IT Companies Adopt CXO Prenups to Navigate C-Suite Transitions

By Consultants Review Team Wednesday, 03 January 2024

As leadership transitions in the Indian IT sector witness a surge, separation agreements tailored for C-suite executives are becoming increasingly prevalent.

These agreements, designed to supersede existing employment contracts, serve to remind departing executives of their ongoing responsibilities to the company and may introduce additional restrictions linked to the individual's role. Legal experts suggest that such agreements are particularly crucial when executives maintain relationships with specific clients, emphasizing the prohibition of solicitation, especially if they are joining a competitor.

Former Infosys presidents Ravi Kumar and Mohit Joshi reportedly signed separation agreements with Infosys before their departures, outlining contractual obligations related to confidentiality, non-solicitation, and non-disparagement.

With a dozen senior executives making strategic moves to rival companies over the past few years, concerns about potential exposure to competitive intelligence, deal pricing, and financial details have prompted the adoption of such prenuptial arrangements. While these agreements offer legal clarity, incentivizing executives to sign them may be necessary, especially when they involve substantial restrictions.

Notably, Wipro recently filed a lawsuit against former CFO Jatin Dalal, who joined Cognizant as CFO, alleging a violation of non-compete obligations. Pooja Ramchandani, Partner for Employment, Labour, and Benefits at law firm Shardul Amarchand Mangaldas, emphasized that separation agreements are mutually negotiated documents covering separation terms, packages, waiver and release of claims, and post-employment restrictions.

As the trend gains traction, industry experts anticipate the continued use of such agreements to navigate the intricate landscape of C-suite transitions in the IT sector.


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