Governance has spoken, and the SushiSwap community remains divided on a proposed candidate for its leadership position of “head chef”.
In a poll, members of the decentralized exchange’s governance forum voted to elect Jonathan Howard, a software engineer, as its chief executive by a slim majority of 53%.
The result comes after more than a week of inflamed and divisive discourse within the SushiSwap community. Many governance forum members were miffed by what they considered Howard’s exorbitant pay package: the head chef may have pocketed more than $10M if certain SUSHI token price targets and other bonus criteria are met.
The poll was a “temperature check” to determine the sentiment of the membership. Now Howard’s appointment will move to a binding poll in which tokenholders will vote proportionately to the SUSHI they hold. No date has been set for the next vote.
Even so, many community members and Sushi insiders believe there should be a separate vote on the prospective head chef’s compensation package.
“It doesn’t feel like we negotiated the compensation package,” community member Nickjrishwait posted. “This probably should have been two proposals.”
So the drama is far from over.
‘Have to be Heard’
Neil Bhasin, one of two current members of SushiSwap’s Compensation Committee, told The Defiant he is opposed to conducting a separate vote on compensation. He warned that it could result in a “race to the bottom of hiring the chef that costs the least amount of money.”
When asked if the vote should next be elevated to a snapshot, Bhasin said “I think tokenholders absolutely have to be heard.” There are a number of tokenholders who participate in governance but don’t interact on the forums, he added.
“I think the key is letting productive discussion happen and then ensuring nothing is being censored and that tokenholders eventually get the ability to vote and exercise their governance,” Bhasin said. “It’s unclear to me that two votes solves much, but it does add more information and data to how tokenholders feel which is welcomed.”
Yet Sushi’s core team has not arrived at a consensus on whether to proceed with an on-chain vote, a person familiar with the Sushi core team’s deliberations told The Defiant.
SushiSwap is the fifth-largest decentralized exchange with $1.07B locked, according to DeFiLlama. Its native Sushi token boasts a nearly $294M market cap, according to CoinGecko.
‘Sushi is not a community-run DAO anymore.’
Howard is the co-founder and chief technology officer of Big Head Club, a studio that creates NFTs based in the San Francisco Bay Area. He is also a co-organizer at Pitch Crew, a community of startup founders, and the founder of Step Function, an advisory firm that helps founders through early stage development.
Howard’s nomination should have been a routine appointment. Yet the outcry over his compensation and the process of nominating and confirming his position has pulled back the curtain on the governance issues challenging DAOs.
SushiSwap core team member, 0xPegbit, tweeted in protest that “Sushi is not a community-run DAO anymore.” The member complained that big investors have too much influence.
“It was a fun experiment. Now it’s controlled by Arca+Cumberland plus a few others who make all the shots with the comp committee.”
The tension between decentralization and some form of centralized authority has been stark. Member SethBenson lamented that Sushi’s new compensation committee — which currently spans just two members — nominated Howard for the role. The project appears to be “moving towards increasing centralization… as opposed to the decentralization that made Sushi great,” said the member on the governance forum.
And yet projects such as SushiSwap need structured decision making to proceed. That’s the rub.
The imbroglio followed the passing of the Sushi 2.0 roadmap in May, which was aimed at rejuvenating the DEX after months of infighting and turmoil.
SushiSwap was a leading DEX throughout early 2021 under the leadership of co-founder, 0xMaki, positioning itself as a decentralized and community-led project in contrast to the VC-backed sector leader, Uniswap.
0xMaki was apparently pushed out of an executive role last September, and then its CTO, Joseph Delong, stepped down in December as tensions flared between him, the community, and SushiSwap investor, Arca.
Arca then backed an attempted merger — which Sushi insiders have likened to a “takeover” in conversations with The Defiant — from Wonderland’s Daniel Sesta and Frog Nation that same month. But the proposal failed after Frog Nation’s CFO was outed as a co-founder of the collapsed centralized exchange, QuadrigaCX.
The Sushi 2.0 roadmap sought to draw a line under the turmoil and consolidate a unified and structured path forward. The key: establishing a legal structure for the SushiDAO, formal compensation for core team members overseen by a ‘compensation committee’, and a new leader selected in an election.
For all the plan’s good intentions on finding peace, the exact opposite happened when Howard was nominated to be head chef.
Howard was originally proposed to receive $800,000 per year — about 14% of stablecoins allocated for the team’s total salaries — plus 600,000 SUSHI tokens vested over four years.
An additional 350,000 SUSHI would be set aside for bonuses awarded as new products, in addition to 1.2M SUSHI for bonuses should the price of SUSHI be increased.
If the criteria for all bonuses are met, Howard could receive more than a third of the SUSHI designated for staff per the Sushi 2.0 roadmap. After receiving sustained backlash for the proposed compensation package, Howard proposed a revised compensation package for himself in the governance forum on Aug. 1.
Howard recommended reducing his salary to $700,000 from and moving price-based bonuses up by $2. That meant SUSHI’s 30-day time-weighted price average would need to tag $5 over 12 separate months.
The total number of SUSHI allocated to bonuses for Howard would remain the same.
He conceded in the governance forum that the severance package outlined in the original proposal, which could have resulted in Howard receiving 24 months’ salary plus bonuses if fired during his first month, has been “a lightning rod” for the community. He suggested capping the severance at the equivalent of six months’ salary, but for his initial appointment to come with a 12-month contract. The deal would come with the same USDC and SUSHi base, and the same SUSHI cliff.
Despite Howard’s revised proposal, many forum-goers remain steadfast in their belief that two separate votes should be conducted to determine the candidate and compensation package.
Lack of Alternatives
“Proposing at least two separate votes would have made this process feel much safer to decide and easier to digest,” BrahDawg said.“Rather than an all or nothing approach.”
Fig also backed dividing the process into two separate polls, despite stating he does not think the proposed compensation for head chef is unreasonable.
“It feels like the community is upset about the pay and lack of alternatives; the only choice is to either vote yes or no… If crypto wants to be competitive with legacy industries, we must be willing to compensate the right talent appropriately.”
The tug of war between decentralization and a core decision-making body remains a thorny challenge.
“Nowhere in Sushi 2.0 stipulates the Compensation Committee’s mandate is intertwined with Leadership Search,” said member SethBenson. “These are two clearly separate mandates and sections.”
SethBenson is not alone in his disappointment with the process underpinning Howard’s election.
On May 14, Kenneth Hurley, a senior technical solutions consultant at Google and software engineer who has previously founded three startups, put himself forward for the role of head chef.
On Aug. 3, Hurley posted on Sushi’s Discord that he wasn’t interviewed, nor was his prospective nomination discussed beyond Bhasin requesting his resume. He said he planned to request a base salary of $350,000.
I’mSoftware, who is the second compensation committee member, replied that “a certain investor who shall not be named” passed on Hurley’s application “because of him being anonymous,” despite Hurley revealing his identity by providing public links to his LinkedIn profile in his application for the position of Head Chef.
I’mSoftware added that the unnamed investor’s decision to pass on Hurley “showed me that they weren’t even doing surface level research on candidates and this is pretty much around the same time I stopped communicating with them. That’s all I have to say on this though.”
Scored by Others
On Sushi’s governance forum, Bhasin said that “candidates were scored by others (large tokenholders, and team), given a grade, and the candidate with the best grade was brought forward.”
Speaking to The Defiant, Hurley said that Howard’s nomination “seems to point to an investor trying to install someone he can control, and the proposal smacks of what VCs do all the time. They install their own CEO who can be controlled.”
“I really don’t know for sure if that is the case, but with all the money [Howard is] asking for and the bonuses and large upfront sign-on bonuses look to me like something someone running a large corporation would get,” he added.