$3.2M severance deal

CEO gets $3.2M severance deal as Bay Area tech company lays off 388 workers

By Stephen Council

Chegg, the Santa Clara tech company known best for its online homework help, and more recently for its struggles amid competition from artificial intelligence tools, is laying off another 388 workers.

The company announced the news in a filing with the Securities and Exchange Commission, writing that layoff will slash about 45% of its current workforce. Chegg also said it is opting to stay a standalone public company, as opposed to selling or going private, and that it’s swapping out its CEO.

This is only the latest in a drumbeat of job cuts at Chegg: June 2024, November 2024, May and now, for a total of 1,396 layoffs. The company declined to respond to SFGATE’s questions and request for comment but in a Monday news release wrote that it is “restructuring” to cut costs.

Chegg’s revenue has sunk over the past few years, and its stock is down more than 95% from a pandemic-era valuation above $12 billion. The company hasn’t been shy about casting blame, and in the news release, pointed the finger again: “The new realities of AI and reduced traffic from Google to content publishers have led to a significant decline in Chegg’s traffic and revenue.”

The company sued Google over the issue in February, calling the tech giant “parasitic.” Chegg alleged that Google is using its “monopoly power” over web search to force publishers into making their content available for Google Search’s AI overviews, which then diminish the need for a user to ever click through to Chegg’s website. But there’s no sign of Google removing the overviews, or settling with Chegg and providing it with some much-needed cash — in July, Google asked the case’s judge to dismiss the lawsuit. (Spokesperson José Castañeda called Chegg’s claims “meritless” in a February statement to SFGATE.)

Since starting as Chegg’s CEO in June 2024, Nathan Schultz has overseen a tumultuous stretch of layoffs — and now, he’s leaving the role under a “mutual” agreement with the board, the Monday announcement said. Dan Rosensweig, who gave way to Schultz after more than a decade atop the company, is being reappointed Chegg’s CEO.

Schultz will be consoled with a nice pile of money, though. Chegg included his “separation agreement” in its Monday filings. He’s set to receive two lump sum payments, one of $1.25 million, as “severance pay,” and another in the range of $525,000 to $600,000, as “bonus” severance. As an “additional severance benefit,” Chegg also agreed to accelerate the vesting for more than 1.1 million of Schultz’s shares in the company — at the company’s share price of $1.24, that’s another $1.4 million. All told, the agreement sets him to serve as an adviser until the end of the year, then leave with more than $3.2 million. 

Chegg said in the main Monday SEC filing that it expects its overall restructuring and layoff plan, including employee severance payments, to cost $15 million to $19 million.