Last week, on September 9, Automattic’s board voted to put CEO Matt Mullenweg on paid leave, a decision the board still hasn’t explained publicly. Mullenweg, in a company-wide Slack message, accused CFO Mark Davies of “conspiring” with three board members behind his back to force the vote through, saying he was given only 50 minutes’ notice and was denied time to have the resolution reviewed by outside legal counsel. He returned to the role roughly 33 hours later, and the same board members who voted him out have since departed the company.
They didn’t just walk out the door, though. In the 33-hour window between Mullenweg being put on leave and his return, two key executives at the company signed off on generous exit packages for each other. Davies, who became interim CEO during that window, and Chief Legal Officer Andy Missan, each signed the other’s severance agreement, effective September 10.
These agreements, effectively golden parachutes, provide each of them with 12 months of base salary paid out as a lump sum, an accelerated vesting schedule for their equity, the ability to exercise their vested stock options, and another year of health coverage, according to the severance documents reviewed by TechCrunch. Between the two of them, the full package — accelerated equity plus a year of salary — comes out to $8.15 million that Automattic would now owe both executives, since Mullenweg fired them upon his return. Automattic’s legal team is working to determine what the next steps are: pay out these sums or fight them by challenging their legal validity. (The company replaced its earlier counsel, Gibson Dunn, with Stephen Shackelford and Shawn J.
Rabin of Susman Godfrey LLP, the company and Mullenweg jointly announced on Wednesday. Automattic’s general counsel, Jordan Hinkes, also had his company account deactivated, sources tell us, suggesting he is gone as well.) Under the agreements, the executives only get their benefits if they sign a broad release of claims and continue to comply with confidentiality, nonsolicitation, and other legally binding post-employment restrictions. The agreements are also written in a way that favors the executives when it comes to how “cause” — the legal standard a company must meet to fire someone without owing severance — is defined.
Under these terms, the company must notify the executive in writing within 60 days of learning about the conduct, give them 30 days to cure the conduct if curable, then get a majority of the board to agree that cause exists. In Davies’ case, the agreement also specifies that his removal from the interim CEO role won’t count as “Good Reason” — a legal term that normally lets an executive resign and still collect severance, on the grounds that their job conditions changed for the worse — as long as he remains CFO. While that clause itself is not strange for a legal agreement, it suggests the document was drafted with Davies’ precise circumstances in mind —becoming interim CEO — effectively ensuring Automattic won’t owe him severance once his temporary CEO stint ends, as he can’t claim that alone as a reason to resign.
While it’s not necessarily improper that the executives signed each other’s agreements, in the context of a governance struggle at Automattic, it is noteworthy. Another factor that has recently come to light is that Davies held no Automattic stock at the time of his departure, according to an HR document viewed by TechCrunch. (One source at the company said Davies sold the stock a “few months ago,” but TechCrunch cannot confirm the time of the sale. Davies did, however, still hold a large number of outstanding vested options, the HR document showed.) These events can be interpreted in two very different ways.
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