Half a century after founding outdoor apparel maker Patagonia, Yvon Chouinard, an eccentric rock climber turned reluctant billionaire with an unconventional capitalist twist, left the company behind. rice field.
Rather than sell the company or take it public, Mr. Chouinard, his wife, and their two adult children will sell approximately $3 billion worth of Patagonia ownership to a specially designed trust and nonprofit. transferred to They were created to preserve the company’s independence and ensure that all of its profits (about $100 million a year) are used to fight climate change and protect undeveloped land around the world. I was.
The unusual move comes at a time of heightened scrutiny against billionaires and corporations. Their rhetoric of making the world a better place is often overshadowed by their contributions to the very problems they claim to solve.
At the same time, Mr. Chouinard’s parting with his family’s fortune is consistent with his long-standing disregard for business norms and lifelong love of the environment.
“I hope this will influence a new form of capitalism that doesn’t just end up with just a few rich and poor,” Chouinard, 83, said in an exclusive interview. “I will donate the maximum amount of money to those who are actively working to save this planet.”
Patagonia will continue to operate as a private, for-profit company based in Ventura, California, selling $1 billion worth of jackets, hats and ski pants each year. But the Chouinard family, who ruled Patagonia until last month, no longer own the company.
In August, the family transferred all of Patagonia’s voting stock (representing 2% of the total stock) to a newly formed entity known as the Patagonia Purpose Trust.
Overseen by Patagonia family members and their close advisors, the trust aims to ensure that Patagonia lives up to its promise to run socially responsible businesses and to donate the profits. The Chouinards donated their shares to a trust, and the bereaved family will pay approximately $17.5 million in taxes on the gift.
The Chouinards then donated the remaining 98% of Patagonia’s common stock to a newly formed nonprofit called the Holdfast Collective. The Holdfast Collective will receive all of the company’s profits and use the funds to fight climate change. Because the Holdfast Collective is 501(c)(4) and allowed to make unlimited political contributions, the family did not receive tax benefits for their contributions.
“It cost them a lot, but it was a cost they were willing to bear to ensure that this company remained true to their principles.” , along with those who helped design the new Patagonia structure. “And they didn’t get a charitable deduction for it. There are absolutely no tax benefits here.”
Republican donor Valle Said is the only example in recent memory of a wealthy business owner giving up his company for philanthropic and political ends. But Sayd took a different approach, donating 100% of his electronics company to nonprofits and giving him $1.6 billion to fund conservative causes, including efforts to stop action on climate change. Made a dollar donation and got a huge personal tax windfall.
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By donating most of the Chouinard family’s assets throughout their lives, Yvon, his wife, Malinda, and their two children, Fletcher and Claire, in their 40s, have established themselves as the most philanthropist in the country.
David Callahan, founder of the website Inside Philanthropy, said, “This family is pretty insane considering most billionaires donate only a small percentage of their net worth each year.
“Even those who signed take an oath Referring to hundreds of billionaires looking to donate most of their fortunes, Callahan said:
Patagonia has already donated $50 million to the Holdfast Collective and plans to donate another $100 million this year, making the new organization a major player in climate philanthropy.
Mosley said the story is unlike any he’s seen in his career. “In my more than 30 years of planning his estate, what the Chouinard family has accomplished is truly amazing,” he said. “It’s an irrevocable promise. They can never take it back and never want to take it back.”
For Mr. Chouinard, it was even simpler than that and provided a satisfying solution to the problem of succession planning.
“I never wanted to own a company, so I didn’t know what to do with it,” he said from his home in Jackson, Wyoming. I could die tomorrow, the company will continue to do the right thing for the next 50 years, and I don’t need to be there.”
“This could actually work”
Chouinard’s confiscation of Patagonia isn’t all that surprising in some ways.
A pioneering rock climber in California’s Yosemite Valley in the 1960s, Chouinard lived out of his car and ate wrecked cans of cat food he bought for five cents.
Today, he still wears old, tattered clothes, drives a battered Subaru, and spends his time living in modest homes in Ventura and Jackson, Wyoming.Chouinard has no computer or cell phone.
Founded by Chouinard in 1973, Patagonia has become a company that reflects his own idealistic priorities and those of his wife. The company is famous for being an early adopter of everything from organic his cotton to on-site daycare, deterring consumers from buying their products. advertisement The New York Times on Black Friday said, “Don’t buy this jacket.”
For decades, the company has donated 1% of its sales to mostly grassroots environmental activists. And in recent years, the company has become more politically active, culminating in the Bears suing the Trump administration to protect his Years National Monument.
But Chouinard’s own net worth continued to grow as Patagonia’s sales skyrocketed, creating an uncomfortable conundrum for outsiders who dislike excess wealth.
“I was listed as a millionaire in Forbes magazine and it really pissed me off.,” He said, ‘I don’t have a billion dollars in the bank. I don’t drive a Lexus.’
of Forbes rankingand the ensuing Covid-19 pandemic, helped kick off a process that unfolded over the past two years, ultimately leading to Chouinard letting go of the company.
In mid-2020, Chouinard began telling his closest advisers, including company chief executive Ryan Gellert, that he was open to selling the company if no better alternative could be found.
“One day he said to me, ‘I swear, Ryan, if you guys don’t start working on this, I’m going to get the Fortune billionaire list and tell people We’re going to start recruiting.” Gellert said, ”At that point, we realized he was serious.”
A small group of Patagonia lawyers and executives began working on the possibility, using the codename “Project Chacabuco” to refer to the Chilean fishing grounds.
Over the next few months, the group will sell part or all of the company, make Patagonia an employee-owned cooperative, become a nonprofit, and even use a special purpose acquisition company (SPAC). We considered various options such as
Hilary Desukie, Patagonia’s general counsel, said:
The easiest way to sell the company or go public would have given Chouinard ample financial resources to fund conservation initiatives. That was the strategy pursued by his close friend, Doug Tompkins, founder of clothing companies Esprit and The North Face.
But Chouinard didn’t believe Patagonia, as a publicly traded company, could prioritize things like worker welfare and climate funding.
“I have no respect for the stock market,” he said. “Once listed, he loses control over the company and needs to maximize shareholder returns, irresponsible company he is one.”
They also considered simply leaving the company to Fletcher and Claire. But the kids didn’t want company, so even that option didn’t work.
“It was important to them not to be seen as a financial beneficiary,” Gellert said. “They felt very strongly about it. It may sound exaggerated, but they really embody the idea that all billionaires are policy failures.”
Ultimately, the legal team and members of the board came to a solution.
In December, the entire team came together for the first time since the pandemic began at a one-day meeting in the hills of Ventura. Meeting outdoors surrounded by oak trees and avocado orchards, all four Chouinards agreed to move forward with a team of advisors.
“There’s still a lot to figure out, but I’m starting to feel like this might actually work,” Gellert said.
Now that the future of Patagonia’s ownership is clear, the company must deliver on its lofty ambitions to tackle climate change while at the same time running a profitable business.
Some experts warn that without the Chouinard family having a financial stake in Patagonia, the company and affiliates could lose focus. The children will remain on Patagonia’s payroll, and Elder Chouinard will have enough to live comfortably, but the company will no longer distribute profits to the family.
Ted Clark, Executive Director of Northeastern University Family Business Center, said: “Take away all economic incentives, and families essentially have no more interests than longing for the good old days.”
As for how the Holdfast Collective will distribute Patagonia’s profits, Chouinard said the focus will be on nature-based climate solutions, such as protecting wild lands. And as a 501(c)(4), the Holdfast Collective can also build on Patagonia’s history of funding grassroots activists, but can also donate to lobbying and political campaigns.
For the Chouinards, it solves the question of what happens to Patagonia after its founder is gone, and ensures that the company’s profits are used to protect the planet.
Chouinard said: “For us, this was the ideal solution.”