Meta Platforms has agreed to a new compensation arrangement with Chief Executive Mark Zuckerberg that could help him offset the financial impact of a proposed billionaire tax in California, while giving him greater flexibility to sell shares in the company.
The deal follows concerns raised by Zuckerberg about remaining a California resident if voters approve a proposed one-time 5 per cent tax on individuals whose net worth exceeds $1 billion.
With his fortune estimated at more than $200 billion, Zuckerberg could face an additional tax bill of about $10 billion if the measure is approved, according to estimates cited in the report.
The proposed tax is expected to go before California voters in November.
According to a financial disclosure released on Wednesday, Meta negotiated the arrangement through a special committee after what the filing described as robust and, at times, contentious discussions.
Under the agreement, known as the Founder Alignment Agreement, Zuckerberg will receive additional shares and be able to sell shares on a quarterly basis. The arrangement is designed to improve his access to the value of his holdings without changing his level of control over the company.
The agreement is expected to remain in place for eight years, provided Zuckerberg continues to reside in California, and appears to apply even if the proposed tax is rejected.
Zuckerberg reportedly told Meta’s board last month that he was considering moving his primary residence out of California and potentially selling his properties in the state, including homes in Palo Alto and Lake Tahoe.
He warned that such a move would attract public attention and raise questions among employees about the company’s future management.
Meta said retaining Zuckerberg’s leadership from California was “critically important” amid what it described as a dramatic transformation in the technology industry and global economy driven by artificial intelligence.
The company has undergone significant changes in recent years, including a shift away from its earlier emphasis on the metaverse towards artificial intelligence products and infrastructure.
Zuckerberg is now leading Meta’s efforts to strengthen its position in the increasingly competitive AI market.
Meta’s agreement with Zuckerberg comes as the company commits substantial resources to artificial intelligence development.
The company said it planned to spend as much as $145 billion on AI projects in 2026, including the infrastructure required to support its ambitions.
Meta’s chief financial officer, Susan Li, said the stock arrangement would also provide the company with additional options for financing future AI investments.
However, the scale of spending has raised concerns among investors about the returns the company will generate from its AI initiatives.
Meta reportedly recorded negative cash flow for the first time since going public 14 years ago, reflecting spending on operations and investments exceeding the cash it generated over the period.
Its shares fell more than 7 per cent on Thursday, wiping more than $100 billion from its market capitalisation, as investors reacted to its spending plans and the uncertainty surrounding future returns.
The company has also continued restructuring its workforce. Its headcount was reported to be down 15 per cent from a year earlier, following several rounds of job cuts.
California is home to many of America’s largest technology companies and a substantial number of the country’s wealthiest individuals. The proposed levy would impose a one-time tax on residents with net worth above $1 billion.
Supporters of the measure argue that taxing the wealthiest residents could generate public revenue, while opponents may argue that it could encourage wealthy individuals and businesses to relocate.
The proposal has particular significance for technology founders whose fortunes are largely tied to shares in the companies they lead.
For Zuckerberg, the Meta agreement provides a way to access more of the value of his holdings while maintaining his leadership role and control of the company.
The arrangement also highlights the intersection of corporate governance, executive compensation, taxation and the enormous investment requirements of the AI race.
Whether California voters approve the proposed tax remains uncertain. But Meta’s decision to structure a new share arrangement around Zuckerberg’s continued California residency shows how the prospect of higher taxes is already influencing corporate decisions.
