Introduction

Automattic faced a dramatic leadership shakeup last week when its board placed CEO Matt Mullenweg on paid leave, only for him to return hours later. During the brief vacuum, two top executives struck reciprocal severance agreements that could cost the company millions.

What Happened

On September 9, Automattic's board voted to put Mullenweg on paid leave, accusing CFO Mark Davies and three board members of conspiring behind his back. Mullenweg received just 50 minutes' notice and was denied time to review the resolution with outside counsel. He returned to the CEO role roughly 33 hours later, and the board members who voted him out have since departed the company. In the hours between his leave and return, CFO Mark Davies and Chief Legal Officer Andy Missan each signed the other's severance agreement. The packages include 12 months of base salary paid as a lump sum, accelerated vesting of equity, the right to exercise vested stock options, and a full year of health coverage. Combined, the two deals total approximately $8.15 million that Automattic would now owe both executives. The agreements also require the signatories to release claims against the company and adhere to ongoing confidentiality and nonsolicitation restrictions. Notably, Davies' deal specifies that his removal from the interim CEO role won't qualify as "good reason" so long as he remains CFO, effectively blocking him from collecting severance on that basis.

Why This Matters

The reciprocal severance deals have sparked scrutiny over whether the board's move to oust Mullenweg was a genuine governance action or a calculated window to secure executive protections. Some analysts suggest the board acted to demonstrate responsiveness to governance concerns, particularly amid an ongoing legal dispute with WP Engine alleging evidence destruction. Others, including Mullenweg, suspect the board was creating a control window for strategic reasons, especially given Davies' lack of company stock at the time of his exit and the agreements' favorable "cause" definition. The situation highlights how quickly executive contracts can shift during governance crises and what it reveals about corporate power dynamics.

Key Takeaways

  • Matt Mullenweg was placed on paid leave by Automattic's board, then returned 33 hours later.
  • During that window, CFO Mark Davies and Chief Legal Officer Andy Missan signed reciprocal severance agreements.
  • The combined package is valued at roughly $8.15 million, covering salary, equity acceleration, and benefits.
  • The deals include conditions such as a broad release of claims and compliance with post-employment restrictions.
  • Davies' agreement specifically bars a "good reason" claim if he stays on as CFO.
  • The board has not publicly explained its motive for the ouster, leaving the true intent open to interpretation.
  • The deals' legal validity is now under review by Automattic's new legal team.

Conclusion

The reciprocal severance agreements signed during Automattic's brief leadership crisis underscore how quickly executive protections can be engineered during governance upheavals. As the company navigates internal conflict and external legal battles, the fate of these multi-million-dollar deals will likely set a precedent for how tech governance disputes are resolved. Stakeholders will be watching closely to see whether Automattic pays out the agreements or challenges their enforceability in court.