Freshworks Revises CEO Mathrubootham’s Stock Awards

Nasdaq-listed SaaS startup Freshworks said its board has revised the stock-based compensation for its leadership names, including chief executive Girish Mathrubootham and president Dennis Woodside.

As per an SEC filing seen by Inc42, Freshworks said that in 2021, the board had granted Mathrubootham a multi-year performance-based restricted stock unit award (CEO PRSU award) in respect of 6 Mn shares with vesting contingent upon achievement of both time- and performance-based conditions.

Now, the Freshworks board has cancelled Mathrubootham’s CEO PRSU award and granted him an annual long-term equity incentive award in 2024.

Mathrubootham has now been granted an annual long-term equity incentive award valued at $19 Mn. 

The development was first reported by The Arc. As per the report, the stock award is expected to be originally valued at up to $130 Mn during the IPO. 

However, amid a significant change in Freshworks’ share price, the value of stock award has changed over the years.

It is pertinent to note that in September 2021, Freshwork got listed on the Nasdaq at $43.50 apiece, a premium to its IPO price of $36. However, currently, the shares are trading at around $20 apiece.

In fact, Freshworks’ board decided to revise Mathrubootham’s stock awards due to macroeconomic conditions beyond the control of the company’s leadership.

It said that the CEO PRSU award was designed to provide multi-year retention incentives for Mathrubootham and to align the achievement of business and operating objectives with long-term stockholder value creation. 

“In determining to cancel Mathrubootham’s CEO PRSU award and grant him an annual long-term equity incentive award in 2024, the Board and the Committee considered the fact that the long-term equity incentive program is an investment the company has asked of its stockholders,” the filing noted.

“However, the Board and the Committee also considered the fact that, as a result of macroeconomic conditions that are entirely outside the control of the Company’s leadership team, the stock price hurdles were too far ahead of the current stock price for the CEO PRSU award to have the retention value expected at the time the award was granted,” it added.

Meanwhile, the fair value of the other top executives’ stock awards stands at $15 Mn for Woodside, $10 Mn for CFO Tyler Sloat (this includes a special refresh equity award with a fair value of $4 Mn), and $6 Mn for chief product officer Srinivas Ramamurthy.

In response to Inc42’s query on the development, Freshworks said in a statement that the recent change in the CEO’s compensation plan underscores its objective to create a reasonable and balanced pay for performance program to motivate and retain its executives by rewarding them based on the company’s financial and operational achievements.

“For our management team as a whole, we believe that having long-term equity being based on a mix of time of service and performance-based achievements better aligns with our objectives as a public company,” the statement added.

We must note that the Indian SaaS unicorn’s net loss narrowed by 49% in Q4 2023 to $28.1 Mn from $55.5 Mn in the prior year’s quarter. It also posted a revenue of $160.1 Mn for the quarter, up 20% year-on-year. 

Freshworks has also set a revenue target of reaching $1 Bn by the year 2026.

The SaaS unicorn fired tens of employees across three rounds of layoffs since mid-2022.

Its chief revenue officer Pradeep Rathinam resigned from his position earlier this month.