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Yvon Chouinard, the founder of the Patagonia outdoor clothing company, announced Wednesday that his family has turned over its ownership of the privately held company to a pair of nonprofits that will work to fight climate change while continuing to run the business. No big deal, it’s just a complete giveaway of a company worth about $3 billion for the sake of keeping the planet habitable. As the New York Times explains (free gift linky),
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.
Chouinard told the Times he hoped his example “will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people.” His goal, he said, was to “give away the maximum amount of money to people who are actively working on saving this planet.”
Yeah, we know! Such people exist, and they can do real good!
The company will continue to run as a profit-making bidness under the new arrangement, without direct ownership by the Chouinard family; the family will oversee the “Patagonia Purpose Trust” to make sure the company’s values and commitments are maintained, what with all the social and environmental responsibilities and sustainable manufacturing. Patagonia will also continue its existing practice of donating one percent of its sales to grassroots environmental activists.
The Times notes that this didn’t exactly come cheap to the Chouinard family, either:
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. Because the Holdfast Collective is a 501(c)(4), which allows it to make unlimited political contributions, the family received no tax benefit for its donation.
“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.”
Why, it’s almost as if they deliberately chose not to take the most profitable course, but instead wanted to maximize the good the arrangement will do. What a bunch of weirdos who don’t understand that capitalism is about screwing over your employees, your customers, and the environment. It’s entirely likely that, at this rate, they won’t have the most toys when they die, and will have to settle for the satisfaction of doing the right thing, and possibly even showing the world a better way of doing business.
What a crazy way to run a company! We hope it catches on. The story also notes that the Holdfast Collective will be starting off with a substantial boost, since Patagonia has already donated $50 million to the nonprofit and plans to give another $100 million this year, so it’s likely to instantly become “a major player in climate philanthropy.”
Chouinard, who’s 83, told the Times that the deal was actually a big relief, since now he’s taken care of planning what happens to the company after he’s gone:
“I didn’t know what to do with the company because I didn’t ever want a company,” he said from his home in Jackson, Wyo. “I didn’t want to be a businessman. Now I could die tomorrow and the company is going to continue doing the right thing for the next 50 years, and I don’t have to be around.”
We really like this guy. The story notes that Patagonia has long been kind of wonderfully idealistic, reflecting the Chouinards’ values, what with using organic cotton, providing on-site child care at its factory, and also the times it has
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.”
Chouinard himself seems openly resentful of his own material wealth, which is how we’d like all really wealthy people to be:
“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.”
That general disgust with wealth for its own sake drove the planning for Patagonia’s new business arrangement: Patagonia board members and attorneys looked into the options for turning the company into a major force in addressing climate change and preserving wild places, and the most obvious options for raising lots of money, going public or selling the company altogether, just didn’t ensure that Patagonia would continue operating sustainably and responsibly — both for the planet and for employees.
Hmm. Wonder if Mr. Chouinard has any interest in running a railroad? Prolly not.
It’s a pretty damned inspiring piece! Go read the whole thing with our gift linky, and take a look at the detailed statement and FAQ at Patagonia, which declares “Earth is now our only shareholder.”
Just as soon as we’re billionaires, we plan to do the very same thing.
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