Final week, on September 9, Automattic’s board voted to place CEO Matt Mullenweg on paid depart, a choice the board nonetheless hasn’t defined publicly. Mullenweg, in a company-wide Slack message, accused CFO Mark Davies of “conspiring” with three board members behind his again to power the vote by, saying he was given solely 50 minutes’ discover and was denied time to have the decision reviewed by exterior authorized counsel. He returned to the function roughly 33 hours later, and the identical board members who voted him out have since departed the corporate.
They didn’t simply stroll out the door, although. Within the 33-hour window between Mullenweg being placed on depart and his return, two key executives on the firm signed off on beneficiant exit packages for one another. Davies, who turned interim CEO throughout that window, and Chief Authorized Officer Andy Missan, every signed the opposite’s severance settlement, efficient September 10.
These agreements, successfully golden parachutes, present every of them with 12 months of base wage paid out as a lump sum, an accelerated vesting schedule for his or her fairness, the flexibility to train their vested inventory choices, and one other 12 months of well being protection, in keeping with the severance paperwork reviewed by TechCrunch.
Between the 2 of them, the total bundle — accelerated fairness plus a 12 months of wage — comes out to $8.15 million that Automattic would now owe each executives, since Mullenweg fired them upon his return.
Automattic’s authorized group is working to find out what the subsequent steps are: pay out these sums or struggle them by difficult their authorized validity. (The corporate changed its earlier counsel, Gibson Dunn, with Stephen Shackelford and Shawn J. Rabin of Susman Godfrey LLP, the corporate and Mullenweg collectively announced on Wednesday. Automattic’s normal counsel, Jordan Hinkes, additionally had his firm account deactivated, sources instructed us. Mullenweg has since stated on X that this transfer had been within the works for weeks, as Hinkes is becoming a member of an AI startup.)
Below the agreements, the executives solely get their advantages in the event that they signal a broad launch of claims and proceed to adjust to confidentiality, nonsolicitation, and different legally binding post-employment restrictions.
The agreements are additionally written in a manner that favors the executives with regards to how “trigger” — the authorized normal an organization should meet to fireplace somebody with out owing severance — is outlined. Below these phrases, the corporate should notify the chief in writing inside 60 days of studying concerning the conduct, give them 30 days to treatment the conduct if curable, then get a majority of the board to agree that trigger exists.
“Trigger” itself is narrowly outlined within the agreements as gross negligence that materially harms the corporate; realizing dishonesty, fraud, or misrepresentation inflicting materials hurt; a cloth authorized violation inflicting materials hurt; a cloth confidentiality or IP breach; or a felony or crime involving “ethical turpitude” (a authorized time period for conduct thought of inherently dishonest or morally reprehensible).
In Davies’ case, the settlement additionally specifies that his removing from the interim CEO function received’t depend as “Good Cause” — a authorized time period that usually lets an govt resign and nonetheless accumulate severance, on the grounds that their job circumstances modified for the more serious — so long as he stays CFO. Whereas that clause itself isn’t unusual for a authorized settlement, it suggests the doc was drafted with Davies’ exact circumstances in thoughts —changing into interim CEO — successfully making certain Automattic received’t owe him severance as soon as his short-term CEO stint ends, as he can’t declare that alone as a cause to resign.
Whereas it’s not essentially improper that the executives signed one another’s agreements, within the context of a governance battle at Automattic, it’s noteworthy.
One other issue that has not too long ago come to mild is that Davies held no Automattic inventory on the time of his departure, in keeping with an HR doc considered by TechCrunch. (One supply on the firm stated Davies offered the inventory a “few months in the past,” however TechCrunch can’t affirm the time of the sale. Davies did, nevertheless, nonetheless maintain numerous excellent vested choices, the HR doc confirmed.)
These occasions may be interpreted in two very alternative ways. In a single situation, Automattic’s board is responding to an inside management disaster, voted to place Mullenweg on depart, after which established protections for the executives who may face adversarial penalties if the intervention failed (because it now has).
Automattic’s authorized battle with internet hosting supplier WP Engine may come into play right here. In July, WP Engine accused Mullenweg of destroying proof in legal filings, particularly textual content by messaging apps like Sign, WhatsApp, and Telegram. If the administrators believed Mullenweg’s habits had turn out to be a severe company danger, placing him on depart and altering administration may assist show to the court docket that the board took the issues severely. This might probably assist scale back any doable sanctions or fines or enhance settlement phrases. (Mullenweg’s X post on September 10, which referenced the alleged destruction, or “spoliation,” of proof proper after the board motion, may help this concept.)
In one other situation, it may seem that Automattic’s board was attempting to create a window of management for another cause — maybe a strategic transaction — by placing Mullenweg on depart and taking the reins. In response to sources, that is the speculation Mullenweg suspects — although by his personal account, the board by no means gave him a said cause for the vote to start with, leaving him, like exterior observers, largely to take a position concerning the underlying motive. That absence of rationalization, mixed with the CFO’s inventory sale, seems to have fed his suspicions and factored into his choice to retake the CEO function and take away the board and different executives.
Automattic has been requested for remark. Makes an attempt to achieve Missan and Davies haven’t been profitable.
This text was up to date after its publication to incorporate additional context about Hinkes’ departure and embed an X publish.
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