Half a century after founding Patagonian outdoor clothing maker Yvon Chouinard, the eccentric mountaineer turned billionaire reluctant with his unique spin on capitalism, has given company leaves.
Instead of selling the company or going public, Mr. Chouinard, his wife and two adult children transferred ownership of Patagonia, worth about $3 billion, to a specially designed trust and a nonprofit. They were created to maintain the company’s independence and ensure that all of the company’s profits – about $100 million a year – are used to fight climate change and protect uncharted lands. develop globally.
The unusual move comes at a time of growing scrutiny of billionaires and corporations, whose rhetoric about making the world a better place is often overshadowed by their contribution to the very problems they claim to want to solve.
At the same time, Mr. Chouinard’s relinquishment of the family fortune is in keeping with his disregard for business standards and his lifelong love of the environment.
“Hopefully this will affect a new form of capitalism that doesn’t just end up with some rich people and some poor people,” said Chouinard, 83. “We will donate the maximum amount to those who are actively working to save the planet.”
Patagonia will continue to operate as a for-profit privately held corporation based in Ventura, California, selling more than $1 billion worth of ski jackets, hats and pants annually. But the Chouinards, who controlled Patagonia until last month, no longer own the company.
In August, the family transferred all of the company’s voting shares, equivalent to 2% of the total shares, into a newly formed organization called the Patagonia Purpose Trust.
The trust, which will be overseen by family members and their closest advisors, ensures that Patagonia lives up to its commitment to running a socially responsible and profitable business. profit. Since the Chouinards donated their shares to a trust, the family would have to pay about $17.5 million in taxes on the gift.
Chouinards then donated the remaining 98% of Patagonia’s common stock to a newly formed nonprofit called Holdfast Collective, which will now receive all of the company’s profits and use the funds to fund against climate change. Since the Holdfast Collective is a 501(c)(4) organization, allowing it to make unlimited political contributions, the family does not receive a tax benefit on its contribution.
“They have to pay a significant cost, but it is a cost they are willing to bear to ensure that this company is able to afford it,” said Dan Mosley, a partner at BDT & Co., a commercial bank. Always follow their rules. with super-rich individuals including Warren Buffett, and who helped Patagonia design the new structure. “And they didn’t get a charity deduction for it. There aren’t any tax benefits here. “
Barre Seid, a Republican donor, is the only other example in recent memory of a wealthy business owner who gave away his company to political and charitable causes. But Mr. Seid took a different approach, giving 100% of his electronics company to a nonprofit, collected a huge personal tax revenue as he made a $1.6 billion gift to fund conservative causes, including efforts to stop action on climate change.
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By giving away most of their fortune during their lifetime, the Chouinards – Yvon, his wife Malinda and their two children, Fletcher and Claire, both in their 40s – became part of the family. The most philanthropic family in the country.
“This family is the difference when you consider that most billionaires give away only a small fraction of their net worth each year,” said David Callahan, founder of the website Inside Philanthropy.
“Even those who signed For commitment Don’t give away that much, and tend to get richer every year,” added Mr Callahan, referring to their pledge to give away most of their wealth.
Patagonia has donated $50 million to the Holdfast Collective and is expected to contribute another $100 million this year, making the new organization a major player in climate philanthropy.
Mr Mosley said the story was unlike any he had seen in his career. “In my 30+ years of estate planning, what the Chouinard family has done is truly remarkable,” he said. “It was committed irrevocably. They can’t take it out again, and they don’t want to take it out again. “
For Mr. Chouinard, it was even simpler than that, offering a satisfactory solution to the succession planning problem.
“I didn’t know what to do with the company because I never wanted to have one,” he said from his home in Jackson, Wyo. “I don’t want to be an entrepreneur. Now I can die tomorrow and the company will continue to do the right thing for the next 50 years, and I don’t need to be around.”
‘This could actually work’
In some ways, the forfeiture of Patagonia is not a surprise from Mr. Chouinard.
A pioneer mountaineer in California’s Yosemite Valley in the 1960s, Mr. Chouinard lived out of his car and ate broken cans of cat food he bought for 5 cents each.
Even today, he wears old ragged clothes, drives a Subaru, and divides his time between modest homes in Ventura and Jackson, Wyo. Mr. Chouinard does not have a computer or a mobile phone.
Patagonia, founded in 1973 by Mr. Chouinard, has become a company that reflects his own idealistic priorities, as well as those of his wife. The company soon adopted everything from organic cotton to on-site baby care and famously discouraged consumers from buying its products, with High optical on Black Friday in the New York Times reads “Don’t Buy This Jacket”.
The company has given away 1% of its revenue over the decades, mostly to environmental activists. And in recent years, the company has become more politically active, going further sue the Trump administration in an effort to protect the Bears Ears National Monument.
However, as Patagonia sales skyrocket, Mr Chouinard’s net worth continues to rise, creating an uncomfortable conundrum for an outsider who hates excessive wealth.
“I was listed as a billionaire by Forbes magazine, which really pisses me off,“I said. “I don’t have a billion dollars in the bank. I don’t drive Lexuses. “
The Forbes rankingand then the Covid-19 pandemic, which helped kick-start a process that would take place over the past two years, and eventually lead to Chouinards abandoning the company.
In mid-2020, Mr. Chouinard began telling his closest advisers, including Ryan Gellert, the company’s chief executive, that if they couldn’t find a good alternative, he would willing to sell the company.
“One day he said to me, ‘Ryan, I swear to God, if you don’t start this, I’m going to go get the Fortune list of billionaires and start calling people,’ ” Mr. Gellert said. “At that point, we realized he was very serious.”
Using the codename Project Chacabuco, which involved a fishing spot in Chile, a small group of Patagonian attorneys and board members began investigating the possibilities.
Over the next few months, the team explored a range of options, including selling part or all of the company, turning Patagonia into an employee-owned partnership, becoming a non-profit organization. profits and even use a special purpose acquisition company, or SPAC.
“We’ve unearthed every stone, but there really aren’t any good options that can accomplish their goals,” said Hilary Dessouky, general counsel for Patagonia. .
The easiest routes, selling the company or taking it public, would give Mr Chouinard ample financial resources to fund conservation initiatives. It’s a strategy pursued by his best friend, Doug Tompkins, founder of clothing companies Esprit and The North Face.
But Mr Chouinard doesn’t believe Patagonia will be able to prioritize things like worker welfare and climate action funding as a public company.
“I have no respect for the stock market at all,” he said. “Once you went public, you lost control of the company and you had to maximize shareholder return, and then you became one of these irresponsible companies.”
They also considered leaving the company for Fletcher and Claire. But even that option doesn’t work, because the kids don’t want the company.
“It is important to them that they are not considered financial beneficiaries,” Mr. Gellert said. “They feel very strongly about it. I know it sounds one-sided, but they really represent the view that every billionaire is a policy failure.”
In the end, the legal team and board members came up with a solution.
In December, at an all-day meeting in the hills above Ventura, the entire team came together for the first time since the pandemic began. Meeting outside, surrounded by oak trees and avocado groves, all four Chouinards, along with their team of advisors, agreed to move forward.
“We still have a million and one things to learn, but it’s starting to get the feeling that this could really work,” Gellert said.
‘The ideal solution’
Now that the future of Patagonia ownership is clear, the company will have to make good on its lofty ambition to simultaneously run a profitable company while tackling climate change.
Some experts warn that without the Chouinard family having a financial stake in Patagonia, the company and related entities could lose focus. While the children remain on Patagonia’s payroll and the Chouinards elders have a comfortable life, the company will no longer distribute any profits to the family.
“What makes capitalism successful is the drive to succeed,” says Ted Clark, executive director of the Center for Family Business at Northeastern University. “If you remove all financial incentives, the family basically doesn’t care about it anymore except longing for the good old days.”
As for how Holdfast Collective will distribute Patagonia’s profits, Mr. Chouinard said much of the focus will be on nature-based climate solutions such as conservation of wild lands. And as a 501(c)(4), Holdfast Collective will also be able to build a funding history for Patagonian grassroots activists but also campaign and donate to political campaigns.
For Chouinards, it addresses the question of what happens to Patagonia after its founder dies, ensuring that the company’s profits will be used to protect the planet.
Mr. Chouinard said: “I feel relieved that I have put my life in order. “For us, this is the ideal solution.”
