Last week, on September 9, AutomatticâÂÂs board voted to put CEO Matt Mullenweg on paid leave, a decision the board still hasnâÂÂt explained publicly. Mullenweg, in a company-wide Slack message, accused CFO Mark Davies of âÂÂconspiringâ with three board members behind his back to force the vote through, saying he was given only 50 minutesâ 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 didnâÂÂt 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 otherâÂÂs 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 â accelerated equity plus a year of salary â comes out to $8.15 million that Automattic would now owe both executives, since Mullenweg fired them upon his return.
AutomatticâÂÂs 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. AutomatticâÂÂs 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 âÂÂcauseâ â the legal standard a company must meet to fire someone without owing severance â 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.
âÂÂCauseâ itself is narrowly defined in the agreements as gross negligence that materially harms the company; knowing dishonesty, fraud, or misrepresentation causing material harm; a material legal violation causing material harm; a material confidentiality or IP breach; or a felony or crime involving âÂÂmoral turpitudeâ (a legal term for conduct considered inherently dishonest or morally reprehensible).
In Daviesâ case, the agreement also specifies that his removal from the interim CEO role wonâÂÂt count as âÂÂGood Reasonâ â a legal term that normally lets an executive resign and still collect severance, on the grounds that their job conditions changed for the worse â as long as he remains CFO. While that clause itself is not strange for a legal agreement, it suggests the document was drafted with Daviesâ precise circumstances in mind âÂÂbecoming interim CEO â effectively ensuring Automattic wonâÂÂt owe him severance once his temporary CEO stint ends, as he canâÂÂt claim that alone as a reason to resign.
While itâÂÂs not necessarily improper that the executives signed each otherâÂÂs 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 âÂÂfew months ago,â 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. In one scenario, AutomatticâÂÂs board is responding to an internal leadership crisis, voted to put Mullenweg on leave, and then established protections for the executives who could face adverse consequences if the intervention failed (as it now has).
AutomatticâÂÂs legal battle with hosting provider WP Engine could come into play here. In July, WP Engine accused Mullenweg of destroying evidence in legal filings, specifically text through messaging apps like Signal, WhatsApp, and Telegram. If the directors believed MullenwegâÂÂs behavior had become a serious corporate risk, putting him on leave and changing management could help demonstrate to the court that the board took the concerns seriously. This could potentially help reduce any possible sanctions or fines or improve settlement terms. (MullenwegâÂÂs X post on September 10, which referenced the alleged destruction, or âÂÂspoliation,â of evidence right after the board action, could support this theory.)
In another scenario, it could appear that AutomatticâÂÂs board was trying to create a window of control for some other reason â perhaps a strategic transaction â by putting Mullenweg on leave and taking the reins. According to sources, this is the theory Mullenweg suspects â though by his own account, the board never gave him a stated reason for the vote to begin with, leaving him, like outside observers, largely to speculate about the underlying motive. That absence of explanation, combined with the CFOâÂÂs stock sale, appears to have fed his suspicions and factored into his decision to retake the CEO role and remove the board and other executives.
Automattic has been asked for comment. Attempts to reach Missan and Davies have been successful.
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