In 2023, the unexpected removal of ChatGPT CEO Sam Altman was a notable event in the business world, but the year ended on a positive note with the establishment of the ChatGPT company’s new board and the reinstatement of its leader. A parallel C-suite development seems to have ignited in India, steadily gaining momentum with each successive quarter. However, the source of this fervour is not a large and single ouster, but a string of resignations and those affected by it are subjects of debate. Nevertheless, the IT sector in India bears the consequences.
Presently, the Indian IT industry grapples with legal complexities, involving companies issuing legal notices to competitors and filing lawsuits against former employees joining rival firms. Although job transitions are common in the IT landscape, major companies in the space are not willing to accept such moves. This issue is again hogging limelight following the statement of Cognizant's CEO Ravi Kumar S that his company is the employee's preferred choice in a Davos interview with a media house.
The statement was made under the context of a legal dispute between IT giant Wipro and its former Chief Financial Officer (CFO) Jatin Dalal, who joined rival company Cognizant recently. Earlier, the Azim Premji-founded organisation sued Mohd Haque, Wipro's former Senior VP, for joining Cognizant.
While many remain baffled about Wipro’s legal measures on Dalal, it is reportedly found that the tech major was following its contract which includes a non-compete clause. According to the clause, the company's employees who step down from their positions and leave the company cannot join the IT firm’s direct rivals for at least one year from their departure.
What is a non-compete clause?
A non-compete clause is a contractual term that prevents an employee from working for a rival employer, starting a similar business, or disclosing confidential information.
This matter was recently addressed by Wipro’s Chief Human Resources Officer, Saurabh Govil, during the company’s Q3 FY2024 results post-earnings press conference. He said, "We fully support individuals aspiring for career goals. We also acknowledge and respect their freedom to choose their path. However, it is important to consider contractual obligations and the specific case is under legal consideration."
On similar lines, Thierry Delaporte, Chief Executive Officer and Managing Director, Wipro said, "Over the past few years, we have invested largely in our leadership and at present our team is exceptionally stronger. We have also developed a robust pipeline of talented individuals who possess significant qualities for higher roles."
Delaporte further emphasised that the company is prepared for individuals choosing to leave. The Wipro chief did not specifically mention any former employee's exit, nor did he speak about the legal dispute.
Despite no direct revelation, he hinted that Wipro is not destabilised by any exit "we have a pipeline of talent." He added, "Aparna Iyer is our new CFO and she is doing a fantastic job, that’s the power of our talented pipeline built over the years."
Iyer took over as Wipro's CFO following Dalal's departure from the company. She stepped into her role in September 2023.
While this was Wipro’s stand on its leadership, (as per reports) Cognizant CEO Kumar S at Davos said that the company is constantly looking at enhancing its "employees and our efforts are to make them an integral part of the leadership team."
Neelabh Shukla, Chief Business Officer at Careernet, told BW Businessworld that it is "highly improbable to come across a noncompetence clause among companies." However, if such a clause does exist, it can be attributed to two main reasons. Firstly, the company genuinely believes that the departing individual could cause harm to their business. Secondly, the company may implement this clause to safeguard its confidentiality.
"Nevertheless, at a junior level, it is not a widely practiced approach to have early-career and mid-career employees sign such agreements," Shukla added.
Hemant Tiwari, MD, Hitachi Vantara India stated that companies enforce non-competition regulations as a means to safeguard their data. "But I believe in the government's endeavours to ensure digital security through legislation such as the data protection law."
Amidst this attention-grabbing legal dispute between Wipro and Cognizant, it is worth noting that Cognizant’s "IT poaching" has been going on since 2022. It has hired prominent Infosys leaders in the past few years. Interestingly, the aforementioned incumbent CEO of Cognizant, Ravi Kumar S, was previously a senior talent at Infosys, who departed from the company in 2022.
According to recent reports, Infosys has also taken legal action against the American IT multinational, citing concerns over its questionable poaching techniques. The Bengaluru-headquartered firm has sent a legal notice that was issued promptly after Cognizant allegedly recruited over 20 high-ranking Infosys employees, including four top executives.