A half-century after founding the outdoor apparel maker Patagonia, Yvon Chouinard, the eccentric rock climber who became a reluctant billionaire with his unconventional spin on capitalism, has given the company away.
Rather than selling the company or taking it public, Chouinard, his wife and two adult children have transferred their ownership of Patagonia, valued at about $3 billion, to a specially designed trust and a nonprofit organisation. They were created to preserve the company’s independence and ensure that all of its profits — some $100 million a year — are used to combat climate change and protect undeveloped land around the globe.
The unusual move comes at a moment of growing scrutiny for billionaires and corporations, whose rhetoric about making the world a better place is often overshadowed by their contributions to the very problems they claim to want to solve.
At the same time, Chouinard’s relinquishment of the family fortune is in keeping with his long-standing disregard for business norms and his lifelong love for the environment.
“Hopefully this will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people,” Chouinard, 83, said in an exclusive interview with The New York Times. “We are going to give away the maximum amount of money to people who are actively working on saving this planet.”
Patagonia will continue to operate as a private, for-profit corporation based in Ventura, California, selling more than $1 billion worth of jackets, hats and ski pants each year. But the Chouinards, who controlled Patagonia until last month, no longer own the company.
In August, the family irrevocably transferred all the company’s voting stock, equivalent to 2% of the overall shares, into a newly established entity known as the Patagonia Purpose Trust.
The trust, which will be overseen by members of the family and their closest advisers, is intended to ensure that Patagonia makes good on its commitment to run a socially responsible business and give away its profits. Because the Chouinards donated their shares to a trust, the family will pay about $17.5 million in taxes on the gift.
The Chouinards then donated the other 98% of Patagonia, its common shares, to a newly established nonprofit organisation called the Holdfast Collective, which will now be the recipient of all the company’s profits and use the funds to combat climate change. Because the Holdfast Collective is a 501(c)(4), which allows it to make unlimited political contributions, the family received no tax benefit for its donation.
“There was a meaningful cost to them doing it, but it was a cost they were willing to bear to ensure that this company stays true to their principles,” said Dan Mosley, a partner at BDT & Co, a merchant bank that works with ultrawealthy individuals including Warren Buffett, and who helped Patagonia design the new structure. “And they didn’t get a charitable deduction for it. There is no tax benefit here whatsoever.”
As for how the Holdfast Collective will distribute Patagonia’s profits, Chouinard said much of the focus will be on nature-based climate solutions such as preserving wild lands. And as a 501(c)(4), the Holdfast Collective will also be able to build on Patagonia’s history of funding grassroots activists, but it could also lobby and donate to political campaigns.
For the Chouinards, it resolves the question of what will happen to Patagonia after its founder is gone, ensuring that the company’s profits will be put to work protecting the planet.
“I feel a big relief that I’ve put my life in order,” Chouinard said. “For us, this was the ideal solution.”
Credit The New York Times