Patagonia founder Yvon Chouinard skipped the conventional Wall Street strategy of moving on from a company by first reaping the rewards and making millions of dollars.
The billionaire chose not to sell the company, go public or gift it to his heirs, his two adult children, Claire and Fletcher. Instead, Chouinard and his family members, including his wife, Malinda, decided to transfer ownership of Patagonia (valued at $3 billion) to a specially designed trust and a nonprofit organization.
The trust and nonprofit organization were established to maintain the company's independence and ensure that its profits of an estimated $100 million will be used for Chouinard to continue his passion of several decades -- preserving undeveloped land and fighting climate change.
The company also announced the decision on Sept. 14 after the news was first reported by the New York Times, stating "Hey, friends, we just gave our company to planet Earth. OK, it’s more nuanced than that, but we’re closed today to celebrate this new plan to save our one and only home. We’ll be back online tomorrow," via Twitter.
Reluctant Billionaire
Chouinard, who is 83, has always been a reluctant billionaire and eschews the lifestyle that his wealth could bring and even abhors technology by choosing to not buy a computer or a cellphone. He founded the company in 1973 and has spent several decades donating 1% of its sales to grassroots environmental groups.
“Hopefully this will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people,” Chouinard told the New York Times in an exclusive interview. “We are going to give away the maximum amount of money to people who are actively working on saving this planet.”
Patagonia will remain as a private company that is estimated to sell over $1 billion of its well-known hats, jackets, and ski apparel annually. The Ventura, California-based company has an avid base of fans among Silicon Valley tech executives and Wall Street traders and employees at investment firms who added their company logos onto vests, even inspiring Instagram accounts such as Midtown Uniform.
But, Patagonia also disliked Wall Street and Silicon Valley's excesses, and in 2021 famously chose to stop allowing all companies to put their logos on the vests. The company said it wanted to concentrate on the future of environment since the logos would lower the lifespan of a garment as the male-dominated workforce changed jobs and fewer garments would end up in landfills.
The Chouinards received no tax benefits from their notable decision and stopped control of Patagonia in August. The family members transferred all of the company’s voting stock, which is 2% percent of the total shares, into the Patagonia Purpose Trust, which was created for this purpose.
The family, along with with their advisors, will oversee and run the trust to make sure the apparel company continues to donate its profits and remain a socially responsible entity that is not focused solely on maximizing profits.
The Chouinards are paying $17.5 million in taxes because their donation was made to a trust.
The remaining 98% of the company which holds its common shares was donated to the Holdfast Collective, the new nonprofit that the family set up. The company's profits will be transferred to the Holdfast Collective so it can fight climate change.
The Holdfast Collective was structured as a 501(c)(4) organization, giving it the ability to make unlimited political contributions, but forgoes any tax advantage. Patagonia made an initial $50 million donation and plans to give another $100 million to the Holdfast Collective in 2022.
The decision by the Chouinards cost the family money, 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.”
BDT & Co. is a bank that works with wealthy business people and individuals such as billionaire Warren Buffett, who is CEO of Berkshire Hathaway.
While several billionaires such as Bill Gates, founder and former CEO of Microsoft (MSFT), and Buffett, signed the Giving Pledge to commit to donating part of their massive wealth, the Chouinards will be at the top of the most charitable families in the U.S.
The majority of billionaires merely donate "a tiny fraction of their net worth away every year,” David Callahan, founder of the website Inside Philanthropy, told the New York Times, while the Chouinards are an outlier.
