September 19, 2022
Patagonia founder Yvon Chouinard announced last week that he is donating his company to fight climate change.
Mr. Chouinard and his family transferred ownership of the private company, said to be valued at about $3 billion, to a trust and a nonprofit organization, the 83-year-old founder said in a letter titled “The Earth is now our sole shareholder.”
Overseen by family members and close advisers, the Trust owns two percent of Patagonia’s shares, but all voting shares, and will be tasked with protecting Patagonia’s existing values and independence. Patagonia expects to generate and donate about $100 million a year, depending on the health of the business.
Mr Choiunard wrote about “re-imagining capitalism” and said: “While we are doing our best to tackle the environmental crisis, it is not enough. We had to find a way to invest more money to fight the crisis, while keeping company values intact. One option was to sell Patagonia and donate all the money. But we couldn’t be sure that a new owner would maintain our values or keep our team of people around the world employed .
“Another way was to take the company public. What a disaster that would be. Even well-intentioned public companies are under great pressure to create short-term profits at the expense of long-term vitality and responsibility.
“To be honest, there were no good options available. So we created our own.”
The 49-year-old brand will remain profitable and continue to be led by CEO Ryan Gellert.
The maneuver however helps the Chouinards avoid taxes. Bloomberg wrote, “The deal is structured in ways that bring other benefits to the billionaire, letting him and his family retain control of Patagonia, shielding them from tax bills that could have run into the hundreds of millions of dollars.”
Older Chouinards may also lose motivation without profit sharing. Ted Clark, executive director of the Northeastern University Center for Family Business, said New York Times“If you take away all the financial incentives, the family basically has no interest in it, other than longing for the good old days.”
DISCUSSION QUESTION: Did Yvon Chouinard have better options than he did transfer ownership of Patagonia to a non-profit organization to fight the climate crisis? Do you see this move as a potential negative impact on the business?
“At the end of the day, this is Yvon Chouinard’s company, and he decides how to move forward. I admire the intent.”
