Meta Platforms has reached an agreement with CEO Mark Zuckerberg requiring him to remain in California or another jurisdiction where the company maintains its corporate headquarters for the next eight years, after he warned he could leave the state if voters approve a proposed wealth tax on billionaires next month.
The agreement includes a new stock arrangement that would allow Zuckerberg to sell shares to cover a potential tax bill while retaining voting control of the company. Under the plan, Meta intends to introduce a new class of nonvoting Class C common stock in January 2027. Shareholders would receive one Class C share for each existing Class A or Class B share they hold, effectively creating a two-for-one stock split.
Zuckerberg would be allowed to sell 20% of the Class C shares he receives immediately. Those shares would represent approximately 10% of his overall economic stake in Meta. The arrangement would give him a potential source of funds to meet his tax obligations without selling shares that carry voting rights.
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The deal comes as California considers Proposition 40, a proposal to impose a one-time 5% tax on the wealth of billionaires. Covered assets would include businesses, securities, art, collectibles and intellectual property. The vote is scheduled for November.
The proposal could affect approximately 250 billionaires in California, whose combined wealth exceeds $2 trillion. Zuckerberg, the world’s sixth-richest person, has an estimated net worth of $240 billion, according to Forbes. If the proposed wealth tax takes effect, he could face a tax bill of up to $12 billion.
In its preliminary filing, the company said the special committee considered the challenges Meta faced during the COVID-19 pandemic, when Zuckerberg could not be physically present with the company’s management team.
“The Special Committee believes that Mr. Zuckerberg’s talent and leadership have been crucial to our growth, strategy, and stability since our inception, and the Special Committee wants that to continue,” the filing said.
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The “Founder Alignment Agreement” comes as Meta increases spending on artificial intelligence infrastructure, data centers and computing capacity to compete with other major technology companies. The new stock arrangement could also provide greater flexibility for employee compensation, acquisitions and capital-raising activities.
California Rep. Ro Khanna described Proposition 40 as a choice between the working class and oligarchs. “In Trump’s America, working people pay more than they should, while billionaires are so unburdened that they are becoming trillionaires. In the America we seek, billionaires and trillionaires will pay their fair share, while working people will be unburdened,” he wrote in The Guardian last week.
Meanwhile, billionaires are spending heavily to oppose Proposition 40. Those backing the effort include Palantir co-founder Peter Thiel, former Google CEO Eric Schmidt, DoorDash CEO Tony Xu and Stripe CEO Patrick Collison. The group has raised more than $300 million to fight the proposed wealth tax.