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Meta has struck an unusual agreement with Mark Zuckerberg designed to keep its founder and chief executive in California after he considered leaving the state over a proposed wealth tax that could result in a multibillion-dollar bill.
Under the agreement, Zuckerberg has committed to remain a resident of California, or the state where Meta maintains its headquarters, and continue leading the company for eight years. The arrangement accompanies Meta’s creation of a new class of non-voting shares that could give him greater flexibility to raise cash without immediately reducing his voting control.
The agreement follows concerns over Proposition 40, a California ballot measure that would impose a one-time 5% tax on the wealth of billionaires if approved by voters. Zuckerberg told Meta that the potential liability had led him to consider moving his primary residence outside the state.
With Zuckerberg’s net worth estimated at around $240 billion, the proposed tax could produce a multibillion-dollar liability. Meta was concerned that meeting such a bill could require Zuckerberg to sell some of the voting shares underpinning his control of the company.
Meta plans to issue a new class of non-voting Class C common stock in January 2027. Each holder of Class A or Class B stock will receive one Class C share for every existing share, effectively creating a two-for-one stock split.
Zuckerberg will be permitted to sell immediately up to 20% of the Class C shares he receives, representing 10% of his overall economic interest in Meta. That could provide sufficient liquidity to meet a potential tax liability without requiring him to sell voting shares.
Restrictions on Zuckerberg’s remaining Class C shares will gradually expire during the eight-year period, subject to the conditions of his agreement with Meta. Selling beyond the permitted amount could result in a reduction in his voting power.
For Meta’s board, the issue extends beyond Zuckerberg’s personal tax position. A special committee of independent directors concluded that retaining him in a leadership role and having him manage the company from its headquarters was critically important to Meta, particularly during a period of intense competition driven by artificial intelligence.
That calculation comes as Meta commits enormous amounts of capital to AI. The company’s long-term forecasts indicate that it could need to raise hundreds of billions of dollars over several years to finance its AI-related growth plans.
The Class C structure could therefore serve a broader corporate purpose. Meta has said the non-voting stock could provide greater flexibility to raise capital, fund acquisitions and compensate employees while preserving the voting power of existing shareholders.
The agreement highlights the unusual governance questions that can arise at founder-controlled public companies. Zuckerberg owns just over 13% of Meta’s shares but controls around 60% of its voting power, making the preservation of that control particularly significant to the company’s governance structure.
His importance to Meta has become particularly pronounced as the company increases investment in artificial intelligence. The board’s special committee concluded that Zuckerberg’s continued leadership and proximity to senior management were important as Meta faces intensifying competition across the technology industry.
The arrangement also illustrates the challenge of balancing founder control with the interests of other shareholders. The Class C structure gives Meta additional financial flexibility without giving the new shares voting rights, while potentially allowing Zuckerberg to meet a large personal liability without selling the shares carrying his existing voting power.
Whether that mechanism is ultimately required for tax purposes will depend on the outcome of the California vote. Proposition 40 has not been approved, meaning Zuckerberg’s potential liability remains contingent on voters supporting the measure.
For Meta, however, the agreement provides greater certainty over the continued involvement and location of the executive who has led the company since its creation. At a time when Meta expects substantial capital requirements to finance its AI ambitions, the board has tied Zuckerberg’s continued leadership and residency to a structure designed to provide financial flexibility while preserving the company’s existing balance of voting control.