Capitalism Redefined: Patagonia Founder gives away the company to fight climate change
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, Mr. 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 organization. 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, Mr. 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,” Mr. Chouinard, 83, said in an exclusive interview. “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 percent 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 percent of Patagonia, its common shares, to a newly established nonprofit organization called the Holdfast Collective, which will now be the recipient of all the company’s profits and use the funds to combat climate change.
“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.”
In some ways, the forfeiture of Patagonia is not terribly surprising coming from Mr. Chouinard.
As a pioneering rock climber in California’s Yosemite Valley in the 1960s, Mr. Chouinard lived out of his car and ate damaged cans of cat food that he bought for five cents apiece.
Even today, he wears raggedy old clothes, drives a beat up Subaru and splits his time between modest homes in Ventura and Jackson, Wyo. Mr. Chouinard does not own a computer or a cellphone.
Patagonia, which Mr. Chouinard founded in 1973, became a company that reflected his own idealistic priorities, as well as those of his wife. The company was an early adopter of everything from organic cotton to on-site child care, and famously discouraged consumers from buying its products, with an advertisement on Black Friday in The New York Times that read, “Don’t Buy This Jacket.”
The company has given away 1 percent of its sales for decades, mostly to grass roots environmental activists. And in recent years, the company has become more politically active, going so far as to sue the Trump administration in a bid to protect the Bears Ears National Monument.
Yet as Patagonia’s sales soared, Mr. Chouinard’s own net worth continued to climb, creating an uncomfortable conundrum for an outsider who abhors excessive wealth.
“I was in Forbes magazine listed as a billionaire, which really, really pissed me off,” he said. “I don’t have $1 billion in the bank. I don’t drive Lexuses.”
The Forbes ranking, and then the Covid-19 pandemic, helped set in motion a process that would unfold over the past two years, and ultimately lead to the Chouinards giving away the company.
Now that the future of Patagonia’s ownership is clear, the company will have to make good on its lofty ambitions to simultaneously run a profitable corporation while tackling climate change.
Source Credit: New York Times
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