Social media giant Meta Platforms (META 1.88%) is plowing tens of billions of dollars annually into two big initiatives. The first is the metaverse. Meta CEO Mark Zuckerberg sees virtual reality, augmented reality, and connected virtual worlds as the future. That said, Meta's Reality Labs segment responsible for all things metaverse recorded an operating loss of $9.4 billion through the first nine months of the year, and the company expects losses to grow substantially in 2023.

The second big bet is AI. Meta is drastically ramping up its capital spending to expand its data center footprint and support the most advanced AI hardware. The goal is to improve how its apps serve content and ads.

Investors really don't like all this spending. Meta stock has plunged 75% from its all-time high last year. The company, which was once worth more than $1 trillion, is now valued at around $250 billion.

Brad Gerstner, founder of Meta shareholder Altimeter Capital, recently published an open letter to Zuckerberg urging him to slash head count, reduce capital spending, and put a much tighter lid on spending related to the metaverse. Gerstner argued that Meta could potentially double its free cash flow to $40 billion per year if these steps were taken.

Zuckerberg has all the power

The concept of skin in the game is an important one for long-term investors to understand. A leader who doesn't own a meaningful stake in the company they helm faces little downside when things go off the rails. When a CEO's net worth is tied up in shares of the company they lead, the odds are good that decisions coming from that CEO will be aimed at the long-term success of the company. That's good for shareholders.

Zuckerberg certainly has skin in the game. With a stake of roughly 350 million shares, nearly all his net worth is tied to his $30 billion-plus stake in the company he founded. But Zuckerberg also has something that many founder-CEOs don't have: complete voting control.

While Zuckerberg owns less than 13% of Meta's outstanding shares, he controls 54.4% of the voting power. That's because most of his stake is in the form of Class B shares, which grant him 10 votes each instead of just one.

For long-term investors, having a CEO with complete control can be a good thing. It means that the CEO can take the kind of risks that take many years to pay off, even if they hurt profits in the short run. The problem, though, is that there's no mechanism to rein in the CEO.

I'm willing to bet that Zuckerberg doesn't care about maximizing free cash flow. Cutting costs would help the bottom line and potentially the stock price today, but Zuckerberg likely knows full well that Meta needs a second act. The goal is to build a thing that could potentially dwarf the success of the social media business, and he's betting on metaverse being that thing.

There's nothing anyone can really do about Meta's aggressive investments. Activist investors can complain, but they knew the risks of investing in a company where the CEO can't be overruled: It works until it doesn't.

When stock prices are going up, investors are going to scoop up shares of newly public companies without paying much attention to the share structure. When Meta went public in 2012 as Facebook, proxy advisory group Institutional Shareholder Services harshly criticized the company's dual-share structure while admitting that it probably wouldn't make any difference for the success of the IPO. "This is a governance profile with a defense against everything expect hubris," read the ISS report.

It took a decade for that warning to ring true. Meta stock has now underperformed the S&P 500 since its IPO, and investors have no real way to challenge the decisions Zuckerberg is making. It's the metaverse or bust, and there's nothing anyone can do about it.