Feta Pays Humanberg to Stay in California, Raises Tax Money by Selling Investors Shares With No Vote

What happened?

Feta, the social media group now paying its chairman to remain at his current address, has agreed a financial incentive to keep Marc Humanberg near Silicon Valley. The company says he had considered leaving California because of a proposed wealth tax, which could mean a multi-billion-dollar payment on paper wealth.

“I love California deeply, and the board has agreed to put that love in writing, with a figure beside it. Shareholders will own the stock. The voting stays with me, since a tax is a cost and a vote is a legacy.”

What is a non-voting share?

It is a share that carries ownership but no vote. Feta will create a new class of them. Humanberg can sell these to raise cash for any tax bill, and his voting shares stay untouched. Controlling the company is the one thing he will not sell to cover the tax.

Buyers will be paying real money for a stake in a company whose direction they have been told, in writing, they cannot influence. Feta describes this as 'broadening participation'.

Who pays for the incentive?

The shareholders, as with every other cost at Feta. They are paying the founder to stay in the state, so that he can sell them shares to pay the state, so that the state does not lose him. The state is at no point asked what it would pay for him to stay, which is the only fair way to run an auction.

How does the incentive work?

Residency is now, in effect, a performance target. Humanberg must keep a bed within reach of the Valley, and the board will presumably check. Staff have asked whether anyone will confirm that he is actually there, and have been told the company has some experience with location data.

What does the wider industry think?

Endlessen Horrorwitz, the venture firm that now backs founders and their forwarding addresses, called the proposed tax 'an exit visa for the future'. Asked whether the incentive was just a subsidy for a rich man, the firm said the future cannot be subsidised, only retained.

Humanberg was more careful. 'A founder's commitment to a place should be measured and reviewed annually, in the same way as his commitment to everything else,' he said, reading from a card.

Should I worry?

Only if you were hoping the tax would be paid by the person it was written for. Under the new arrangement, a tax on the founder is financed by investors who cannot vote, supported by a bonus paid by investors who can, and avoided entirely if he moves. It is the most flexible tax in California, since it is whichever one the payer is willing to be near.