Patagonia’s founder, Yvon Chouinard has set an example in corporate leadership. The progressive, outdoorsy billionaire has recently taken a significant step in fighting the issues of climate change; by donating his entire company. 100% of company stocks are being donated, ensuring that all profits made by Patagonia will be dedicated to the issue of the century, fighting the climate crisis. The company’s donation will make it one of the largest contributors to the cause and inevitably result in a surge of support by conscious consumers.
The former artisan and rock climber turned entrepreneur has been at the center of Patagonia's growth into one of the world's largest sport and apparel brands over the past 50 years. Motivated to 'change the system', Patagonia demonstrates that business does not have to be at the expense of the environment and sustainable profit is possible. The actions of Patagonia, such as using enviro-friendly materials and continuously donating a portion of sales had them recognised as one of the earliest B-Corp’s.
The success of Patagonia is reflected in its valuation of over $3 billion. This solidified Chouinard as a Forbes billionaire, which inspired him to look for solutions to relieve himself of the company’s fortune and instead, allow it to make a greater impact.
He was clear that any alternative that disregards the company's values was not an option. This was the main reason he opted not to sell, as there was no guarantee that a new owner could uphold the values. His second option, to take the company public, would mean company decisions would be made to maximise shareholder profits which could come at the expense of upholding the foundational integrity the company was built on. With a lack of options Chouinard deemed acceptable, his trail-blazing nature led him to create his own.
So, how did Chouinard go about this structure? The decision cost them $17.5 million in taxes because their donation was made to a trust. Dan Mosley, a partner at BDT & Co., a merchant bank that helped Patagonia create the new structure, told the New York Times. “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,” he said. “And they didn’t get a charitable deduction for it. There is no tax benefit here whatsoever.”
The family members transferred 2% of the total shares which is all of the company’s voting stock into the Patagonia Purpose Trust. Chouinard and the family’s advisors continue to oversee and run the trust to ensure company continues to donate its profits and remain a socially responsible entity that is not focused on maximising profits.
The remaining 98% of the company which holds its common shares was donated to the Holdfast Collective, the new nonprofit. The Holdfast Collective was structured to give it the ability to make unlimited political contributions, but forgoes any tax advantage. The nonprofit will protect nature, biodiversity and environmentally dependent communities by using every dollar received to fight climate change.
As Chouinard himself puts it, “instead of ‘going public’, you could say we’re ‘going purpose’. This company restructure may potentially be the most significant of modern time. As a global company pivots to a completely green mechanism of growth and prosperity we can be certain others will follow suit. Yvon Chouinard will go down in history as a pioneer of this change and Patagonia will prosper for its efforts. Hats off to an incredible human and the power of corporate structure built for good, a new brand of capitalism has been born.
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