Meta creates non-voting stock so Zuckerberg can cover possible California wealth tax
The filing, released with Meta's third-quarter earnings, lets CEO Mark Zuckerberg sell shares to pay a potential 5% tax on billionaires under Proposition 40 without losing voting control.
At a glance
- Meta is creating a non-voting Class C stock so CEO Mark Zuckerberg can pay a possible California wealth tax without losing voting control.
- Proposition 40 would tax Californians worth more than $1 billion at 5%; Zuckerberg is worth about $225 billion.
- Meta says Zuckerberg agreed to stay in California for eight years and that many factors, not just the tax, drove the stock plan.
Meta plans to create a new class of non-voting stock to help CEO Mark Zuckerberg pay a possible California billionaire tax, according to a filing released Wednesday alongside the company's third-quarter earnings report.
The move comes before a Nov. 3 vote on Proposition 40, which would impose a 5% tax on Californians worth more than $1 billion. Zuckerberg, the world's sixth-richest person, has a net worth of about $225 billion.
What the plan does
Meta said it will create a Class C non-voting common stock effective in January. Zuckerberg will essentially receive a portion of the new shares through a dividend, and will be able to "immediately sell or transfer up to 20%" of them "for any reason, including so that he may pay his potential tax liability under California Proposition 40, if enacted into law, without affecting his majority voting control," the filing said.
Meta said Zuckerberg has committed to remaining in California for eight years, "unless there are material unforeseen circumstances that would render it prudent or advisable for Mr. Zuckerberg to reside elsewhere."
The filing noted his salary of "only $1 each year," saying that if the tax were enacted and he became liable, he would "effectively be paying to serve as the Company's chief executive officer while residing in California."
Meta pushes back on single-cause framing
"There were many driving factors that led the board and special committee to approve the Class C shares, and it would be misleading to attribute it to any single reason," Meta told CNBC in a statement.
Meta said a special committee views Zuckerberg as central to its future, including its push into artificial intelligence and his work with Meta Superintelligence Labs, led by AI chief Alexandr Wang. The filing said Zuckerberg had made clear he would not support significant equity financing that reduced his voting power, and that the new stock lets Meta raise "critical equity capital" without doing so.
Tech peers split on the measure
Zuckerberg is one of the few California-based tech leaders to remain in the state, along with Nvidia CEO Jensen Huang, who recently told CBS Sunday Morning that paying the tax would be a "privilege." Elon Musk and Michael Dell live in Texas, while Google co-founders Larry Page and Sergey Brin moved to Florida. Brin told The New York Times in April that he fled the Soviet Union with his family in 1979 and that "I don't want California to end up in the same place."
Tech figures including former Google CEO Eric Schmidt, Stripe CEO Patrick Collison, venture investor Peter Thiel and DoorDash CEO Tony Xu have put money into opposing Prop. 40, according to media reports based on campaign filings. Collison and Xu are Meta board members; Thiel served on the board from 2005 until 2022.
Sen. Bernie Sanders, I-Vt., supports the measure. A recent Citrin-Politico poll showed 46% in favor and 43% opposed, suggesting it may fall short of the majority needed.
Source: CNBC.
Questions and answers
- What is California Proposition 40?
- It is a ballot measure that would impose a 5% tax on Californians worth more than $1 billion. Voters decide on it on Nov. 3.
- Why did Meta create a new stock class for Mark Zuckerberg?
- Meta said the Class C non-voting shares let Zuckerberg immediately sell or transfer up to 20% of the granted shares, including to pay a possible Prop. 40 tax, without affecting his majority voting control. The company said many factors drove the decision.
- Is Proposition 40 expected to pass?
- Recent polling suggests it may fail to win the required majority. A Citrin-Politico poll showed 46% in favor and 43% opposed.
