Automattic is reviewing the legal status of executive severance agreements worth a combined $8.15 million after interim CEO Mark Davies and Chief Legal Officer Andy Missan approved compensation packages for each other during the brief period when CEO Matt Mullenweg was placed on leave by the company’s board.
The agreements were signed during a roughly 33-hour window between September 9, when Automattic’s board voted to place Mullenweg on paid leave, and September 12, when he returned to the CEO position. Following his return, Mullenweg dismissed both executives, raising questions about whether the severance arrangements remain enforceable.
Board Vote Triggered Leadership Dispute
According to company-wide communications previously reported by TechCrunch, Mullenweg accused Chief Financial Officer Mark Davies of conspiring with three board members to secure the vote that temporarily removed him from his role. He said he received approximately 50 minutes’ notice before the vote and was not given time to seek advice from external legal counsel.
Mullenweg returned as CEO about 33 hours later. The board members who supported the decision to place him on leave subsequently left the company.
Executives Approved Each Other’s Exit Packages
During the period when Mullenweg was absent, Davies, who had become interim CEO, and Chief Legal Officer Andy Missan signed severance agreements for one another that became effective on September 10.
According to documents reviewed by TechCrunch, both agreements provide 12 months of base salary paid in a lump sum, accelerated vesting of equity awards, the ability to exercise vested stock options, and an additional year of health coverage.
Combined, the salary and equity components of the agreements amount to approximately $8.15 million that Automattic could potentially owe the two executives following their departures.
Company Examining Legal Options
Automattic’s legal team is now assessing whether to honor the agreements or challenge their validity. The company recently replaced its previous legal counsel, Gibson Dunn, with attorneys Stephen Shackelford and Shawn J. Rabin of Susman Godfrey LLP, according to announcements made by both Automattic and Mullenweg.
Sources also told TechCrunch that Automattic General Counsel Jordan Hinkes had his company account deactivated. Mullenweg later stated on X that Hinkes had already been preparing to leave the company to join an artificial intelligence startup.
The severance agreements require the executives to sign broad releases of claims and continue complying with confidentiality, nonsolicitation, and other post-employment obligations in order to receive the benefits.
Severance Terms Include Narrow Definition Of Cause
The agreements establish specific requirements before Automattic can terminate an executive for cause without paying severance. The company must notify the executive in writing within 60 days of learning about the conduct, provide a 30-day opportunity to address the issue if it can be remedied, and obtain majority board approval that cause exists.
The agreements define cause narrowly. Covered conduct includes gross negligence that materially harms the company, fraud or dishonesty that causes material harm, material legal violations, significant breaches involving confidential information or intellectual property, and felony offenses or crimes involving moral turpitude.
Davies’ agreement also specifies that removal from the interim CEO position would not qualify as “Good Reason,” a legal standard that can allow executives to resign while still receiving severance benefits. The provision states that as long as Davies remained CFO, the end of his temporary CEO assignment alone would not trigger severance eligibility.
Stock Holdings And Ongoing Questions
According to an internal HR document reviewed by TechCrunch, Davies did not hold Automattic stock at the time of his departure. One source said he sold his shares several months earlier, although TechCrunch was unable to independently verify when the sale occurred.
The document indicated that Davies still held a substantial number of vested stock options. The circumstances surrounding the board’s decision and the subsequent severance agreements have become part of a broader governance dispute inside Automattic.
The events have also unfolded against the backdrop of Automattic’s ongoing legal battle with hosting company WP Engine. In court filings submitted in July, WP Engine alleged that Mullenweg destroyed evidence through messaging platforms including Signal, WhatsApp, and Telegram.
According to TechCrunch, one interpretation is that the board’s intervention was intended to address concerns about leadership and corporate risk. Another view, attributed to sources familiar with the situation, is that the board sought temporary control of the company for reasons that were not publicly explained.
Mullenweg has stated that the board did not provide him with a reason for the vote that placed him on leave. According to sources, the absence of a stated explanation contributed to his decision to resume the CEO role and remove the directors and executives involved.
Featured image credits: Wikimedia Commons
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