Thread

1. xnx · 1790439571 · focus · HN ↗

   Fireship pointed out that the board members gave themselves a generous severance package in the very brief interim, so that was very possibly the whole plan.

   1. tptacek · 1790441715 · focus · HN ↗

      Yeah, if Mullenweg really did control a majority of the voting shares, the previous board are the villains in this story no matter what you think of Mullenweg.

      1. EA-3167 · 1790442890 · focus · HN ↗

         If they can see that Mullenweg has lost it completely and beyond their ability to influence, and they also know that he’s a tyrant who would happily screw them, this seems like a fairly rational exit.

         Obviously that may not be the case, but when the captain is steering the ship into rocks over and over the crew is going to take what they can and hit the lifeboats.

         Ed sp

         1. tptacek · 1790443143 · focus · HN ↗

            No, if the board doesn't believe it can continue to serve the company and meet its fiduciary duty, its obligation is to resign. CEO is an operational role; the board by design is not. It's a very big deal to "fire" the CEO, and doing so when you don't actually have the voting authority to follow through seems pretty close to malfeasance.

            1. Analemma_ · 1790443431 · focus · HN ↗

               I mean it sounds like “board which does not actually have the legal ability to fire the CEO” is a fundamentally defective concept and shouldn’t be allowed to exist in the first place. But once it does and you are in that situation, I think you are obligated to make the best attempt you can at your nominal duties. I have no idea where you’re getting “malfeasance” from at this attempt.

               1. tptacek · 1790444020 · focus · HN ↗

                  Wordpress is a private company. This is a normal private-company structure.

                  I'm not suggesting the board actually did anything legally risky here. The standards for that in Delaware are high. But morally, it's much harder to defend, so long as they knew this is what the outcome would be --- which it seems like they kind of clearly did.

                  1. EA-3167 · 1790447908 · focus · HN ↗

                     Moral dimensions are an interesting topic, but moral actions come first and foremost from environments that promote group morality. I’d argue that Mullenweg has spent a lot of time and effort undermining that. Besides in the world of big business if the lawyers are consulted and give the high sign the moral dimension is often superficial, performative, or absent.
                  2. FireBeyond · 1790460936 · focus · HN ↗

                     Automattic, you mean. But it’s easy to get confused. WP.org is him, not the Foundation, but is hosted on Foundation servers. WP Engine owes Automattic money, not the Foundation, or community, but Automattic because the Foundation silently granted Automattic commercial rights to WP, the same day they told the community they were the WordPress stewards to keep it free from commercial influence.
               2. ragall · 1790451008 · focus · HN ↗

                  The board does have the legal ability to fire the CEO, provided that it passes a very bar, such as being able to prove mental unfitness, etc... which wasn't the case here.

                  On the other hand, if you're arguing that a board should be able to fire the CEO without cause and have him barred for eternity, then you're arguing that majority shareholders shouldn't be allowed to serve as CEO - in a private company !! - which has been the basis of capitalism for ever. It would destroy the economy as we know it.

                  1. 3eb7988a1663 · 1790452154 · focus · HN ↗

                     That's news to me. One of the few real powers of the board is to fire the CEO. You don't need to put the CEO on a PIP first. If the board thinks the CEO could do better, that is all that it takes.

                     1. ragall · 1790452295 · focus · HN ↗

                        The board represents the will of the shareholders. When the CEO is also the majority shareholder with 84% of the voting power, the board better have a damn good reason, otherwise the majority shareholder can simply dissolve the board and appoint a new one, which he did.

                        1. EA-3167 · 1790453477 · focus · HN ↗

                           They represent the shareholders (all of them), but are also expected to act as a reasonable person would for the good of the company. They’re expected to use good judgement, uphold the law and a bunch of other issues. “The majority shareholder says jump off a cliff and we must obey” is nonsense.

                           1. ragall · 1790453773 · focus · HN ↗

                              > but are also expected to act as a reasonable person would for the good of the company

                              It's the people they represent, i.e. the shareholders, who get to decide what's the good of the company, and the board is simply meant to enact those wishes. This is a constitutional issue of representation: at what point do the elected representatives decide the current situation calls for a referendum instead of an ordinary (representative) vote ?

                              > The majority shareholder says jump off a cliff and we must obey” is nonsense

                              If the majority shareholder decides that, then 1) the board must resign at once and 2) any one minority shareholder must sue and have the Delaware Court of Chancery determine that the majority shareholder has abused his powers. I'm not sure what would follow that court decision.

                           2. tptacek · 1790455109 · focus · HN ↗

                              They're specifically not supposed to represent the interests of a minority of the shareholders!

                              That doesn't mean they're required to faithfully represent the interests of any one person with majority voting power, but it does mean they can't select some random subset of minority voters and serve them instead.

                              1. EA-3167 · 1790455999 · focus · HN ↗

                                 I didn’t say that they’re beholden to the minority, they have a duty to ALL shareholders which is generally most clearly expressed through acting in the wellbeing of the company itself.

                                 1. ragall · 1790478417 · focus · HN ↗

                                    It's not clear what the wellbeing of the company actually is, especially if there's a disagreement between shareholders as to how long of a horizon the management has to think about. Delaware courts are well known to give great leeway to majority shareholders, with some narrow exceptions.
                              2. jeltz · 1790458408 · focus · HN ↗

                                 Legally the board has the duty to represent all shareholders, minority and majority, and of they cannot they have to resign.
                              3. FireBeyond · 1790463513 · focus · HN ↗

                                 Minority shareholders with far less ownership can and have successfully sued corporations for a failure to represent their interests too.

                                 1. ragall · 1790478262 · focus · HN ↗

                                    Sure, but it's not the within board's authority to preempt a court's decision and fire the CEO. The board should have resigned, and let the minority shareholders sue so that that court may decide.
      2. Analemma_ · 1790443090 · focus · HN ↗

         What were they supposed to do? If you’ve been following Mullenweg’s behavior, he’s clearly unstable, and while this is admittedly armchair diagnosis, a lot of his recent writing gives me strong stimulant psychosis vibes. Granted maybe you shouldn’t take a job as a board member at a company where the CEO has 83% of voting shares to begin with, but once you’re there, you still have a fiduciary duty to do what’s best for the company, so IMO they were obligated to at least try and eject him.

         1. tptacek · 1790443158 · focus · HN ↗

            Resign.

            1. ImPostingOnHN · 1790443781 · focus · HN ↗

               Alternatively, Matt can resign if he doesn't like what his bosses did. Instead he chose to vote out his bosses: also an apparently legal option, albeit one much worse for the company's fiscal situation.

               Indeed, Matt has a fiscal responsibility to resign from the company and stfu. He's dragging it down for all the investors, of which he is only one, and doing it purely for personal glory. That is unethical.

               Boards vote themselves pay packages all the time. It was unwise for Matt to agree to pay it out by firing them for reasons purely personal to Matt.

               Matt, since we know you are reading this: Do what is best for the company, not yourself: go away.

               1. tptacek · 1790444069 · focus · HN ↗

                  All you're really saying here is that you wish Mullenweg had lost this power struggle. I get that. I'm not sticking up for Mullenweg. But the adults in the room all knew that Mullenweg wasn't going to lose, and created chaos anyways. You can't pin that on Mullenweg.

                  1. ImPostingOnHN · 1790444137 · focus · HN ↗

                     [dead]

               2. ragall · 1790450245 · focus · HN ↗

                  > Alternatively, Matt can resign if he doesn't like what his bosses did

                  The board members weren't "his bosses", he's "the boss" and the board serves as his pleasure, within the limits of the Delaware statutes with regards to the protection of minority shareholders.

                  1. tptacek · 1790451755 · focus · HN ↗

                     That's sort of true and sort of not, right? He's not in fact "the boss" of the board, though with his voting ability (and that of his committed proxies) he can replace the board instantly.

                     The board has every right to fire the CEO. That's not at issue. The board could reasonably do that even if the CEO has majority voting control --- iff the board is certain the CEO won't immediately reverse the decision and replace the board. If they fire the CEO performatively (or as a hail mary) knowing the CEO will reverse them, they're causing operational chaos with no upside, and that's not something the board can legitimately do.

                     There's a subtext in some comments about this that the board can legitimately express a position that it's better that the company not exist than exist with Mullenweg at the helm. That's not a legitimate thing for the board to pursue.

                     1. ragall · 1790452759 · focus · HN ↗

                        > That's sort of true and sort of not, right? He's not in fact "the boss" of the board

                        He is the boss by virtue of having 84% of the voting power; and, as the board represents the will of the shareholders, the board should always consult with the shareholders before taking such action, if nothing else because majority shareholders have the power to dissolve the board and appoint a new one.

                        There's a parallel here with firing regular employees: there's dismissal with cause, and without cause. The dismissal *without cause* of a CEO that's also a majority shareholder makes non sense, so any dismissal would have to have a *cause* as codified by Delaware Law. IANAL, but it's usually mental unfitness, moral reprobation, or something of that gravity. Since they did not have a justified cause, I agree with you that the board should have resigned.

                        The interesting question here is whether the new severance packages, that the board gave itself in the brief interim, will be considered legal. We'll have to wait for a lawsuit to settle that.

                        1. ImPostingOnHN · 1790469663 · focus · HN ↗

                           > the board should always consult with the shareholders before taking such action

                           This is ridiculous. Boards are elected by shareholders to act on behalf of their fiduciary interests, the actions the board took were in that interest, and matt replaced the board, because he placed personal power above financial upside. He's explicitly said this is the case before.

                           The fact that one of the shareholders ultimately voted against all of the shareholders' fiduciary interest does not mean the board made a wrong or unethical or immoral decision. It means that Matt did (who, notably, approved the board and then changed his mind, no doubt causing further operational chaos at the company).

                           > The interesting question here is whether the new severance packages, that the board gave itself in the brief interim, will be considered legal. We'll have to wait for a lawsuit to settle that.

                           I'm excited for this proposition because it would mean discovery of matt's terrible management decisions for the company as evidence that the board acted in investors' fiduciary interest in removing him, and that he acted against it in removing them. And I have faith that matt is deluded and shortsighted enough to open himself up to that by trying such a suit. I just don't have faith that courts will look down on directors choosing company health and investor interests over matt's crazy.

                           1. ragall · 1790478061 · focus · HN ↗

                              > Boards are elected by shareholders to act on behalf of their fiduciary interests, the actions the board took were in that interest, and matt replaced the board, because he placed personal power above financial upside

                              Contrary to popular opinion, Delaware courts have given great leeway to majority shareholders in deciding a company's strategy, and placing certain things above short-term "financial upside" is among those.

                              > I'm excited for this proposition because it would mean discovery of matt's terrible management decisions

                              It's funny you don't see the contradiction between considering the board as the paladins of small shareholders, just while the board was allowing the new interim CEO to leech company money by giving himself (and the chief legal counsel) a golden parachute.

                              1. ImPostingOnHN · 1790526146 · focus · HN ↗

                                 > Contrary to popular opinion, Delaware courts have given great leeway to majority shareholders in deciding a company's strategy

                                 Are you sure this is the case?

                                 Company shareholders less frequently decide a company strategy than elect people to a board, and let those people decide, like matt did here. The directors were approved by matt specifically.

                                 Of course, matt didn't like his own decision, so he changed his mind. That's his right, I guess. It doesn't mean the board did anything wrong (and in this case, seems it didn't).

                                 > placing certain things above short-term "financial upside"

                                 Purely out of curiosity (since it is immaterial to whether courts have ever okayed boards getting severance packages), can you cite precedent for when those "certain things" are purely personal grievances by a paranoid lunatic of which pursuit harms both the short-term and long-term health of the company? I feel like we'd have to get presidential (if you know what I mean), since that is the most similar narcissist businessperson, closest in behavior.

                                 That is why I'm pretty confident no court will affirmatively believe the board committed any malfeasance by trying to replace a crazy person who is taking down the company, rather than indulging him in his paranoid delusions (wish this was an exaggeration).

                  2. pdpi · 1790455131 · focus · HN ↗

                     > The board members weren't "his bosses", he's "the boss" and the board serves as his pleasure

                     Both are true. The board as a whole is his boss in his role as CEO. He is the board's boss in his role as majority shareholder. That makes the situation a little less clear.

                     1. ragall · 1790478122 · focus · HN ↗

                        The role as a majority shareholder wins, and only courts can decide that that's not the case and declare the CEO to be unfti.

                        1. ImPostingOnHN · 1790547098 · focus · HN ↗

                           It doesn't "win" in the sense that they get a direct, share-proportional vote during board meetings. That is the role of the board: it is the one that votes on CEO.

                           I don't think a court examining the board's removal of matt would conclude they acted improperly based on some gross simplification to "the role as majority shareholder role wins", that's why the board was able to legally remove matt. They made the right call, and matt subsequently made a different call in removing them because he was mad and full of himself. Both calls seem technically legal.

            2. Brian_K_White · 1790456678 · focus · HN ↗

               That's merely an option, not the only option, or the only valid option, or even necessarily the most valid option.

               Do the right thing and make someone else be guilty of actively firing me for doing the right thing, (and leave the door open for the theoretical possibility that they don't), rather than me being guilty of giving up, is a perfectly valid stance, even if it's not what you would do.

               It's one thing to say "well obviously Matt will just do the obvious thing we all "just know" he will" and it's quite another for Matt to actually do it. One is conjecture, the other is recorded fact history. Matt can no longer say he wouldn't do something like fire an entire board for the crime of doing their jobs. It's valuable to force the issue.

               1. tptacek · 1790456856 · focus · HN ↗

                  It's a valid stance for a random individual, but not for a board member, who assumes additional obligations that are external to their own personal morals. If your morality and your board duties conflict, your obligation is to resign.

                  1. bradleyjg · 1790461098 · focus · HN ↗

                     I think noisy resignation is the rational move for various reasons.

                     But I don’t think it’s required. The director under Delaware law is not conceptualized as a proxy for the whims of a majority of the voting rights.

                  2. Brian_K_White · 1790476249 · focus · HN ↗

                     Incorrect. Resignation is merely one of your infinite valid options. Your obligations are mostly not to do various incorrect things, not to do any particular specific thing other than pursue a goal.
         2. onemoresoop · 1790448739 · focus · HN ↗

            Definitely not award themselves very generous severance packages, that sounds fishy as hell regardless of any other factors.

            1. rbanffy · 1790450330 · focus · HN ↗

               If the packages are generous enough, it would create an incentive not to fire them, and, that way, be actually in the best interest of the company.

               If the CEO is indeed insane and incapable of fulfilling his duties, and he still controls 84% of the voting shares, all options are nuclear.

               1. onemoresoop · 1790463484 · focus · HN ↗

                  I could see that logic somewhat if I squint really hard but still, awarding yourself such packages remains very fishy..
         3. chairmansteve · 1790451574 · focus · HN ↗

            > What were they supposed to do?

            The normal thing to do is to resign from the board. Maybe put out a statement explaining why.

            1. 7e · 1790472992 · focus · HN ↗

               Then they could be sued by a minority shareholder for knowing they should take action, but then failing to, and resigning instead. Failing to take an action is still breach of fiduciary duty.

               1. NetMageSCW · 1790537620 · focus · HN ↗

                  Only if you believe it is their fiduciary duty to remove him, and that is a long stretch unlikely to make it though the lawsuits.
      3. lemmetellya · 1790452323 · focus · HN ↗

         [dead]

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