Will Patagonia’s ownership help save the planet and its retail business?
Patagonia founder Yvon Chouinard announced last week that he is giving away his company to combat climate change.
Mr. Chouinard and his family transferred ownership of the privately-held company, reportedly valued at about $3 billion, to a trust and a nonprofit organization, the 83-year-old founder said in a letter titled “Earth is now our only shareholder.”
Overseen by members of the family and close advisors, the trust owns two percent of Patagonia’s stock, but all the voting shares and will be tasked with protecting Patagonia’s existing values and independence. Patagonia expects to generate and donate about $100 million annually, depending on the health of the business.
Mr. Choiunard wrote of “reimagining capitalism” and said: “While we’re doing our best to address the environmental crisis, it’s not enough. We needed to find a way to put more money into fighting the crisis while keeping the company’s values intact. One option was to sell Patagonia and donate all the money. But we couldn’t be sure a new owner would maintain our values or keep our team of people around the world employed.
“Another path was to take the company public. What a disaster that would have been. Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility.
“Truth be told, there were no good options available. So, we created our own.”
The 49-year old brand will remain a for-profit and continue to be led by CEO Ryan Gellert.
The maneuver nonetheless helps the Chouinards avoid taxes. Bloomberg wrote, “The deal is structured in ways that also bring the billionaire other perks, by letting him and his family keep control of Patagonia while shielding them from tax bills that could have totaled hundreds of millions of dollars.”
The elder Chouinards may also lose motivation without profit distributions. Ted Clark, executive director of the Northeastern University Center for Family Business, told The New York Times, “If you take all the financial incentives away, the family will have essentially no more interest in it except a longing for the good old days.”
- Patagonia’s Next Chapter: Earth Is Now Our Only Shareholder – Patagonia
- Earth is now our only shareholder. – Patagonia
- Patagonia founder gives away company: ‘Earth is now our only shareholder’ – The Washington Post
- Patagonia Founder Is Giving His Company Away in Pledge to Fight Climate Change – The Wall Street Journal
- Patagonia’s $3 billion corporate gift is also a convenient way to avoid taxes – Quartz
- Patagonia Billionaire Who Gave Up Company Skirts $700 Million Tax Hit – Bloomberg
- Patagonia founder gives company away, future profits aimed to help fight climate crisis – USA Today
- Patagonia’s Bold Move Shakes Up The Ideas Of Capitalism And Consumerism – The New York Times
DISCUSSION QUESTIONS: Did Yvon Chouinard have better options than to transfer ownership of Patagonia to a non-profit to fight the climate crisis? Do you see the move as potentially having a negative impact on the business?