How Can Mark Zuckerberg Give Away All That Stock and Still Control Facebook?

Mark Zuckerberg promised earlier this month to give away or spend 99 percent of his Facebook stock over his lifetime, a chunk of shares currently worth roughly $45 billion.

We don’t know much about what Zuckerberg and wife Priscilla Chan plan to spend the money on — that has been an interesting topic of debate these past two weeks. What we do know is that giving away Facebook shares means, eventually, giving up control over Facebook, too.

But Zuckerberg doesn’t seem interested in losing control over his company — at least not immediately. A security filing with details about the new investment vehicle, the Chan Zuckerberg Initiative LLC, says the CEO “intends to retain his majority voting position in our stock for the foreseeable future.” Given that Zuckerberg is just 31 years old, it’s probably safe to assume he plans to keep Facebook under his control for quite some time.

The easiest way to do this: Simply hold onto his shares. Zuckerberg promised to give away his stock over his lifetime. Nothing requires that he do this right away.

But let’s assume Zuckerberg maxes out his spending/donation limit of $1 billion worth of Facebook shares per year for the next three years, as this recent filing indicated. Facebook has two classes of stock: Class A shares that carry one vote apiece (the same shares you can buy on the stock exchange), and Class B shares that carry 10 votes per share. Zuckerberg has a boatload of Class B shares and, as a result, controls roughly 60 percent of the voting power at the company.

At the current stock price, gifting or spending $1 billion per year for the next three years would diminish Zuckerberg’s total voting control to just under 57 percent — still a healthy majority, but diminished control nonetheless. If he wanted to continue giving at this pace, it would require some strategic planning to orchestrate a win-win: The ability to spend and give away his shares while maintaining control over the company he created.

The company declined to comment, but here’s how he might be able to pull it off.

The most obvious possibility here is that Zuckerberg could simply get more Facebook shares, allowing him to give away his current stock while still maintaining a total voting majority. Stock grants are common for most company executives, but not for Zuckerberg. He hasn’t received a Facebook stock grant since 2005. (He also takes an annual salary of just $1.) So this would be unusual.

It’s also possible that other Class B shareholders — board members and other early investors — could make Zuckerberg a proxy for their votes, something Facebook co-founder Dustin Moskovitz does with the 6 percent of the voting power that he owns. But this scenario would obviously require some help.

What wouldn’t really work: Transferring Class B shares to Zuckerberg. According to the company’s S-1 filing, “transfers by holders of Class B common stock will generally result in those shares converting to Class A common stock.” That means those Class B shares would essentially lose their voting power once transferred.

Facebook’s dual-class stock structure, where Class B shares each carry 10 votes versus just one vote for a Class A share, ensures the company is controlled by its board of directors. And in case you’re wondering if Facebook can grant even more voting power to those shares, it can’t. Nasdaq’s corporate governance requirements stipulate that a company “cannot create a new class of security that votes at a higher rate than an existing class of securities, or take any other action that has the effect of restricting or reducing the voting rights of an existing class of securities.” So eliminate that option.

It could take a page out of Google’s playbook and add a new set of voteless Class C shares for the general public to buy, essentially redirecting investors toward stock that’s worthless when it comes to voting on decisions. This would help prevent future dilution of voting power.

This wouldn’t necessarily be a favorable move. Facebook’s last proxy statement, filed in April, included a proposal to do just the opposite: Make every share, regardless of class, worth just one vote as a way to give regular shareholders a say in how Facebook is governed. This proposal came from shareholders, not the company, which tells you two things: 1) Some investors don’t want power concentrated in the board and 2) the company disagrees with that idea. The measure didn’t pass.

Here’s an interesting idea: If Facebook ever issued a dividend, even a small one, the Chan Zuckerberg LLC could hold Facebook stock and donate or invest the dividend returns without ever having to sell Class B shares. Facebook has never issued a dividend, deciding to invest back into its business instead. But even a $1 return per share, roughly 1 percent on the year, would net Zuckerberg more than $400 million per year. It’s not a ton by Zuckerberg standards, but it could be used to prolong the time until he sells his Class B shares nonetheless.

That possibility underscores the point that Zuckerberg isn’t giving his shares away to a charity or a particular initiative right now. He will eventually move 99 percent of his shares to the Chan Zuckerberg company, which he also controls. Of course, he has to do something with those shares — sell them or reap dividends — in order to carry out his larger aims. But more clarity around this issue is important to understanding how much he’ll raise not only for his causes, but also for the investors and employees of Facebook. Zuckerberg may not be in charge some day.

This article originally appeared on Recode.net.