Billionaire Patagonia Founder Donates Company, Fortune ‘To Save Climate’

Half a century after founding Patagonia, a maker of clothing for adventure sports, Yvon Chouinard, the eccentric climber who became a reluctant billionaire and developed an unusual attitude toward capitalism, decided to donate the company.

Instead of selling it or going public, Chouinard, his wife and the couple’s two adult children transferred their Patagonia property, valued at around US$3 billion (R$15.5 billion), to a specially designed and a non-profit organization. The two organizations were created to preserve the company’s independence and ensure that all of its profits — around $100 million a year — are used to fight climate change and protect unexplored lands across the planet.

The unusual decision comes at a time of increasing scrutiny for billionaires and big business, who talk rhetorically about making the world better but often exacerbate the problems they say they want to solve.

At the same time, Chouinard’s renunciation of the family fortune fits his enduring attitude of disregard for corporate norms, and his lifelong love of the environment.

“We hope this will influence a new form of capitalism whose end result is not creating a few rich and a bunch of poor,” Chouinard, 83, said in an exclusive interview. “Let’s give as much money as possible to people who are actively working to save the planet.”

Patagonia will continue to operate as a private for-profit company, headquartered in Ventura, Calif., with annual sales of more than $1 billion in ski jackets, hats and pants. But the Chouinards, who controlled Patagonia until last month, no longer own the company.

In August, the family irrevocably transferred all of the company’s voting shares, equivalent to 2% of the total outstanding shares, to a newly established entity, the Patagonia Purpose Trust.

The fund, which will be overseen by family members and their closest advisors, aims to ensure that Patagonia fulfills its commitment to running a socially responsible business, and donating its profits. Because the Chouinards donated their shares to a fund, the family will pay about $17.5 million in taxes on the transaction.

The Chouinards then donated the remaining 98% of Patagonia, the company’s common stock, to a newly established nonprofit, the Holdfast Collective, which will now receive all of the company’s profits and use that money to fight climate change. . Because the Holdfast Collective was organized as a 501(c)(4) entity, allowing it to make unlimited political contributions, the family received no tax benefits for their donation.

“There was a significant cost to them, but it was a cost they were willing to pay to make sure the company stayed true to its principles,” said Dan Mosley, a partner at BDT & Co., an investment bank that works with wealth, including Warren Buffett, and helped Patagonia design the new structure. “And they didn’t benefit from a deduction for their charitable donation either. There’s no tax benefit whatsoever in the operation.”

Barre Seid, a funder for the Republican Party, is the only other example in recent memory of a wealthy businessman who decided to donate his company for the benefit of philanthropic and political causes. But Seid took a different approach by donating 100% of his electronics business to a nonprofit, and enjoyed huge personal tax benefits by donating $1.6 billion to fund conservative causes, including efforts to block action on climate change.

By giving away most of their assets in their lifetime, the Chouinards — Yvon, his wife Malinda, and the couple’s two children, Fletcher and Claire, both in their 40s — have established themselves as one of the most charitable families in America.

Patagonia has already donated US$50 million to the Holdfast Collective and expects to contribute an additional US$100 million this year, making the new organization a leading player in climate philanthropy. .

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. “The decision is irrevocable. They can’t take back control of the company, and they don’t want to.”

For Chouinard, it was an even simpler decision than that, and it offered a satisfying solution to the succession planning issue.

“I didn’t know what to do with the company because I never wanted a company,” he said from his home in Jackson, Wyoming. “I didn’t want to be a businessman. Now, if I die tomorrow, the company will keep doing the right thing for the next 50 years, and I don’t have to be around. This might actually work.”

In some ways, the handover of Patagonia’s confiscation control is not very surprising, coming from Chouinard.

When he was a pioneer mountaineer in Yosemite Valley, California, in the 1960s, Chouinard lived in his car and fed from damaged cans of cat food, which he bought for five cents.

Even today, he wears old clothes, drives a run-down Subaru and divides his time between modest homes in Ventura and Jackson. Chouinard doesn’t have a computer or a cell phone.

Patagonia, which he founded in 1973, grew into a company that reflected the idealistic priorities of its owner and his wife. The company was among the first to embrace a range of trends, from using organic cotton to creating on-the-job day care for its staff, and, at one famous moment, discouraging consumers from buying its products by posting an advertisement for Black Friday in The New York Times with the signature “don’t buy this jacket”.

The company has been donating 1% of its revenue for decades, mostly to grassroots environmental activists. And in recent years, Patagonia has become more politically active, even suing the Trump administration in an attempt to protect Bears Ears National Monument.

However, as Patagonia’s sales grew, Chouinard’s personal net worth continued to soar, creating an uncomfortable conundrum for an outsider who abhors excessive wealth.

“I got on the Forbes Billionaires list, and it pissed me off, a lot. A lot,” he said. “I don’t have $1 billion in the bank. I don’t drive a Lexus.”

The Forbes rankings, and then the Covid-19 pandemic, helped set in motion a process that would develop over the past two years, and that ultimately led the Chouinards to donate their company.

In mid-2020, Chouinard began telling his closest advisers, including Ryan Gellert, the company’s chief executive, that if they couldn’t find a good alternative, he was prepared to sell the company.

“One day he said to me, ‘Ryan, I swear to God, if you guys don’t start moving about this, I’m going to take Fortune’s list of billionaires and start calling people offering the company,” said Gellert. “In that moment, we realized he was serious.”

the ideal solution

Now that the future is clear in terms of controlling Patagonia, the company will have to figure out how to fulfill its ambitions of running a profitable corporation while fighting climate change.

Some experts caution that without the Chouinard family’s financial stake in Patagonia, the company and related entities could lose focus. As long as the Chouinards’ children remain on Patagonia’s payroll and their parents have enough money to live comfortably, the company will no longer distribute any profits to the family.

“What makes capitalism so successful is that there is motivation to succeed,” said Ted Clark, executive director of the Center for Family Businesses at Northeastern University. “If you remove all financial incentives, the family will essentially have no interest in it, except nostalgia for the good old days.”

As for how the Holdfast Collective will distribute Patagonia’s profits, Chouinard said much of the focus will be on nature-based climate solutions, such as preserving wild lands. And as a 501(c)(4) entity, the Holdfast Collective will also be able to extend Patagonia’s track record in terms of funding grassroots activists, as well as lobbying and donating money to political campaigns.

For the Chouinards, this settles the question of what will happen to Patagonia after its founder is gone, and ensures that the company’s profits will be put to work protecting the planet.

Translation by Paulo Migliacci