Meta disclosed a stock incentive on Wednesday under which founder and CEO Mark Zuckerberg committed to living in California for eight years. Meta's filing allows an exception for material unforeseen circumstances that make living elsewhere prudent or advisable. The plan could help cover higher taxes if voters approve Proposition 40 on Election Day, November 3. Meta apparently feared that Zuckerberg might leave California.
The disclosure accompanied Meta's third-quarter earnings report, less than two weeks before the midterm elections. The arrangement is the first of its kind among California's megacap technology companies. Proposition 40 would levy a 5% tax on California residents whose wealth exceeds $1 billion. Zuckerberg's net worth is about $225 billion, making Zuckerberg the world's sixth-richest person. Meta's filing argued that liability for the wealth tax would effectively mean Zuckerberg pays to lead Meta while living in California, given Zuckerberg's $1 annual salary.
Meta created non-voting Class C common stock that will take effect in January. Zuckerberg will receive some of the new stock through a dividend. The filing says Zuckerberg can immediately sell or transfer up to 20% of the awarded shares for any purpose, including paying Proposition 40 taxes if enacted, without changing Zuckerberg's majority voting control.
Zuckerberg and Nvidia CEO Jensen Huang are the only technology CEOs with fortunes of at least $100 billion who still live in California. Elon Musk and Michael Dell live in Texas. Amazon founder Jeff Bezos has always maintained a primary residence outside California. Google co-founders Larry Page and Sergey Brin left California before the election and purchased luxury homes in Florida. Oracle founder Larry Ellison also officially resides in Florida.
Much of the technology industry opposes Proposition 40. Various media reports citing campaign filings identify Page, Brin, former Google CEO Eric Schmidt, Stripe CEO Patrick Collison, investor Peter Thiel and DoorDash CEO Tony Xu as contributors to opposition efforts. Collison and Xu serve on Meta's board. Thiel served on Meta's board from 2005 until 2022. Brin told The New York Times in April that Brin's family fled the Soviet Union in 1979, adding, "I don't want California to end up in the same place."
However, Huang recently told CBS Sunday Morning that paying the tax would be a "privilege". Forbes ranks Huang immediately below Zuckerberg among billionaires, with wealth of $185 billion. Proposition 40 supporters, including independent Vermont Senator Bernie Sanders, have urged voters to approve the measure. Recent polls suggest Proposition 40 may fall short of the majority required for passage. A recent Citrin-Politico poll found 46% support and 43% opposition.
According to the filing, Meta and a special committee consider Zuckerberg essential to Meta's future and ambitions to become a major artificial intelligence competitor. Meta said the company wants to preserve Zuckerberg's close working relationship with Meta Superintelligence Labs, led by AI chief Alexandr Wang. The special committee credited Zuckerberg's abilities and leadership with helping Meta grow, set strategy and maintain stability since the company's founding. The committee said the committee wants Zuckerberg's contribution to continue.
Meta considered issuing Class A common stock to raise money. The filing says Zuckerberg opposed any substantial equity financing that would dilute Zuckerberg's voting power. The filing described the arrangement as allowing Meta to obtain essential equity capital while preserving Zuckerberg's voting power. The filing also credited Zuckerberg's vision and management abilities with creating long-term value.
Meta's Stock Incentive to Keep Zuckerberg in California Sparks Wealth Tax Debate
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Summary
Meta revealed a stock incentive aimed at keeping CEO Mark Zuckerberg in California for eight years, amid Proposition 40, a potential 5% wealth tax on ultra-high-net-worth individuals. The plan includes Class C shares, giving Zuckerberg the option to sell up to 20% of his award to cover tax costs. Meta stressed his vital role in AI development, noting his $1 annual salary would make him liable for the tax if passed. Tech leaders like Google co-founders and Patrick Collison oppose the tax, while Jensen Huang of Nvidia supports it. Investors evaluating value investing in crypto and traditional assets are weighing this move’s risk-to-reward ratio.
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