Patagonia will be controlled by a trust and a non-profit organization
The Chouinards became one of the most charitable families in America.
The company will maintain its philosophy in the fight against climate change
Half a century after founding the Patagonian outdoor sportswear brand, Yvonne Chouinard, an eccentric mountaineer who unwittingly became a billionaire through his unorthodox approach to capitalism, has abandoned his company.
Rather than sell the company or go public, Chouinard, his wife and two adult children handed over their Patagonian property, estimated to be worth $3 billion, to a specially designed trust and nonprofit organization. It was created to preserve the company’s independence and ensure that all of its profits – about $100 million annually – are used to combat climate change and protect underutilized lands around the world.
The unusual decision comes at a time of growing scrutiny with 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 renunciation of the family fortune is in line with what he has become famous for contempt for business practices And his everlasting love for the environment.
“I hope this affects a new form of capitalism that doesn’t produce a handful of rich people and a lot of poor people,” Chouinard, 83, said in an exclusive interview. “We will donate the most money to the people who are working hard to save this planet.”
The company’s new plan
Patagonia will continue to operate as a private, for-profit company headquartered in Ventura, California, selling more than $1 billion annually in ski jackets, hats, and pants. But the Chouinards, who controlled Patagonia until last month, no longer own the company.
In August, the family permanently transferred the company’s entire voting capital, equal to two percent of the total shares, to a newly created entity known as the Patagonia Purpose Fund.
The trust, which will be overseen by family members and their closest advisors, aims to ensure that Patagonia fulfills its commitment to be a socially responsible company and pass on its profits. Since the Chouinards donated their shares to a trust, the family will pay about $17.5 million in tax on the gift.
Después, los Chouinard donaron el otro 98 por ciento de Patagonia, sus acciones ordinarias, a una organización el sin fines de lucro recién establecida llamada The Holdfast Collective, que ahora será la beneficiaria de empresas de la zares los las Climate change. Because Holdfast Collective is a 501(c)(4) registered entity, which allows it to make unlimited political contributions, the family will not receive any tax benefits for their donation.
Dan Mosley, partner at BDT & Co., said: He works with very wealthy individuals, including Warren Buffett, who helped Patagonia design this new structure. Nor did they receive a charitable deduction for tax purposes. There was no tax benefit at all.”
Barre Seid, a Republican donor, is the only recent example of a wealthy businessman giving up his company for charitable and political reasons. But Syed took a different approach, donating 100 percent of his electronics business to a nonprofit, earning a huge tax gain on his $1.6 billion donation to conservative causes, including initiatives to stop measures against climate change.
A completely different story
By giving away the bulk of their living assets, the Chouinards — Yvonne, his wife Malinda and their two children, Fletcher and Claire, both in their 40s — have established themselves among the most charitable families in the country.
Patagonia has already donated $50 million to The Holdfast Collective and expects to contribute an additional $100 million this year, making the new organization a major player in climate philanthropy.
Mosley commented that this story was unlike any other he had seen in his career. “I’ve been in estate planning for over 30 years and what the Chouinards have done is exceptional,” he said. It is an irrevocable commitment. They can’t get back what was moved and never want to do it.
For Chouinard, it was easier than this, providing a satisfactory solution to the question of succession planning.
“I didn’t know what to do with the company because I never wanted one,” he said from his home in Jackson, Wyoming. “I never wanted to be an entrepreneur. Now, I could die tomorrow and the company will continue to do the right thing for the next 50 years, I don’t need to be around.”
“This could work”
Somehow, the Patagonian loan isn’t a complete surprise, coming from Chouinard.
In the 1960s, when he was a pioneer mountaineer in California’s Yosemite Valley, Chouinard lived out of his car and ate spoiled cans of cat food he had bought for 5 cents apiece.
To this day, he wears old, tattered clothes, drives a Subaru, and spends time in two modest homes in Ventura and Jackson. Chouinard does not have a computer or mobile phone.
Founded by Chouinard in 1973, Patagonia grew into a company that reflected his idealistic priorities, as well as those of his wife. The company was an early adopter of everything from organic cotton to on-site baby-care services, and became notorious for discouraging consumers from buying its products, with a Black Friday ad in the New York Times that read: “Don’t buy this jacket.”
For decades, the company has donated 1 percent of its sales, mostly to environmental activists in the community. In recent years, she has become more active in politics, even filing a lawsuit against the Trump administration in an effort to protect the Bears Ears National Monument.
However, with Patagonian sales soaring, Chouinard’s net worth continued to grow, creating the uncomfortable dilemma of an anti-establishment who abhors excessive wealth.
“I was featured in Forbes as a billionaire, which really pissed me off,” he said. “I don’t have a billion dollars in the bank. I don’t drive a Lexus.”
The Forbes listing and then the COVID-19 pandemic helped launch a process that would unfold over the past two years, culminating in Chouinards’ delivery of the company.
In the middle of 2020, Chouinard began telling his closest advisers, including Ryan Gellert, the company’s CEO, that if they didn’t find a good replacement, he would be willing to sell the company.
“One day he said to me, ‘Ryan, I swear to God, if you don’t start packing for this, I’m going to list billionaires in Fortune and start calling you directly,'” Gilbert said. “At that moment, we knew he was serious.”
the ideal solution
Now that the future of Patagonia ownership is clear, the company will have to fulfill its lofty ambitions of running a profitable business while also combating climate change.
Some experts warn that without the financial intervention of the Chouinard family, Patagonia and related entities could lose focus. While the children are still on the company’s payroll and the older Chouinards have had enough to live comfortably, the company won’t share its profits with the family anymore.
“What makes capitalism so successful is the drive to strive for success,” explained Ted Clark, executive director of the Center for Family Business at Northeastern University. “If you remove all financial incentives, the family will have no interest in the company, other than a longing for the good times.”
As for how The Holdfast Collective will distribute profits from Patagonia, Chouinard said much of it will go to nature-based climate solutions, such as conservation of undeveloped lands. Additionally, as a 501(c)(4) entity, Holdfast Collective will also be able to continue the Patagonian legacy of funding community activist initiatives, but can also lobby and donate to political campaigns.
For the Chouinards family, this solves the question of what will happen to Patagonia after the death of its founder, as it ensures that the company’s profits are used to protect the planet.
“I am very relieved to know that I arranged my life,” Chouinard said. “For us, this was the perfect solution.”
You may also like:
Video | What actions should be taken to mitigate climate change being made in this progress?
© 2022 The New York Times Company