,872) and Mehta (30,523).

Current Directors and Executive Officers. This row includes: (1) 2,976 RSUs that vest within 60 days, (2) 160,276 shares that may be acquired under stock options that are or will become exercisable within 60 days, and (3) 169,195 shares of common stock over which there is shared voting and investment power.

5% Beneficial Owners. This table shows shares beneficially owned by BlackRock, Inc., 55 East 52nd Street, New York, NY 10055, and The Vanguard Group, 100 Vanguard Blvd., Malvern, PA 19355, as follows:

(# of shares)       BlackRock       Vanguard
Sole voting power 30,994,860 839,580
Shared voting power 0 134,708
Sole dispositive power 36,121,482 41,077,465
Shared dispositive power 0 955,278

The foregoing information is based solely on a Schedule 13G/A filed by BlackRock with the SEC on January 29, 2018 and a Schedule 13G/A filed by Vanguard with the SEC on February 9, 2018, as applicable.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our Directors, certain officers and stockholders who beneficially own more than 10% of any class of our equity securities registered pursuant to Section 12 of the Exchange Act (collectively, the “Reporting Persons”) to file initial statements of beneficial ownership of securities and statements of changes in beneficial ownership of securities with respect to our equity securities with the SEC. All Reporting Persons are required by SEC regulation to furnish us with copies of all reports that such Reporting Persons file with the SEC pursuant to Section 16(a). Based solely on our review of the copies of such forms received by us and upon written representations of the Reporting Persons received by us, we believe that there has been compliance with all Section 16(a) filing requirements applicable to such Reporting Persons with respect to the year ended December 31, 2017, except that one Form 4 for Mr. Chintamaneni, reporting a sale of shares, and one Form 4 for Srinivasan Veeraraghavachary, also reporting a sale of shares, were filed one day late and one charitable gift of shares by Ms. Breakiron-Evans in 2016 that should have been reported on a Form 5 in early 2017 was reported late on a Form 5 in early 2018.

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Proposal 2
Advisory Vote on Executive Compensation (Say-on-Pay)
What are you voting on?
In accordance with Section 14A of the Exchange Act, we are asking stockholders to vote on an advisory basis to approve the compensation paid to our NEOs, as described in this proxy statement.
The Board unanimously recommends a vote FOR the approval, on an advisory (non-binding) basis, of our executive compensation.        

Resolution Stockholders Are Being Asked to Approve

RESOLVED, that the stockholders of Cognizant Technology Solutions Corporation approve, on an advisory basis, the compensation of the Company’s named executive officers, disclosed pursuant to Item 402 of Regulation S-K in the Company’s definitive proxy statement for the 2018 Annual Meeting of Stockholders.

Background

94% votes cast
“FOR”
Say-on-Pay at
2017 Annual
Meeting

        The Dodd-Frank Act requires that our stockholders have the opportunity to cast an advisory vote on executive compensation at annual meetings, commonly referred to as a “Say-on-Pay” vote, at least once every three years. At the 2011 Annual Meeting and again at the 2017 Annual Meeting, the Company’s stockholders voted, on an advisory basis, on the frequency of the Say-on-Pay vote, in both instances voting in favor of the holding of a Say-on-Pay vote every year. A Say-on-Pay vote was first held at the 2011 Annual Meeting and has been held at each subsequent annual meeting. Holding the Say on Pay vote every year gives the stockholders the opportunity to provide direct and frequent feedback on our compensation philosophy, policies and procedures. The next Say-on-Pay vote will occur in 2019.

The Say-on-Pay vote is a non-binding vote on the compensation of our NEOs, as described in the Compensation Discussion and Analysis section, the tabular disclosure regarding such compensation, and the accompanying narrative disclosure, set forth in this proxy statement. Please read the “Compensation Discussion and Analysis” section starting on page 27 for a detailed discussion about our executive compensation programs and compensation philosophy, including information about the fiscal 2017 compensation of our NEOs.

The votes solicited by this Proposal 2 are advisory, and therefore are not binding on the Company, the Board or the Compensation Committee. However, the Board, including the Compensation Committee, values the opinions of our stockholders and, to the extent there is any significant vote against the NEO compensation as disclosed in this proxy statement, we will consider our stockholders’ concerns and evaluate what actions, if any, may be appropriate to address those concerns.

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Compensation Discussion and Analysis

This Compensation Discussion and Analysis section describes the general objectives, principles and philosophy of the Company’s executive compensation program, focused primarily on the compensation of our NEOs.

Overview of Executive Compensation Program

Compensation Committee

The Compensation Committee oversees and administers our executive compensation program, including the evaluation and approval of compensation plans, policies and programs offered to our NEOs. The Compensation Committee operates under a written charter adopted by the Board and is comprised entirely of independent, non-employee directors as determined in accordance with various Nasdaq and SEC rules. The Compensation Committee has the authority to engage its own independent advisor to assist in carrying out its responsibilities under its charter.

Key Program Features

The following tables summarize key elements of our executive compensation program and where they are described in the Compensation Discussion and Analysis section.

What We Do                                                                                                               What We Don’t Do
  Pay for performance, with high percentages of performance-based and long-term equity compensation
See page 29
  No hedging or speculation with respect to Cognizant securities
See page 35
  Use appropriate peer groups and market data when establishing compensation
See page 28
  No short sales of Cognizant securities
See page 35
  Retain an independent external compensation consultant
See page 28
  No margin accounts with Cognizant securities
See page 35
  Set significant stock ownership guidelines for executives
See page 34
  No pledging of Cognizant securities
See page 35
  Maintain a strong clawback policy
See page 35
  No tax “gross ups” on severance benefits
See page 36
  Utilize “double trigger” change in control provisions
See page 42    

Program Objectives

The Compensation Committee has designed the executive compensation program to meet the following objectives:

Ensure executive compensation is aligned with our corporate strategies and business objectives and that potential realizable compensation is set relative to each executive’s level of responsibility and potential impact on our performance;

Tie a substantial portion of executive officer compensation to achieving both short-term and long-term performance objectives that enhance stockholder value;

Reinforce the importance of meeting and exceeding identifiable and measurable goals through superior awards for superior performance;

Provide total direct compensation that is competitive in markets in which we compete for management talent in order to attract, retain and motivate the best possible executive talent;

Provide an incentive for long-term continued employment with our Company; and

Reinforce our desired culture and unique corporate environment by fostering a sense of ownership, urgency and overall entrepreneurial spirit.


Company Performance and Impact on Compensation Program

The Compensation Committee set 2017 executive compensation in March 2017, except with respect to Mr. Friedrich, who joined the Company in May 2017. The Compensation Committee’s decisions with respect to 2017 executive compensation were primarily based on:

The Company’s performance during 2017, 2016 and in previous years, including relative to its industry;

Anticipated and desired Company performance for 2017 and 2018 based on Company and industry projections and Company goals;

Individual executive performance and responsibility; and

The market for executive talent.

The Compensation Committee believes that the design of the compensation program, including having the appropriate mix of compensation elements and performance metrics and targets, has a significant impact on driving Company performance.

The performance by the Company in 2015, 2016 and 2017 across the performance metrics and targets selected by the Compensation Committee is set forth under “Aligning Pay with Performance.”

   See page 6 for further information

Details of the compensation elements and performance by the Company in 2015, 2016 and 2017 against each of the performance-based compensation elements is set forth under “Direct Compensation of Named Executive Officers.”

   See page 29 for further information

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Role of Stockholder Say-on-Pay Votes

The Company provides its stockholders with the opportunity to cast an annual, non-binding advisory vote on executive compensation. At the 2017 Annual Meeting, approximately 94% of the votes cast on the Say-on-Pay proposal were voted “FOR” the proposal. In making its decisions regarding executive compensation for 2017, the Compensation Committee considered the significant level of stockholder support our compensation program has received from stockholders in past years and chose to generally retain the same structure of the executive compensation program. Nevertheless, there were two notable changes to the compensation structure for NEOs made by the Compensation Committee in 2017:

Increased non-GAAP EPS weighting in PSUs awarded in 2017 (from 25% to 50%), with weighting of revenue reduced (from 75% to 50%), to reflect increased Company focus on profitability; and

Annual RSU grant timing changed for certain NEOs from the fourth quarter of 2016 to the first quarter of 2017 to align with the timing of the Company’s other annual equity grants and other annual compensation decisions by the Compensation Committee.

See “Direct Compensation of Named Executive Officers” starting on page 29. The Compensation Committee will continue to consider the outcome of the Company’s Say-on-Pay votes when making future compensation decisions for the NEOs.

The Compensation-Setting Process

Compensation Committee and Engagement of Compensation Consultant

To achieve the objectives of our executive compensation program, the Compensation Committee evaluates our executive compensation program with the goal of setting compensation at levels the committee believes are competitive with those of other technology-related growth companies that compete with us for executive talent. The committee has periodically engaged an independent compensation consultant to provide additional assurance that the Company’s executive compensation program is reasonable and consistent with its objectives. The consultant reports directly to the Compensation Committee, periodically participates in committee meetings, and advises the committee with respect to compensation trends and best practices, plan design, and the reasonableness of individual compensation awards. Although the Compensation Committee reviews the compensation practices of our peer companies and other market data as described below, the committee does not adhere to strict formulas or survey data to determine the mix of compensation elements. Instead, as described below, the Compensation Committee considers various factors in exercising its discretion to determine compensation, including the experience, responsibilities and performance of each NEO as well as the Company’s overall financial performance. This flexibility is particularly important in designing compensation arrangements to attract and retain executives in a highly-competitive, rapidly changing market.

Since 2010, the Compensation Committee has engaged Pay Governance, an independent executive compensation advisory firm, to review all elements of executive compensation, benchmark such compensation in relation to other comparable companies with which we compete for executive talent, and provide recommendations to ensure that our executive compensation program continues to enable us to attract and retain qualified executives through competitive compensation packages that incentivize the attainment of our short-term and long-term strategic objectives. As part of the compensation-setting processes for 2015, 2016 and 2017, the committee asked Pay Governance to provide benchmark compensation data and/or review management’s recommendations for year-over-year compensation adjustments, including a review for general market competitiveness and competitiveness with the Company’s peer group.

The Compensation Committee has assessed the independence of Pay Governance and concluded that no conflict of interest exists that would prevent Pay Governance from providing independent advice regarding executive and director compensation matters.

Role of Executive Officers in Determining Executive Compensation

Our CEO, aided by our Chief People Officer, among others, provides statistical data and makes recommendations to the Compensation Committee to assist it in determining compensation levels. In addition, our CEO and our President provide the committee with a review of the performance of other executive officers. While the Compensation Committee utilizes this information and values management’s observations with regard to compensation, the committee makes the ultimate decisions regarding executive compensation.

Peer Group and Market Data

The Compensation Committee, with assistance from Pay Governance, establishes the Company’s peer group that is used for market comparisons and benchmarking of the compensation for Mr. D’Souza, Mr. Mehta and Ms. McLoughlin. The peer group used in the compensation-setting process for 2017 is comprised of a group of technology-related firms selected based on revenue, headcount and market capitalization.

Accenture Plc

Automatic Data Processing, Inc.

CA Technologies, Inc.

Computer Sciences Corporation

Convergys Corporation

Fidelity National Information Services, Inc.

Fiserv, Inc.

Leidos Holdings, Inc.

Mastercard Incorporated

NetApp, Inc.

Symantec Corporation

Visa, Inc.

Yahoo! Inc.

For the other two NEOs, Mr. Chintamaneni and Mr. Friedrich, the Compensation Committee used market data that the Company obtained from third party benchmarking services for similar roles and levels. The committee believes this approach is appropriate for the roles of these NEOs as it allows for the use of a broader market data view not limited to the Company’s peer group. Such market data was evaluated and utilized by the Compensation Committee with the assistance of Pay Governance.

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Direct Compensation of Named Executive Officers

Primary Compensation Elements for 2017 – Overview

Our executive compensation program is designed to motivate, retain and engage our executive leadership and appropriately reward them for their contributions to the achievement of our business strategies and goals. In order to achieve our compensation objectives, the Company provides its executives with a total direct compensation package consisting of the elements listed in the chart below.

The Compensation Committee makes decisions on executive compensation from a total direct compensation perspective. Each element is considered by the committee to be important in meeting one or more compensation program objectives. The following chart illustrates the balance of elements of 2017 target total direct compensation for our CEO and other NEOs.

Base Salary

Stable source of cash income at competitive levels


Annual Cash Incentive (ACI)

Annual cash incentive to motivate and reward achievement of Company financial and operational objectives

Measurement Period Target Compensation
1 year (2017) 85% of base salary
Payout Range

Historical ACI award achievements by year

2015 2016 2017
142.0% 79.8% 114.8%

Performance Stock Units (PSUs)

Annual grant of performance stock units that reward achievement of Company financial objectives, continued service and long-term performance of our common stock

Measurement Period Vesting
2 years (2017-2018) 1/3rd at 30 months
2/3rds at 36 months
Vesting Range

Historical PSU achievements by performance measurement period

20151 20162 2016/172
122.9% 38.2% 85.5%

Restricted Stock Units (RSUs)

Grants of restricted stock units to reward continued service and long-term performance of our common stock

Grants Annually for Mr. D’Souza (CEO), Mr. Mehta and Ms. McLoughlin; every 3 years for Mr. Chintamaneni and Mr. Friedrich

Vesting Quarterly over 3 years

Note: The above presentation seeks to provide a view of 2017 total direct compensation as reviewed by the Compensation Committee. As such, it uses grant date share prices for RSUs and PSUs and the target level of achievement for the ACI and PSUs. The above presentation excludes additional grants of RSUs and PSUs to Mr. Mehta and Mr. Chintamaneni made in connection with the expansion of their roles in 2016 and the signing bonus and grants of RSUs and PSUs to Mr. Friedrich upon his joining the Company in 2017.

2017 Target Annual Compensation Mix

1 Weighting was 100% revenue for the 2015 performance measurement period.
2 Weighting was 75% revenue and 25% non-GAAP EPS for the 2016 and 2016/17 performance periods.

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Base Salary

The Compensation Committee reviews the base salaries of our NEOs on an annual basis. The primary objective of the base salary component of an executive’s total direct compensation is to provide financial stability and certainty. The committee makes periodic adjustments to base salary based on individual performance and contributions, market trends, increases in the cost of living, competitive position and our financial situation. Consideration is also given to relative responsibility, seniority, experience and performance of each individual NEO. No specific weight is assigned to any of the above criteria relative to the others, but rather the committee uses its judgment in combination with market and other data provided by Pay Governance and the Company.

Annual Cash Incentive (ACI)

2017 Annual Cash Incentive

The Compensation Committee has designed our ACI program to stimulate and support a high-performance environment by tying such incentive compensation to the attainment of organizational financial goals and by recognizing superior performance. The annual cash incentives are intended to compensate individuals for the achievement of these goals. The committee determines actual cash incentives after the end of the fiscal year based upon the Company’s performance.

For 2017, the Compensation Committee based the annual cash incentive awards for the NEOs on the achievement of financial goals tied to metrics that it believes are valued by our stockholders. The committee believes that our stockholders value and measure the performance of these executives based principally on the growth of Company revenue, earnings and cash flow. Consequently, as in past years, the committee believed it appropriate to establish three components to the annual cash incentive: revenue, non-GAAP Income from Operations (see “Non-GAAP Financial Measures and Forward-Looking Statements” on page 65) and days sales outstanding (“DSO”).

The Compensation Committee determined a target for each component (revenue, non-GAAP Income from Operations and DSO) and a weighting for the various components as a percentage of the total award such that achievement of the targeted level of performance for all three components would result in the executives receiving their target awards. The committee set threshold, or minimum, levels for each of the components below which no annual cash incentive would be paid for the particular component. The committee also set maximum levels for each of the components above which no additional annual cash incentive would be paid for the particular component and that collectively result in a maximum possible annual cash incentive equal to 200% of the target awards for the executives. Achievement for performance between the threshold and target levels or between the target and maximum levels for any of the components is calculated using straight-line interpolation.

Annual Cash
Incentive Target
Based on High
Growth Objectives

        The Compensation Committee established revenue and non-GAAP Income from Operations targets for 2017 at levels 9.0% and 8.9% above the Company’s 2016 revenue and non-GAAP Income from Operations, respectively. These targets were established to incentivize the Company’s management to prioritize a continued high level of growth in the Company’s revenue as well as a targeted level of non-GAAP Operating Margin. Meanwhile, the DSO component remained at the same targeted level as prior years as the committee viewed the target as appropriately incentivizing maintenance of a healthy cash flow level. As a result of these targets, there was substantial uncertainty at the time the committee established the performance goals for 2017 as to the likelihood of the Company’s attainment of the targeted levels of performance.

Prior to determining the performance by the Company against the targets for 2017, the Compensation Committee increased the revenue and non-GAAP Income from Operations targets by the amount of revenue and income from operations derived from acquisitions completed during 2017.

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Stock-Based Awards

Overview

We provide long-term incentive compensation through stock-based awards in the form of PSUs and RSUs. The Compensation Committee believes that such stock-based grants provide our executive officers with a strong incentive to manage the Company from the perspective of an owner with an equity stake in the long-term success of the business, create an ownership culture, and help align the interests of our executives to those of our stockholders. In addition, the committee believes the vesting features of the stock-based grants should further our goal of executive retention by providing an incentive to our executive officers to remain in our employ during the vesting period.

In considering the number of stock-based awards to grant, the Compensation Committee first establishes a target compensation value that it wants to deliver to the NEOs through long-term equity awards. In doing so, the committee generally takes into account various factors, including the value of PSUs and RSUs that each of our executive officers has previously been awarded, the base salary and target ACI of the executive officer, the Committee’s emphasis on performance-based and equity compensation in the mix of total compensation, and the perceived retention value of the total compensation package in light of the competitive environment. The committee also generally takes into account increases in the cost of living, the size of comparable awards made to individuals in similar positions within the industry, the scope, responsibility and business impact of the officer’s position, the individual’s potential for increased responsibility and promotion over the award term, and the individual’s personal experience and performance in recent periods. Once the target value is established, the committee determines the number of PSUs and RSUs to be granted by reference to the current value of the Company’s common stock.

PSUs

PSUs granted in 2017 have a 2-year performance measurement period (fiscal years 2017 and 2018) over which the Company’s performance is measured across two performance metrics: revenue and non-GAAP EPS. See “Non-GAAP Financial Measures and Forward-Looking Statements” on page 65. Revenue and non-GAAP EPS each determine 50% of the award.

For each metric, the Compensation Committee established at the time of the award:

Threshold – 50% vesting, with 0% vesting for performance below the threshold.
Target – 100% vesting.
Maximum – 200% vesting, and maximum possible number of PSUs that may vest.

Whether and to what extent the performance as to either metric has been achieved will be determined by the Compensation Committee in its sole discretion based upon the audited financials for the 2017 and 2018 fiscal years. To the extent the level of achievement falls between the threshold and target levels or between the target and maximum levels for either metric, straight-line interpolation is utilized to calculate the payout level for the component.

Performance across the two metrics determines the total number of PSUs that may vest, with actual vesting of the awards as set forth below, and contingent upon the NEO continuing in the service of the Company through such dates:

1/3rd will vest 30 months following the start of the performance measurement period.
2/3rds will vest 36 months following the start of the performance measurement period.

For information on 2016 PSUs that in part vested in, and 2016/17 PSUs that had a performance measurement period during, 2017, see “Aligning Pay with Performance” on page 6, “Primary Compensation Elements for 2017 – Overview” on page 29 and footnotes 4 and 5 to the Outstanding Equity Awards at Fiscal Year-End 2017 Table on page 39.

RSUs

RSUs vest in quarterly installments over a 3-year period from the grant date. Grants are made annually for Mr. D’Souza, Mr. Mehta and Ms. McLoughlin, with the full amount of such grants included in target direct compensation. Grants are made on a three-year cycle for Mr. Chintamaneni and Mr. Friedrich, with the targeted grant date value of annual vestings included in target direct compensation.

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2017 Compensation for Our Named Executive Officers

Francisco D’Souza   CEO

   Age 49

Education
BBA, University of Macau
MBA, Carnegie Mellon University

Cognizant Tenure
24 years

Public Company Boards
General Electric Company

2017 Compensation
Target Direct Compensation – $12,232,013
3% increase to reflect general market trends
Base salary – $669,282 (~0% increase vs. 2016)
Annual cash incentive – target of 85% of base salary as in 2016 ($564,655); actual payout of $648,111 (114.8% of target) based on Company performance
Annual PSU grant – $7,219,618 (3% increase vs. 2016)
Annual RSU grant – $3,774,223 (3% increase vs. 2016 (December 2015 grant))
Key Responsibilities and Career Highlights
Mr. D’Souza sets the strategic direction of the Company, promotes Cognizant’s values and client-first culture, and focuses on ensuring the Company’s sustainable growth and driving long-term stockholder value. He co-founded Cognizant in 1994 and has served as the Company’s CEO since 2007, leading revenue growth from $2.1 billion that year to $14.8 billion in 2017.

Committee Assessment
In light of Mr. D’Souza’s continued success as CEO in 2016, the Compensation Committee continued in 2017 its past practice of setting overall CEO compensation close to the median but weighted more heavily towards equity compensation vs. the Company’s peer group, providing the opportunity for higher realized compensation based on Company performance.

Rajeev Mehta   President

   Age 51

Education
BS, University of Maryland
MBA, Carnegie Mellon University

Cognizant Tenure
21 years

2017 Compensation
Target Direct Compensation – $6,816,724
3% increase to reflect general market trends
Base salary – $630,000 (0% increase vs. 2016)
Annual cash incentive – target of 85% of base salary as in 2016 ($535,500); actual payout of $614,647 (114.8% of target) based on Company performance
Annual PSU grant – $3,704,952 (3% increase vs. 2016)
Annual RSU grant – $1,946,272 (4% increase vs. 2016 (December 2015 grant))

Additional equity grants – PSUs ($898,775) and RSUs ($599,160), not included in target direct compensation, made in 2017 in connection with his promotion to President in 2016

Key Responsibilities and Career Highlights
Mr. Mehta is responsible for the overall profit and loss of Cognizant’s operations, leading the global industry and geographic business units, as well as consulting, digital services and systems and technology solutions. His responsibilities also include overseeing the Company’s Chief Operating Officer and Chief People Officer, focusing on talent, utilization, performance and ongoing operational excellence, and managing the Company’s emerging business accelerator unit and other special initiatives dedicated to building new solutions for our clients. Mr. Mehta joined Cognizant in 1997 and has consistently contributed to the Company’s growth.

Committee Assessment
In setting Mr. Mehta’s 2017 compensation, the Compensation Committee considered but did not rely upon Company peer group information as the committee viewed his role at Cognizant as more expansive than those of the peer group set of executives. The committee determined that a 3% increase for 2017, to reflect general market trends, was appropriate in light of the 14% increase in target direct compensation Mr. Mehta received upon his promotion to President in September 2016. As with the CEO, his overall compensation mix was weighted heavily towards equity compensation as compared to the Company’s peer group. Additional equity grants of PSUs and RSUs were made in 2017, representing the equity component of the increase in target direct compensation Mr. Mehta received upon his promotion to President in September 2016.

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Karen McLoughlin   CFO

   Age 53

Education
BA, Wellesley College
MBA, Columbia University

Cognizant Tenure
14 years

Public Company Boards
Best Buy Co., Inc.

2017 Compensation
Target Direct Compensation – $3,930,130
8% increase to align compensation to market
Base salary – $500,000 (17% increase vs. 2016)
Annual cash incentive – target of 85% of base salary as in 2016 ($425,000); actual payout of $487,815 (114.8% of target) based on Company performance
Annual PSU grant – $1,967,017 (5% increase vs. 2016)
Annual RSU grant – $1,038,113 (6% increase vs. 2016 (December 2015 grant))
Key Responsibilities and Career Highlights
Ms. McLoughlin oversees the Company’s worldwide financial planning and analysis, accounting and controllership, tax, treasury and internal audit functions. She is also responsible for the investor relations, enterprise risk management, procurement and real estate functions. Prior to joining Cognizant in 2003, Ms. McLoughlin held key financial management positions with Spherion Corp. and Ryder System Inc. She began her career with Price Waterhouse (now PricewaterhouseCoopers LLP).

Committee Assessment
In light of Ms. McLoughlin’s continued strong performance as CFO and her compensation being below median CFO pay at the Company’s peer group, the Compensation Committee approved an 8% overall increase in target direct compensation for Ms. McLoughlin for 2017 to more closely align her compensation to the Company’s peer group median.

Ramakrishna Prasad Chintamaneni   EVP and President, Global Industries and Consulting

   Age 48

Education
B. Tech, Indian Institute of Technology, Kanpur Postgraduate Diploma, XLRI – Xavier School of Management

Cognizant Tenure
18 years

2017 Compensation
Target Direct Compensation – $3,099,236
Base salary – $475,000 (15% increase vs. base salary prior to December 2016)
Annual cash incentive – target of 85% of base salary as in 2016 ($403,750); actual payout of $463,424 (114.8% of target) based on Company performance
Annual PSU grant – $1,041,603 (50% increase vs. 2016)
RSUs – $1,178,883 in grant date fair value targeted to vest annually; grants made in multiple once-every-three-year reloads, with a total of $1,949,000 in grant date fair value of RSUs (covering a 3-year vesting period) made in 2017
Key Responsibilities and Career Highlights
Mr. Chintamaneni leads Cognizant’s vertical commercial organization, which includes all industry verticals and the global consulting business. He joined Cognizant in 1999 and established key relationships with many of Cognizant’s largest banking and financial services clients. Prior to joining Cognizant, Mr. Chintamaneni spent seven years in the investment banking and financial services industry.

Committee Assessment
Mr. Chintamaneni’s target direct compensation was increased by 31% at the time of his promotion to his current role in December 2016, including a 15% increase in both base salary and annual cash incentive and a 39% increase in equity compensation. In light of this, the Compensation Committee determined that no further changes to his target direct compensation should be made for 2017.

Matthew W. Friedrich   EVP, General Counsel, Chief Corporate Affairs Officer and Secretary

   Age 51

Education
BA, University of Virginia
JD, University of Texas School of Law

Cognizant Tenure
1 year

2017 Compensation
Target Direct Compensation – $2,723,968
Base salary – $525,000
Annual cash incentive – target of 85% of base salary ($446,250); actual payout of $512,206 (114.8% of target base salary for all of 2017) based on Company performance
Annual PSU grant – $751,166
RSUs – $1,001,552 in grant date fair value targeted to vest annually; $3,004,656 grant date fair value award of RSUs (covering a 3-year vesting period) made in 2017
Signing bonus – $500,000
Signing equity grants – PSUs ($500,778) and RSUs ($1,251,942) made upon his joining the Company
Key Responsibilities and Career Highlights
Mr. Friedrich is responsible for the Company’s legal and corporate affairs functions. Prior to joining Cognizant in May 2017, Mr. Friedrich served as Chief Corporate Counsel for Chevron Corporation from 2014 to 2017. He previously was a law firm partner with Freshfields Bruckhaus Deringer. Mr. Friedrich began his legal career as a federal prosecutor, serving in the United States Department of Justice (DOJ) for more than 13 years.

Committee Assessment
In considering Mr. Friedrich’s compensation upon his joining Cognizant in May 2017, the Compensation Committee used market data for public company general counsels. A signing bonus and equity grants provided additional incentives for Mr. Friedrich to join the Company.

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Other Elements of Compensation

Supplemental Retirement Programs

We do not have any nonqualified deferred compensation programs, pension plans or pre-tax supplemental executive retirement plans for our executive officers, except for the CSRP described under “Broad-Based Programs” below.

Broad-Based Programs

Our U.S.-based executive officers are eligible to participate in our broad-based medical, dental and vision insurance, life and accidental death insurance, 401(k) savings plan, CSRP and ESPP on the same basis as all other regular employees.

Under the 401(k) savings plan, we match employee contributions at the rate of 50% for each dollar contributed during each pay period, up to the first 6% of eligible compensation contributed during each pay period, subject to applicable U.S. Internal Revenue Service (“IRS”) limits. The matching contributions immediately vest.

Our U.S.-based executive officers who are subject to contribution restrictions under our 401(k) savings plan due to statutory limits that apply to highly-compensated employees are eligible to participate in the Cognizant Technology Solutions Supplemental Retirement Plan (the “CSRP”) on the same basis as all other regular U.S.-based employees. The CSRP is a nonqualified savings plan in which the employee’s contributions are made on a post-tax basis to an individually owned, portable and flexible retirement plan held with a life insurance company. The CSRP works alongside established qualified retirement plans such as our 401(k) savings plan or can be the basis for a long-term stand-alone retirement savings plan. We provide a fully vested incentive match following the same formula as our 401(k) savings plan. Because the CSRP is not subject to the same IRS non-discrimination rules as our 401(k) savings plan, employees that face limitations on their 401(k) contributions due to these rules can avail themselves of the CSRP without forgoing the Company match. Although there is a limit in the amount of employer contributions, there is no limit to the amount an employee may contribute to the CSRP and it can be used in concert with other retirement strategies that may be available outside of the Company.

The 401(k) savings plan, CSRP and other generally available benefit programs allow us to remain competitive for employee talent. We believe that the availability of the aforementioned broad-based benefit programs generally enhances employee morale and loyalty.

Perquisites

We seek to maintain an egalitarian culture in our facilities and operations. The Company’s philosophy is to provide a minimal amount of personal benefits and perquisites to its executives and generally only when such benefits have a strong business purpose.

We incur expenses to ensure that our employees, including our executive officers, are accessible to us and our customers at all times and to promote our commitment to provide our employees and executives with the necessary resources and items of technology to allow them to operate “around the clock” in a “virtual office” environment. However, we do not view these expenses as executive perquisites because they are essential to the efficient performance of their duties and are comparable to the benefits provided to a broad-based group of our employees. We also provide personal security services to certain of our executive officers where we believe the provision of such services is in the interest of the Company, and we may reimburse executives for approved travel expenses where an immediate family member accompanies an executive to attend a business function at which such family member is generally expected to attend.

In addition, the Company provides Mr. D’Souza with limited access to an administrative assistant of the Company and vehicle rentals for security purposes. Mr. D’Souza does not reimburse the Company for its cost of providing the administrative services and vehicle rentals and the Company pays him an additional amount to help offset any income taxes associated with the receipt of such services.

Executive Stock Ownership Guidelines

CEO 6x annual base salary
The Company adopted revised stock ownership guidelines in March 2017 to further align the interests of our NEOs with those of stockholders. Under the revised guidelines, each NEO is required over time to hold a number of shares with a value, as of the time the revised guidelines were put in place or, for later identified NEOs, the time an executive becomes an NEO, equal to the applicable multiple of annual base salary. The annual base salary utilized in the calculation is the annual base salary applicable under the prior guidelines at the time the revised guidelines were adopted or, for later identified NEOs, the annual base salary when an officer becomes an NEO. As with the prior guidelines, compliance is required within five years of an officer becoming an NEO, subject to limited exceptions for hardship or other personal circumstances as determined by the Compensation Committee.
Other NEOs 4x annual base salary

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Hedging, Short Sale, Margin Account and Pledging Prohibitions

The Company’s insider trading policies include the following prohibitions:

No hedging or speculation with respect to Cognizant securities. All of the Company’s directors, officers and other employees are prohibited from purchasing or selling puts, calls and other derivative securities of the Company or any other derivative security that provides the equivalent of ownership of any of the Company’s securities or an opportunity, direct or indirect, to profit from the change in value of the Company’s securities.
No short sales of Cognizant securities. All of the Company’s directors, officers and other employees are prohibited from engaging in short sales of Cognizant securities, preventing such persons from profiting from a decline in the trading price of the Company’s common stock.
No margin accounts with Cognizant securities. The Company’s directors and certain of its senior officers and other specified “insiders,” including the NEOs, are prohibited from using Company securities as collateral in a margin account.
No pledging of Cognizant securities. The Company’s directors and certain of its senior officers and other specified “insiders,” including the NEOs, are prohibited from pledging the Company’s securities as collateral for a loan, or modifying an existing pledge.

Clawback Policy

The Company maintains a Clawback Policy, which applies to all NEOs and certain other members of management.

When Clawback Policy May Apply    Compensation Subject to Clawback
Company is required to prepare an accounting restatement due to material noncompliance by the Company with any financial reporting requirement under the securities laws that is caused directly or indirectly by any current or former employee’s gross negligence, willful fraud or failure to act that affects the performance measures or the payment, award or value of any compensation which is based in whole or in part on the achievement of financial results by the Company (“incentive compensation”)

Incentive compensation actually received during the preceding three years

less

amount that would have been received based on restated financial results

…and to the extent the restatement is caused by an employee’s willful fraud or intentional manipulation of performance measures that affect incentive compensation, for such employee… Same as above, but clawback may cover the entire period the employee was subject to the clawback policy
Employee engages in illegal or improper conduct that causes significant financial or reputational harm to the Company Any portion of incentive compensation
Employee has knowledge of and fails to report to the Board of Directors the conduct of any other employee or agent of the Company who engages in any of the conduct described above Any portion of incentive compensation
Employee is grossly negligent in fulfilling his or her supervisory responsibilities to prevent any employee or agent of the Company from engaging in any of the conduct described above Any portion of incentive compensation

Equity Grant Practices

The Compensation Committee or the Board approves the grant of stock-based equity awards, such as options, PSUs and RSUs, at its regularly scheduled meetings or by written consent (to be effective on the date of the meeting or receipt of all signed consents, or a later date specified). In addition, the Board has authorized an executive committee comprised of members of the executive management team to grant options to newly hired and existing employees, other than employees subject to Section 16 reporting as defined by the SEC.

The Compensation Committee and the Board do not engage in any market timing of the stock-based equity awards made to executive officers or other award recipients. It is the Company’s policy that all stock option grants, whether made by the Board, the Compensation Committee or the executive committee, have an exercise price per share equal to the fair market value of our common stock based on the closing market price per share on the grant date.

Risk Assessment

The Compensation Committee believes that its approach to goal setting and setting of targets with payouts at multiple levels of performance assists in mitigating excessive risk-taking that could harm the Company’s value or reward poor judgment by executives. Several features of the Company’s compensation programs reflect sound risk management practices. Notably, the Compensation Committee believes compensation has been allocated among base salary and short and long-term compensation target opportunities in such a way as to not encourage excessive risk-taking, but rather to reward meeting strategic Company goals that enhance stockholder value. In addition, the Compensation Committee believes that the mix of equity award instruments used under the Company’s long-term incentive program (full value awards as well as the multi-year vesting of the equity awards) also mitigates risk and properly accounts for the time horizon of risk.

The Compensation Committee believes that the Company’s compensation policies do not create risks that are reasonably likely to have a material adverse effect on the Company.

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Tax Considerations – Deductibility of Executive Compensation

IRC Section 162(m) imposes a $1 million limit on the amount that a public company may deduct for compensation paid to covered employees who are employed as of the end of the year. Prior to the U.S. Tax Cuts and Jobs Act of 2017 (the “Tax Reform Act”), covered employees generally consisted of our CEO and each of the next three highest compensated officers serving at the end of the taxable year other than our CEO, and compensation that qualified as “performance-based” under Section 162(m) was exempt from this $1 million deduction limitation. As part of the Tax Reform Act, the ability to rely on the “performance-based” exemption was, with certain limited exceptions, eliminated. In addition, the definition of covered employees was expanded to generally include all named executive officers. Although we maintain compensation plans that originally were intended to permit the payment of compensation deductible under Section 162(m), we may no longer be able to take a deduction for any compensation in excess of $1 million that is paid to a covered employee, subject to the Tax Reform Act’s limited transition relief rules.

Ongoing and Post-Employment Compensation

We have entered into Amended and Restated Executive Employment and Non-Disclosure, Non-Competition and Invention Assignment Agreements (collectively, the “Employment Agreements”) with each of the NEOs under which certain payments and benefits would be provided should the NEO’s employment terminate under certain circumstances, including in connection with a change in control.

We believe that the Employment Agreements continue to achieve two important goals crucial to our long-term financial success, namely, the long-term retention of the NEOs and their commitment to the attainment of our strategic objectives. These agreements will allow our NEOs to continue to focus their attention on our business operations and strategic plans without undue concern over their own financial situations during periods when substantial disruptions and distractions, including a potential change in control, might otherwise prevail. We believe that these severance packages are fair and reasonable in light of the years of service our NEOs have rendered us (average tenure of over 15 years), the level of dedication and commitment they have rendered us over that period, the contributions they have made to our growth and financial success and the value we expect to receive from retaining their services, including during challenging transition periods following a change in control.

No Tax Gross-ups
on Severance
Benefits
       

None of the NEOs is entitled to any tax gross-up payments for the tax liability they incur with respect to such severance benefits.

The material terms of the NEOs’ Employment Agreements and post-employment compensation, including certain changes to such Employment Agreements made in February 2018, are described in “Potential Payments Upon Termination or Change in Control” starting on page 42.

Compensation Committee

Compensation Committee Report

The Compensation Committee has furnished the report set forth below. The information contained in this report shall not be deemed to be “soliciting material” or “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933 or the Exchange Act.

To the Board of Directors of Cognizant Technology Solutions Corporation:

The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis set forth in the Company’s proxy statement for the 2018 Annual Meeting of Stockholders. The Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in such proxy statement for filing with the Securities and Exchange Commission and incorporated by reference into the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

By the Compensation Committee of the Board of Directors of Cognizant Technology Solutions Corporation

Betsy S. Atkins
John N. Fox, Jr.
John E. Klein
Michael Patsalos-Fox

Compensation Committee Interlocks and Insider Participation

During the year ended December 31, 2017, Ms. Atkins and Messrs. Fox, Klein, Patsalos-Fox and Robert E. Weissman served on the Compensation Committee. No member of the Compensation Committee was or is a current or former officer or employee of the Company or any of its subsidiaries.

None of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more of its executive officers serving as a member of the Board or the Compensation Committee of the Company.

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Executive Compensation Tables and Pay Ratio

2017 Summary Compensation Table

The following 2017 Summary Compensation Table provides certain summary information concerning the compensation earned for services rendered in all capacities to us and our subsidiaries for the years ended December 31, 2015, 2016 and 2017 by our CEO, CFO and each of our three other most highly compensated executive officers who were serving as executive officers at the end of the 2017 fiscal year (collectively, the “NEOs”). No executive officers who would have otherwise been includable in such table on the basis of total compensation for the 2017 fiscal year have been excluded by reason of their termination of employment or change in executive status during that year.

Name and
Principal Position
     Year      Salary      Bonus      Stock
Awards
1, 2
     Option
Awards
     Non-Equity
Incentive
Plan
Comp.3
     All Other
Pension and
Nonqualified
Deferred Comp.
     All Other
Comp.
     SEC Total4      Adjusted
SEC Total5
Francisco D’Souza
CEO
2017 $ 669,282 $ 10,993,841     $ 648,111 $ 167,157 6 $ 12,478,392 $ 12,478,392
2016 $ 664,300 $ 7,018,671 $ 450,332 $ 123,337 $ 8,256,640 $ 12,030,863
2015 $ 645,000 $ 10,483,400 $ 778,306 $ 44,677 $ 11,951,383 $ 11,951,383
Rajeev Mehta
President
2017 $ 630,000 $ 7,149,159 $ 614,647 $ 56,205 7 $ 8,450,011 $ 8,450,011
2016 $ 574,100 $ 3,584,397 $ 389,284 $ 5,750 $ 4,553,531 $ 7,098,962
2015 $ 538,500 $ 5,353,875 $ 649,795 $ 1,500 $ 6,543,670 $ 6,543,670
Karen McLoughlin
CFO
2017 $ 500,000 $ 3,005,130 $ 487,815 $ 8,100 8 $ 4,001,045 $ 4,001,045
2016 $ 426,500 $ 1,875,841 $ 289,126 $ 7,950 $ 2,599,417 $ 3,637,530
2015 $ 406,000 $ 2,801,868 $ 489,910 $ 7,950 $ 3,705,728 $ 3,705,728
Ramakrishna Prasad
Chintamaneni

EVP and President, Global
Industries and Consulting
2017 $ 475,000 $ 2,938,243 $ 463,424 $ 8,100 9 $ 3,884,767 $ 3,884,767
2016 10 $ 417,250 $ 566,052 $ 2,445,428 $ 7,950 $ 3,436,680 $ 3,436,680
 
Matthew W. Friedrich
EVP, General Counsel,
Chief Corporate Affairs
Officer and Secretary
2017 11 $ 330,144 $ 500,000 $ 5,508,542 $ 512,206 $ 132,148 12 $ 6,983,040 $ 6,983,040
 
 

1

Represents the aggregate grant date fair value of RSUs and PSUs determined in accordance with FASB ASC Topic 718 granted in each respective year. The reported dollar amounts do not take into account any estimated forfeitures related to continued service vesting requirements. See “Stock-Based Awards” on page 31 for a description of the terms of the RSUs and PSUs granted during 2017.

2

These amounts do not necessarily represent the actual value that will be recognized by the NEOs upon vesting of shares. The amounts reported in the columns assume settlement of PSUs at target levels; however, PSUs may vest at a maximum of 200% of target, depending on the Company’s revenue and/or non-GAAP EPS. For PSUs granted in 2017, if the maximum level of performance is achieved, the grant date fair value for the PSUs will be approximately $14,439,236 for Mr. D’Souza, $9,207,454 for Mr. Mehta, $3,934,035 for Ms. McLoughlin, $2,083,206 for Mr. Chintamaneni and $2,503,889 for Mr. Friedrich. None of the NEOs forfeited any stock awards during the 2017, 2016, or 2015 fiscal years. For information regarding assumptions underlying the valuation of stock-based awards, see the notes to the Consolidated Financial Statements in our Annual Report on Form 10-K for the applicable fiscal year.

3

Amounts shown in this column represent cash incentive awards earned for each respective fiscal year and paid in the first quarter of the following year under our annual cash incentive program.

4

Total compensation, as determined under SEC rules.

5

The Company moved the timing of annual RSU grants for certain NEOs from the fourth quarter of 2016 to the first quarter of 2017 to align with the timing of the Company’s other annual equity grants and other annual compensation decisions by the Compensation Committee. The Adjusted SEC Total represents the SEC Total plus, for 2016, the target value of the RSU grants made in the first quarter of 2017 (using a March 2, 2017 grant date fair value) to Mr. D’Souza ($3,774,223), Mr. Mehta ($2,545,432) and Ms. McLoughlin ($1,038,113) to provide stockholders annual compensation numbers that are more comparable on a year-to-year basis and more indicative of the targeted annual compensation to these executive officers. The same RSU grants are also included for 2017. The amounts in Adjusted SEC Total are not a substitute for the amounts reported under the SEC Total.

6

Includes a 401(k) savings plan matching contribution in the amount of $830, travel expenses for Mr. D’Souza’s spouse to attend business functions that she was generally expected to attend, home and other security services, provision of secure vehicles/transport in the amount of $127,271, use of an administrative assistant of the Company for personal matters, which is valued at $6,251, plus a gross-up for taxes related thereto equal to $6,731, and vehicle rentals, which is valued at $1,375, plus a gross-up for taxes related thereto equal to $1,481.

7

Represents a 401(k) savings plan matching contribution in the amount of $5,750 and home security services in the amount of $50,455.

8

Represents a 401(k) savings plan matching contribution in the amount of $2,551 and a CSRP matching contribution in the amount of $5,549.

9

Represents a 401(k) savings plan matching contribution in the amount of $2,750 and a CSRP matching contribution in the amount of $5,350.

10

2016 was the first year in which Mr. Chintamaneni was an NEO.

11

Mr. Friedrich joined the Company in 2017.

12

Includes relocation costs of $79,511, plus a gross-up for taxes related thereto equal to $52,084, and travel expenses for Mr. Friedrich’s spouse to attend a business function that she was generally expected to attend.

2018 Proxy Statement   37


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2017 Grants of Plan-Based Awards Table

The following table provides certain summary information concerning each grant of an award made to an NEO in the 2017 fiscal year under a compensation plan.

Grant
Date
Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
1


Estimated Future Payouts
Under Equity Incentive
Plan Awards2
All Other
Stock Awards:
Number of
Shares of Stock
or Units3
All Other
Option
Awards:
Number of
Securities
Underlying
Options
Exercise or
Base Price
of Option
Awards
($/Sh)
Grant Date
Fair Value
of Equity
Awards4
Name       Threshold    Target    Maximum    Threshold    Target    Maximum              
Francisco D’Souza 03/02/17    $ 282,328 $ 564,655 $ 1,129,310
03/02/17 59,994 119,987 239,974 $ 7,219,618
03/02/17 62,726 $ 3,774,223
Rajeev Mehta 03/02/17 $ 267,750 $ 535,500 $ 1,071,000
03/02/17 38,256 76,512 153,024 $ 4,603,727
03/02/17 42,304 $ 2,545,432
Karen McLoughlin 03/02/17 $ 212,500 $ 425,000 $ 850,000
  03/02/17 16,346 32,691 65,382 $ 1,967,017
03/02/17 17,253 $ 1,038,113
Ramakrishna Prasad 03/02/17 $ 201,875 $ 403,750 $ 807,500
Chintamaneni 03/02/17 8,656 17,311 34,622 $ 1,041,603
12/12/17 26,545 $ 1,896,640
Matthew W. Friedrich 05/15/17 $ 223,125 $ 446,250 $ 892,500
05/15/17 9,707 19,413 38,826 $ 1,251,944
05/15/17 66,004 $ 4,256,598

1

Represents the range of annual cash incentive that can be earned by the NEO if the minimum threshold, target and maximum performance targets are achieved. The annual cash incentive is prorated if performance levels are achieved between the threshold and target levels or between the target and maximum levels. Performance below the minimum threshold results in no annual cash incentive payout to the NEO. See “Annual Cash Incentive (ACI)” on page 30 for information regarding the methodology and performance criteria applied in determining these potential cash incentive amounts. The actual annual cash incentive paid to each NEO for his or her 2017 performance is reported as Non-Equity Incentive Plan Comp. in the 2017 Summary Compensation Table on page 37.

2

Represents the range of shares that could vest pursuant to PSUs. See “Stock-Based Awards” on page 31 for a description of the terms of the PSUs.

3

Represents RSUs. See “Stock-Based Awards” on page 31 for a description of the terms of the RSUs.

4

Represents the grant date fair value of the RSUs and PSUs determined in accordance with FASB ASC Topic 718, assuming target achievement for PSUs. For information regarding assumptions underlying the valuation of stock-based awards, see Note 16 of the Consolidated Financial Statements in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

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Outstanding Equity Awards at Fiscal Year-End 2017 Table

The following table provides certain summary information concerning outstanding equity awards held by the NEOs as of December 31, 2017.

Option Awards1 Stock Awards
Name



Number of
Securities Underlying
Unexercised Options
Equity
Incentive
Plan Awards;
Number of
Securities
Underlying
Unexercised
Unearned
Options
Option
Exercise
Price
Option
Expiration
Date
Number
of Shares
or Units of
Stock That
Have Not
Vested
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested2
Equity
Incentive
Plan Awards;
Number of
Unearned
Shares, Units
or Other
Rights That
Have Not
Vested
Equity
Incentive
Plan Awards;
Market or
Payout Value
of Unearned
Shares, Units
or Other Rights
That Have Not
Vested2
   Exercisable      Unexercisable                                   
Francisco D’Souza 240,000     $ 9.11 12/08/18
18,939 3 $ 1,345,048
47,045 3 $ 3,341,136
26,872 4 $ 1,908,449
109,063 5 $ 7,745,654
119,987 6          $ 8,521,477
Rajeev Mehta  9,672 3 $ 686,905
31,728 3 $ 2,253,323
13,723 4 $ 974,607
55,696 5 $ 3,955,530
76,512 6 $ 5,433,882
Karen McLoughlin 12,500 $ 15.53 08/13/18
5,062 3 $ 359,503
12,940 3 $ 918,999
7,182 4 $ 510,066
29,147 5 $ 2,070,020
32,691 6 $ 2,321,715
Ramakrishna Prasad
Chintamaneni
1,965 3 $ 139,554
16,712 3 $ 1,186,886
26,545 3 $ 1,885,226
1,990 4 $ 141,330
10,768 5 $ 764,743
2,172 5 $ 154,255
17,311 6 $ 1,229,427
Matthew W. Friedrich 55,004 3 $ 3,906,384
19,413 6 $ 1,378,711

1

Each stock option grant included in this table has a term of 10 years measured from the grant date, and all outstanding options granted to the NEOs as of December 31, 2017 have fully vested pursuant to their terms.

2

Market value was determined based on a closing price of a share of our common stock of $71.02 as of December 29, 2017.

3

Mr. D’Souza, Mr. Mehta and Ms. McLoughlin. Awards shown are time-based RSUs that were granted on November 30, 2015 and March 2, 2017 and vest on specified dates if the individual is still employed by the Company:

Mr. D’Souza: Approximately 9,962 shares are scheduled to vest in March, June, September and December of 2018; and approximately 5,227 shares are scheduled to vest in March, June, September and December of 2019 and also in March 2020.
Mr. Mehta: Approximately 5,943 shares are scheduled to vest in March, June, September and December of 2018; and approximately 3,525 shares are scheduled to vest in March, June, September and December of 2019 and also in March 2020.
Ms. McLoughlin: Approximately 2,704 shares are scheduled to vest in March, June, September and December of 2018 and approximately 1,438 shares are scheduled to vest in March, June, September and December of 2019 and also in March 2020.

Mr. Chintamaneni. Awards shown are time-based RSUs that were granted on February 16, 2016, December 1, 2016 and December 12, 2017 and vest on specified dates if Mr. Chintamaneni is still employed by the Company: Approximately 4,694 shares are scheduled to vest in March, June, September and December of 2018 and also in March 2019; approximately 4,301 shares are scheduled to vest June, September and December of 2019; and approximately 2,212 shares are scheduled to vest in March, June, September and December of 2020.

Mr. Friedrich. Awards shown are time-based RSUs that were granted on May 15, 2017 and vest on specified dates if Mr. Friedrich is still employed by the Company: Approximately 5,500 shares are scheduled to vest in March, June, September, and December of 2018 and 2019 and also in March and June of 2020.

2018 Proxy Statement   39


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4

2016 Performance Measurement Period PSUs. Represents the number of shares that are eligible to vest based on PSUs with a 2016 performance measurement period. 1/3rd vested on May 31, 2017 (not shown) and the remaining 2/3rds vest on November 30, 2018 (subject to continued employment through such date). Performance for such awards was calculated and achieved as set forth below. Prior to determining the performance by the Company against the targets for 2016, the Compensation Committee increased the revenue and non-GAAP EPS targets by the amount of revenue and earnings per share derived from acquisitions completed during 2016. See “Stock-Based Awards” on page 31 for additional information.



5

2016/17 Performance Measurement Period PSUs. Represents the number of shares of stock that are eligible to vest based on PSUs with a 2016/17 performance measurement period (combined performance of the Company for 2016 and 2017). 1/3rd vest on July 1, 2018 and the remaining 2/3rds vest on January 1, 2019 (subject to continued employment through such dates). Prior to determining the performance by the Company against the targets for 2016/17, the Compensation Committee increased the revenue and non-GAAP EPS targets by the amount of revenue and earnings per share derived from acquisitions completed during 2016 and 2017. See “Stock-Based Awards” on page 31 for additional information.



  a Compound annual growth of component required to achieve target vs. 2015 actual.

6

2017/18 Performance Measurement Period PSUs. Represents the number of unearned shares of stock not vested equal to the target award for PSUs with a 2017/18 performance measurement period. The actual number of shares of stock that may vest will be determined by the Company’s combined 2017 and 2018 performance versus target levels on two metrics: revenue (50% of the award) and non-GAAP EPS (50% of the award). For the shares subject to each of the metrics, the number that may vest may be zero, if a threshold level of performance is not achieved as to the metric, or between 50% and 200% of the target number of shares. After the Compensation Committee determines, based on the cumulative performance for the fiscal 2017 and 2018 measurement period, the number of shares that may vest, such shares will vest as follows: 1/3rd on July 1, 2019 and the remaining 2/3rds on January 1, 2020 (subject to continued employment through such dates). See “Stock-Based Awards” on page 31 for additional information.

2017 Option Exercises and Stock Vested Table

The following table provides additional information about the value realized by the NEOs on option award exercises and stock award vestings during the year ended December 31, 2017.

Name Option Awards Stock Awards
           Number of
Shares
Acquired on
Exercise
           Value
Realized on
Exercise
1
           Number of
Shares
Acquired on
Vesting Date2
           Value
Realized on
Vesting3
Francisco D’Souza 240,000 $ 15,115,810 170,288 $ 11,970,251
Rajeev Mehta 89,533 $ 6,293,377
Karen McLoughlin 7,500 $ 425,608 44,121 $ 3,100,267
Ramakrishna Prasad Chintamaneni 10,000 $ 489,368 32,260 $ 2,224,019
Matthew W. Friedrich 11,000 $ 786,170

1

Value realized on exercise is calculated based upon the number of options exercised and the fair market value or sale price of the shares on the date of exercise less the exercise price, before any applicable tax withholding.

2

The number of shares shown in the table reflects the gross number of shares received by each NEO upon vesting of the stock awards. The Company reduced the number of shares issued to each NEO by automatically withholding a number of shares with a fair market value as of the vesting date sufficient to satisfy required tax withholdings. Each NEO actually received the following net number of shares of Company stock following such share withholding: Mr. D’Souza, 83,891; Mr. Mehta, 53,626; Ms. McLoughlin, 22,886; Mr. Chintamaneni, 16,334; and Mr. Friedrich, 5,428.

3

Value realized on vesting is calculated by multiplying the number of shares acquired on vesting by the fair market value of the shares on the respective vesting date, including any dividend equivalents payable on vesting.

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2017 Pension Benefits Table

None of the NEOs participated in any defined benefit pension plan in 2017.

2017 Nonqualified Deferred Compensation Table

None of the NEOs participated in any nonqualified defined contribution or other nonqualified deferred compensation plan in 2017.

2017 Pay Ratio

The following table provides information, based on our reasonable estimates, about the relationship between the annual total compensation of our CEO and the annual total compensation of our employees as of December 31, 2017.

Category       Median Employee
Annual Total
Compensation
      CEO
Annual Total
Compensation
      Pay Ratio
(CEO : median
employee)
CEO Pay to Worldwide Median Employee Pay $31,998 $12,478,392 390 : 1
(SEC-required pay ratio disclosure)
CEO Pay to U.S. Median Employee Pay $90,293 138 : 1
(Supplemental pay ratio information)

Employees Included. The Company had approximately 260,000 employees worldwide as of December 31, 2017, including approximately 50,400 in North America, approximately 13,800 in Europe and approximately 195,800 in various other locations throughout the rest of the world, including approximately 180,000 in India. In identifying the worldwide median employee, we included all of such employees, except for our CEO and approximately 600 employees of Netcentric and Zone, which businesses we acquired during the fourth quarter of 2017. In identifying the U.S. median employee, we included all U.S. employees, except for our CEO. We did not include any independent contractors in either calculation.

Compensation Included. In identifying the worldwide and U.S. median employees, we used the actual salary, bonus, and annual cash incentive (in each case annualized for full-time employees who joined during 2017) and the grant date fair value of PSUs and RSUs awarded during 2017 for each applicable employee as of December 31, 2017. Where there were multiple employees with the resulting median compensation, we calculated each of such employees’ annual total compensation in the same manner as the “SEC Total” of compensation shown for our CEO in the “2017 Summary Compensation Table” on page 37. We used such annual total compensation to identify the median of such employees and for disclosure of median employee pay herein.

Currency Conversion. For employees receiving their compensation in a currency other than U.S. dollars, we translated such compensation to U.S. dollars at average monthly exchange rates for 2017.

Cost-of-Living Adjustment. We applied a cost-of-living adjustment to the compensation of each of our employees resident in a jurisdiction other than the jurisdiction in which our CEO resides (the United States) in order to adjust the compensation of such employees to the jurisdiction in which our CEO resides. In making such cost-of-living adjustments, we used the cost-of-living index for the country in which the employee is based for all employees not based in the United States. Each such cost-of-living index, including that for India (27.48), the location of the median employee, was used to adjust the applicable compensation of employees to the cost-of-living index for the United States (77.23). All cost-of-living indexes used were as published by Numbeo.com for mid-year 2017. Without application of a cost-of-living adjustment, and after otherwise utilizing the same process described above to identify the median employee, the median employee would have been a full-time, salaried employee located in India with annual total compensation of $12,187. The ratio of the annual total compensation of our CEO to such median employee’s annual total compensation was 1,024 : 1.

Supplemental U.S. Median Employee Pay Ratio. The form and amount of our CEO’s annual total compensation is largely influenced by prevailing compensation practices in the United States and the competitive market for senior executive talent. While the market for such talent is global, given that the Company is a U.S.-headquartered, publicly traded company, we believe that it is useful to understand the relationship between the annual total compensation of our CEO and the median of the annual total compensation of our U.S. employees.

2018 Proxy Statement   41


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Potential Payments Upon Termination or Change in Control

Overview of Potential Payments

We have entered into Employment Agreements with our NEOs that provide certain benefits upon such employees being terminated without Cause or leaving for Good Reason (a “Qualifying Termination”). Such benefits are adjusted in the event the Qualifying Termination occurs within the 12 months following a change in control. Following a review by the Compensation Committee of the terms of such Employment Agreements against the Company peer group and other market trends and data that indicated that such agreements provided benefits that were below market, we entered into amended and restated versions of such Employment Agreements with each of our NEOs in February 2018. The table below summarizes the benefits under such Employment Agreements as amended and restated and the benefits under the prior versions of such Employment Agreements.

                         Unvested PSUs /
Performance-Based Awards
Termination
Event
Employment
Agreement
Version
Salary and Bonus Benefits Unvested
RSUs /
Time-Based
Awards
Performance
Measurement Period
Ended; Performance
Objectives Satisfied
     Performance
Measurement
Period Not
Ended
Qualifying
Termination –
no Change in
Control
Current 1x
…base salary, payable over 12 months
…annual cash incentive (100% of target), payable in a lump sum
18 months of reimbursement for COBRA premiums Acceleration of awards
that would otherwise vest in the next 12 months
Acceleration of awards that would otherwise vest in the next 12 months Forfeited
Previous
– Prior to February 2018 amendment and restatement
22 months
…base salary, payable in installments
12 months of reimbursement for COBRA premiums
Qualifying Termination – within 12 months of Change in Control Current 2x
…base salary, payable over 24 months
…annual cash incentive (100% of target), payable in a lump sum
18 months of reimbursement for COBRA premiums Acceleration of entire award Acceleration of entire award Acceleration of entire award (based on performance as of change in control date)
Previous
– Prior to February 2018 amendment and restatement
1x

…base salary, payable over 12 months

…annual cash incentive (100% of target), payable in a lump sum
12 months of reimbursement for COBRA premiums

What is a “Qualifying Termination”?
Termination without “Cause”       Leaving for “Good Reason”

“Cause” is defined as:

Willful malfeasance or willful misconduct in connection with employment;
Continuing failure to perform duties requested by the Board;
Failure to observe material policies of the Company;
Commission of any felony or any misdemeanor involving moral turpitude;
Engaging in any fraudulent act or embezzlement; or
Any material breach of an Employment Agreement.

“Good Reason” is defined as:

A material diminution of authority, duties or responsibilities;
A material diminution in overall compensation package that is not broadly applied to other executives;
The Company’s failure to obtain from its successor the express assumption of an Employment Agreement; or
The Company’s change, without the NEO’s consent, in the principal place of his or her work to a location more than 50 miles from the primary work location, but only if the change is after a change in control.

42   Cognizant Technology Solutions Corporation


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The amended and restated versions of the Employment Agreements also provide the following benefits upon the death of the employee (the prior versions did not include any such benefits): 

1x annual cash incentive (100% of target), pro-rated for the portion of the year the employee served, payable in a lump sum;
Acceleration of the entirety of any equity awards that would have vested solely upon continued service with the Company; and
Acceleration of any equity awards that had performance measurement periods ongoing, with the level of achievement determined by the Compensation Committee’s good faith determination of the level of Company achievement of the performance objectives for the portion of the performance measurement period that elapsed prior to death.

No Excess Parachute Payments

        The Employment Agreements also provide that in the event any payments under the Employment Agreements would constitute parachute payments under IRC Section 280G, then the payments under the Employment Agreements will be reduced by the minimum amount necessary so that no amounts paid will be non-deductible to the Company or subject to the excise tax imposed under IRC Section 4999.

Cash severance payments are contingent on the NEO executing a waiver and release of claims in favor of the Company and complying with one-year post-termination non-competition and non-solicitation covenants, a six-month post-termination intellectual property covenant and a perpetual confidentiality covenant.

Upon any termination of employment, each NEO will also be entitled to any amounts earned, accrued and owed but not yet paid to such NEO as of the termination date and any benefits accrued and earned in accordance with the terms of any benefits plans or programs, and these amounts are not conditioned upon the release becoming effective. No additional amounts will be paid on termination due to death or disability.

Calculation of Potential Payments

The following table shows potential payments to our NEOs under the Employment Agreements in effect on December 31, 2017 (i.e., prior to the amendment and restatement of such Employment Agreements in February 2018) in the event of a Qualifying Termination prior to or within 12 months following a change in control. After the period of 12 months following a change in control, the potential payments upon a Qualifying Termination, absent another change in control, revert to those prior to a change in control as set forth below. Potential payments are calculated assuming a December 31, 2017 Qualifying Termination date and, where applicable, using the closing price of our common stock of $71.02 on December 29, 2017, as reported on Nasdaq.

Name       Trigger       Salary and
Bonus
      Benefits       Awards
Acceleration /
Extension
      Total
Francisco D’Souza Qualifying Termination Prior to Change in Control $ 1,217,883 $ 10,834    $ 7,320,315 $ 8,549,033
Qualifying Termination Following Change in Control $ 1,228,955 $ 10,834 $ 26,696,418 $ 27,936,207
Death or Disability
Retirement
Termination for Other Reasons
Rajeev Mehta Qualifying Termination Prior to Change in Control $ 1,155,000 $ 14,574 $ 3,981,452 $ 5,151,027
Qualifying Termination Following Change in Control $ 1,165,500 $ 14,574 $ 15,749,537 $ 16,929,611
Death or Disability
Retirement
Termination for Other Reasons
Karen McLoughlin Qualifying Termination Prior to Change in Control $ 916,667 $ 11,221 $ 1,967,964 $ 2,895,852
Qualifying Termination Following Change in Control $ 925,000 $ 11,221 $ 7,225,078 $ 8,161,298
Death or Disability
Retirement
Termination for Other Reasons
Ramakrishna Prasad Qualifying Termination Prior to Change in Control $ 870,833 $ 15,606 $ 1,781,111 $ 2,667,550
Chintamaneni Qualifying Termination Following Change in Control $ 878,750 $ 15,606 $ 6,054,597 $ 6,948,953
Death or Disability
Retirement
Termination for Other Reasons
Matthew W. Friedrich Qualifying Termination Prior to Change in Control $ 962,500 $ $ 1,562,582 $ 2,525,082
Qualifying Termination Following Change in Control $ 971,250 $ $ 5,905,455 $ 6,876,705
Death or Disability
Retirement
Termination for Other Reasons

2018 Proxy Statement   43


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Proposal 3
Ratification of Appointment of Independent Registered Public Accounting Firm
What are you voting on?
Our Audit Committee has appointed PricewaterhouseCoopers LLP (“PwC”) as the independent registered public accounting firm to audit our consolidated financial statements and our internal control over financial reporting for 2018. We are asking our stockholders to ratify this appointment of PwC. Although ratification is not required by our By-laws or otherwise, the Board values the opinions of our stockholders and believes that stockholder ratification of the Audit Committee’s selection is a good corporate governance practice. If the selection is not ratified, the Audit Committee will take this fact into consideration in determining whether it is appropriate to select another independent auditor for 2018 or future years. Even if the selection is ratified, the Audit Committee may select a different independent auditor at any time during the year if it determines that this would be in the best interests of the Company and its stockholders.
The Board unanimously recommends a vote FOR the Ratification of the Appointment of PricewaterhouseCoopers LLP as our Independent Registered Public Accounting Firm for 2018.        

Our Auditor Review and Engagement Process

The Audit Committee is directly responsible for the appointment, compensation (including negotiation and approval of the audit fee), retention and oversight of the independent registered public accounting firm that audits our financial statements and our internal control over financial reporting. Our Audit Committee and its Chairperson are directly involved in the selection of the lead audit partner at the start of each rotation.

To ensure continuing audit independence:

The Audit Committee periodically considers whether there should be a change of the accounting firm that is retained, and considers the advisability and potential impact of selecting a different accounting firm;
Neither the accounting firm nor any of its members is permitted to have any direct or indirect financial interest in or any connection with us in any capacity other than as our auditors, providing audit and non-audit related services; and
In accordance with SEC rules and PwC policies, audit partners are subject to rotation requirements to limit the number of consecutive years an individual partner may provide services to our Company. For lead and concurring audit partners, the maximum number of consecutive years of service in that capacity is five years.

The members of the Audit Committee and the Board believe that the continued retention of PwC to serve as the Company’s independent registered public accounting firm is in the best interests of the Company and its stockholders.

We Expect PricewaterhouseCoopers LLP to Attend the 2018 Annual Meeting

PwC representatives are expected to attend the Annual Meeting. They will have an opportunity to make a statement if they wish and are expected to be available to respond to appropriate questions from stockholders.

44   Cognizant Technology Solutions Corporation


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Audit Committee Report

The Audit Committee has furnished the following report:

To the Board of Directors of Cognizant Technology Solutions Corporation:

The Audit Committee of the Board of Directors acts under a written charter, which is available in the “Company Governance” section of the “About Cognizant” page of the Company’s website located at www.cognizant.com. The members of the Audit Committee are independent Directors, as defined in its charter and the rules of The Nasdaq Stock Market LLC. The Audit Committee held 11 meetings during 2017.

Management is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s independent registered public accounting firm (“auditor”) is responsible for performing an independent integrated audit of the Company’s annual financial statements and management’s assessment of the effectiveness of the Company’s internal control over financial reporting. The Audit Committee is responsible for providing independent, objective oversight of these processes.

The Audit Committee has reviewed the Company’s audited financial statements for the fiscal year ended December 31, 2017 and has discussed these financial statements with management and the Company’s auditor. The Audit Committee has also received from, and discussed with, the Company’s auditor various communications that such auditor is required to provide to the Audit Committee, including the matters required to be discussed by Statement on Auditing Standards No. 1301, Communications with Audit Committees, as adopted by the Public Company Accounting Oversight Board (PCAOB), as may be modified or supplemented.

The Company’s auditor also provided the Audit Committee with formal written statements required by PCAOB Rule 3526 (Communications with Audit Committees Concerning Independence) describing all relationships between the auditor and the Company, including the disclosures required by the applicable requirements of the PCAOB regarding the auditor’s communications with the Audit Committee concerning independence. In addition, the Audit Committee discussed with the auditor its independence from Cognizant Technology Solutions Corporation. The Audit Committee also considered whether the auditor’s provision of certain other non-audit related services to the Company is compatible with maintaining such firm’s independence.

Based on its discussions with management and the auditor, and its review of the representations and information provided by management and the auditor, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

By the Audit Committee of the Board of Directors of Cognizant Technology Solutions Corporation

Zein Abdalla
Maureen Breakiron-Evans
Jonathan Chadwick
John E. Klein
Leo S. Mackay, Jr.
Joseph M. Velli

2018 Proxy Statement   45


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Independent Registered Public Accounting Firm Fees and Other Matters

Fees

The following table summarizes the fees of PwC, our independent registered public accounting firm, for each of the last two fiscal years.

Fee Category 2016         2017
Audit Fees $ 7,681,100 $ 6,421,600
Audit-Related Fees $ 3,486,100 $ 4,063,100
Tax Fees $ 879,400 $ 710,200
All Other Fees $ 238,000 $ 911,000
Total Fees $ 12,284,600 $ 12,105,900

Audit Fees

Audit fees consist of fees for the audit of our consolidated financial statements (including services necessary for rendering an opinion under Section 404 of the Sarbanes-Oxley Act), the review of our interim quarterly financial statements, and other professional services provided in connection with statutory and regulatory filings or engagements. The decrease in audit fees from 2016 to 2017 was principally due to a reduction in fees in 2017 related to matters that are the subject of the Company’s ongoing internal investigation that is being conducted under the oversight of the Audit Committee, with the assistance of outside counsel, focused on whether certain payments relating to Company-owned facilities in India were made improperly and in possible violation of the U.S. Foreign Corrupt Practices Act and other applicable laws.

Audit-Related Fees

Audit-related fees consist of fees for assurance and related services that are reasonably related to the performance of the audit and the review of our financial statements and which are not reported under “Audit Fees”, including financial due diligence services related to business combinations. These services relate to attest services that are not required by statute or regulation, consultations concerning financial accounting and reporting matters, and independent assessment of controls related to outsourcing services. The increase in audit-related fees from 2016 to 2017 was principally due to services related to the independent assessment of the Company’s controls related to outsourcing services.

Tax Fees

Tax fees comprise fees for a variety of permissible services relating to tax compliance, tax planning and tax advice. These services include assistance in complying with local transfer pricing requirements, assistance with local tax audits and assessments, withholding tax and indirect tax matters, preparation and filing of local tax returns, and technical advice relating to local and international tax matters.

All Other Fees

For 2017, other fees primarily relate to advisory fees for immigration services outside the United States and benchmarking services. For 2016, other fees primarily relate to advisory fees for immigration services.

Audit Committee Pre-Approval Policy and Procedures

The Audit Committee has adopted policies and procedures relating to the approval of all audit and non-audit services that are to be performed by our independent registered public accounting firm. This policy generally provides that we will not engage our independent registered public accounting firm to render audit or non-audit services unless the service is specifically approved in advance by the Audit Committee or the engagement is entered into pursuant to one of the pre-approval procedures described below.

From time to time, the Audit Committee may pre-approve specified types of services that are expected to be provided to us by our independent registered public accounting firm during the next 12 months. Any such pre-approval is detailed as to the particular service or type of services to be provided.

The Audit Committee has also delegated to Maureen Breakiron-Evans, the current Audit Committee Chair, the authority to approve any audit or non-audit services to be provided to us by our independent registered public accounting firm. Any such approval of services pursuant to this delegated authority is reported on at the next Audit Committee meeting. During 2016 and 2017, the Audit Committee approved all services provided to us by PwC that are subject to the pre-approval policies and procedures described above.

46   Cognizant Technology Solutions Corporation


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Company Proposals



Proposal 4

Approval of Amendment and Restatement of 2004 Employee Stock Purchase Plan

What are you voting on?

We are asking stockholders to approve the amendment and restatement of the Cognizant Technology Solutions Corporation 2004 Employee Stock Purchase Plan (as amended and restated, the “Amended and Restated ESPP” and, as previously amended and restated as of April 1, 2013, the “ESPP”) so that the Company has enough shares of common stock available for purchase to maintain its compensation structure and achieve the purposes of the ESPP, which are to:

Provide a means whereby eligible employees may purchase shares of common stock through payroll deductions;
Provide a further incentive for employees to promote our best interests; and
Encourage stock ownership by employees in order to participate in our economic progress.

If our stockholders do not approve this proposal, then the Amended and Restated ESPP will not take effect, the number of shares of common stock reserved for issuance under the ESPP will not be increased and the ESPP will continue in full force and effect in accordance with its terms.

The Board unanimously recommends a vote FOR the approval of the amendment and restatement of the Cognizant Technology Solutions Corporation 2004 Employee Stock Purchase Plan.

Overview

Our stockholders approved the ESPP in 2013. On February 27, 2018, the Board adopted the Amended and Restated ESPP upon the recommendation of the Compensation Committee and following a review by the Compensation Committee and the Board of the ESPP. The Board is submitting the Amended and Restated ESPP to our stockholders for approval. The Amended and Restated ESPP constitutes an amendment and restatement of the ESPP. The key differences between the Amended and Restated ESPP and the ESPP are:

The Amended and Restated ESPP increases the number of shares of common stock reserved for issuance under the ESPP from 28,000,000 shares to 40,000,000 shares, resulting in approximately 13,600,000 shares available for issuance under the Amended and Restated ESPP (the additional 12,000,000 shares plus approximately 1,600,000 shares remaining from the original 28,000,000 shares reserved for issuance).
The Amended and Restated ESPP includes the provision of additional flexibility for the Compensation Committee to make adjustments upon various corporate events to maintain intended benefits of the ESPP.

Rationale for Share Increase

In its determination to approve the Amended and Restated ESPP, the Board considered the following:

ESPP share supply nearly exhausted. If we do not increase the shares available for issuance under the ESPP, then, based on historical usage rates of shares under the ESPP, we would expect to exhaust the available shares under the ESPP during 2018, at which time we would lose an important compensation tool aligned with stockholder interests to attract, motivate and retain highly qualified talent.
4 – 5 year share supply being requested. Based on historical usage, we estimate that the shares reserved for issuance under the Amended and Restated ESPP would be sufficient for approximately four to five years, assuming participation remains at our historical levels and share prices remain consistent, as reflected in our three-year average burn rate, and noting that future circumstances may change the number of participants and the level of participation in the Amended and Restated ESPP. Based on the foregoing, we expect that we would require an additional increase to the share reserve under the Amended and Restated ESPP in 2022 or 2023 (primarily dependent on the future price of our shares, award levels/amounts and hiring activity during the next few years). The share reserve under the Amended and Restated ESPP could last for a longer or shorter period of time, depending on our future share prices and levels of participation in the plan, which we cannot predict with any degree of certainty at this time.
Increase represents 2% of shares outstanding. The total aggregate equity value of the additional 12,000,000 authorized shares being requested under the Amended and Restated ESPP (above the shares remaining available for issuance under the ESPP), based on the closing price of our common stock on April 9, 2018, is $947 million. Such shares represent 2% of our total shares outstanding as of the Record Date.

In light of the factors described above, and the fact that the ability to continue to offer the benefit of participating in an employee stock purchase plan is vital to our ability to continue to attract and retain employees in the competitive labor markets in which we compete, the Board has determined that the size of the share reserve under the Amended and Restated ESPP is reasonable and appropriate at this time.

2018 Proxy Statement   47


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Frequently Asked Questions About the Amended and Restated ESPP

This summary is qualified in its entirety by reference to the complete text of the Amended and Restated ESPP, which is attached as Appendix A to this proxy statement.

Who will be eligible to participate in the Amended and Restated ESPP?

All employees of Cognizant and its designated subsidiaries, other than those whose customary employment is 20 hours or less per week or no more than five months per calendar year or who own more than 5% of the total combined voting power or value of all classes of our stock, will be eligible to participate in the Amended and Restated ESPP. As of March 31, 2018, this represents approximately 48,000 persons (approximately eighteen executive officers and approximately 48,000 other employees) at Cognizant and its U.S. subsidiaries.

Who will administer the Amended and Restated ESPP?

Administration. The Amended and Restated ESPP will be administered by the Compensation Committee, an independent committee of the Board. The Compensation Committee will have the authority to make rules and regulations for the administration of the Amended and Restated ESPP.

Change in Control and Similar Significant Transactions. In the event of certain significant transactions or a ‘‘Change in Control’’ (as defined in the Amended and Restated ESPP), the Compensation Committee may provide for (i) either the replacement or termination of outstanding rights in exchange for cash, (ii) the assumption or substitution of outstanding rights by the successor or survivor corporation or parent or subsidiary thereof, if any, (iii) the adjustment in the number and type of shares of stock subject to outstanding rights, (iv) the use of participants’ accumulated payroll deductions to purchase stock on a new purchase date prior to the next purchase date and termination of any rights under ongoing offering periods or (v) the termination of all outstanding rights.

How many shares will be available for purchase under the Amended and Restated ESPP?

The number of shares of our common stock reserved for issuance under the Amended and Restated ESPP will be 40,000,000 shares, which includes the 28,000,000 shares originally reserved for issuance under the ESPP (of whic