We’re Living in the Age of the Imperial CEO

We live in the Age of the Imperial CEO.

That was made abundantly clear this past week with the public filing of paperwork for AI-juggernaut Anthropic ahead of what may be the largest IPO ever. The prospectus detailed the voting power given to the company’s seven founders at the expense of would-be investors.

While the mechanics of Anthropic’s approach are unique, the effect isn’t. SpaceX, which went public in June, gave Elon Musk almost total control of the rocket maker/AI lab through a dual-class stock structure. And, in recent days, Meta Platforms’ board of directors created new nonvoting shares designed to ensure co-founder and chief executive Mark Zuckerberg’s control of the company through its own dual-class system.

The collective effect: The companies at the forefront of developing AI have one less layer of outside accountability, at a time when vast swaths of the nation are concerned about Big Tech’s power.

Unlike most companies that operate under one-share, one-vote rules, some have opted to give certain shareholders increased voting power, often through a special class of stock.

So-called dual- or multiclass ownership structures, once rare for publicly traded companies, have been debated on Wall Street for more than 100 years.

Yet, in the modern era, founder protections have become more in vogue with certain hot-tech companies. The common denominator has often been tech leaders at helms with enough leverage to dictate such terms to eager investors motivated by FOMO.

Unequal voting power can enable—if not embolden—today’s tech titans to take bigger and bigger risks as they pursue visions of disruption that seem straight from science fiction.

If these leaders are right, investors can be launched to new riches. If they are wrong, those investors have little influence to course-correct. And given these bold names increasingly making up many 401(k)s and pension plans, many are signed up for the ride.

In some instances, investors have been mightily rewarded. Meta shareholders, for example, have watched shares in what was once known as Facebook rise more than 1,500% since the IPO price of $38 in 2012.

While it has mostly been an upward trajectory for Meta, there have been some rollercoaster-like share-price drops along the way. In particular, amid investors’ concerns around Zuckerberg’s giant bet on the metaverse and the billions of dollars he was investing into that unproven technology.

But Zuckerberg could make such gambles knowing he had ultimate control with a dual-share system. When he decided to pivot yet again, this time to AI, he just did so with equal gusto and $100 million paydays to those who could help best.

Such “Founder Mode” confidence is celebrated in Silicon Valley, and seen as only something a real founder can pull off, as opposed to corporate managers beholden to the whims of boards of directors and shareholder sentiments.

The reverence for Founder Mode was evident in the Meta board’s recent decision. Issuing him nonvoting shares could help him deal with potentially high personal costs if California voters on Nov. 3 approve a one-time state tax on billionaires. It is a proposition fueled, in part, by the income disparity created by Silicon Valley.

If the tax passes, Zuckerberg, who takes a $1 annual salary, told the board he worried he would have to sell voting shares to cover the liability. That could have reduced his voting power to about 53% from 60.6%. He threatened to relocate out of the state where Meta is based if he didn’t get help.

The board acquiesced. In the Oct. 21 filing, the company said: “Even though Mr. Zuckerberg has voting control of the Company, all of the directors engage meaningfully in Company matters, express their candid views with Mr. Zuckerberg, and do not rubber-stamp decisions.”

The flip side of the argument might be best represented with the performance of Snap, the messaging-app company. Co-founder and CEO Evan Spiegel, who holds 53.1% of voting power, has for years been zealously pursuing a smartglasses product that he sees as a new gateway to the digital world.

Given the lack of consumer success so far, investors aren’t enthused with the pivot. Shares are down almost 70% since its 2017 IPO price. The company faced an activist investor this past spring pushing for the spinoff or shutdown of the smartglasses work. But such efforts have had no noticeable effect.

Following Snap’s IPO, the S&P Dow Jones Indices barred new companies with multiple share classes from its ranks. Inclusion in the S&P 500, for example, typically drives demand for company shares. In early 2018, then-Securities and Exchange commissioner Robert Jackson Jr., a Democrat, gave a hallmark speech on the issue at the University of California, Berkeley’s law school, calling for expiration dates on dual-class structures.

“Simply put,” he warned, “asking investors to put eternal trust in corporate royalty is antithetical to our values as Americans.”

That push failed. In 2023, the S&P reversed itself on the dual-class ban. And excitement among individual investors helped make SpaceX’s IPO the biggest ever.

Investors, it seems, want to give control to their favorite CEOs.

The issue of control has been a long-running theme for Musk in business. At Tesla, where he is also CEO, Musk successfully pushed for a new comp plan last year intended to eventually give him more shares if he reaches ambitious goals.

Unlike other tech companies, Tesla didn’t go public in 2010 with a dual-class of shares. At the time, Tesla wasn’t a darling of Wall Street—like Google or Meta. He had often expressed concern about losing control to activist shareholders.

Today, Musk operates in a much different world. Tesla and SpaceX are considering a merger where, presumably, Musk’s total control would be cemented.

So far, there are no signs of investor reluctance over Anthropic’s unique corporate structure—intended, in part, to shield safety decisions around AI from investor and market demands. Significant control of the company’s board goes to a long-term benefit trust made up of “disinterested” members with expertise in areas such as national security and public policy.

Meanwhile the founders, including CEO Dario Amodei, collectively maintain 50.1% of voting power through a special class of stock. In its filing, Anthropic said it believes the founders group is “distinctly equipped to be stewards of our mission.”

Ultimately, for investors, it comes down to this: buying the stock is a vote for their reign.