San Francisco — Automattic Executives Sign Severance Deals Amid Leadership Turmoil

During a brief period of leadership change at Automattic, the company behind WordPress.com, interim CEO Mark Davies and Chief Legal Officer Andy Missan signed reciprocal severance agreements. These agreements, executed while CEO Matt Mullenweg was temporarily ousted, provide the executives with substantial exit packages, including a year's salary, accelerated equity vesting, and extended health coverage. The agreements have sparked questions about the circumstances of Mullenweg's leave and the actions of Automattic's board.

On September 9, Automattic's board voted to place Mullenweg on paid leave. The board has not publicly explained the rationale behind this decision. According to a company-wide Slack message from Mullenweg, he accused CFO Mark Davies of conspiring with three board members to force the vote. Mullenweg claimed he was given only 50 minutes' notice and was denied the opportunity to have the resolution reviewed by outside legal counsel. He returned to his role approximately 33 hours later, and the board members who voted for his ouster have since left the company.

In the interim period of Mullenweg's absence, Davies assumed the role of interim CEO. During this time, Davies and Missan signed severance agreements for each other. These agreements, described as golden parachutes, include a 12-month base salary paid as a lump sum, accelerated vesting of equity, the ability to exercise vested stock options, and an additional year of health coverage. The total financial obligation for Automattic, should the agreements be honored, amounts to $8.15 million for both executives.

The legal validity of these severance agreements is currently under review by Automattic's legal team. The company has replaced its previous legal counsel, Gibson Dunn, with Stephen Shackelford and Shawn J. Rabin of Susman Godfrey LLP. Additionally, Automattic's general counsel, Jordan Hinkes, reportedly had his company account deactivated, suggesting his departure from the company.

The severance agreements stipulate that the executives will receive their benefits only if they sign a broad release of claims and adhere to confidentiality, nonsolicitation, and other post-employment restrictions. The agreements also define "cause"—the legal standard for terminating an employee without severance—in a manner that favors the executives. Under these terms, the company must notify the executive in writing within 60 days of discovering the conduct, provide 30 days to remedy the situation if possible, and secure a majority board agreement that cause exists. "Cause" is narrowly defined as gross negligence, knowing dishonesty, fraud, or a material legal violation that causes significant harm to the company.

Board Dynamics and Legal Implications

The departure of the board members who voted for Mullenweg's ouster may affect future governance and decision-making at Automattic. The board's actions during this period have raised questions about internal corporate governance and the processes in place for executive accountability. The severance agreements, if contested, could set a precedent for how similar situations are handled in the future.

Automattic's decision on whether to honor or contest the severance agreements could lead to legal proceedings. The company's new legal team will play a crucial role in determining the next steps. If the agreements are challenged, it could result in a protracted legal battle that might impact Automattic's operations and public perception.

Leadership Stability and Strategic Direction

Observers will be watching for any further changes in Automattic's leadership team and how these might impact the company's strategic direction. The swift return of Mullenweg and the departure of key board members suggest potential shifts in company strategy and priorities. Stakeholders will be keen to see how these changes affect Automattic's growth and innovation in the competitive tech landscape.

What to Watch

• Legal Challenges: Automattic's decision on whether to honor or contest the severance agreements could lead to legal proceedings.
• Board Dynamics: The departure of the board members who voted for Mullenweg's ouster may affect future governance and decision-making at Automattic.
• Leadership Stability: Observers will be watching for any further changes in Automattic's leadership team and how these might impact the company's strategic direction.

For more details, the original report can be accessed on TechCrunch.