Outdoor equipment company Patagonia says “the earth is now our sole shareholder” after transferring company ownership from founder Yvon Chouinard and his family to two nonprofits created to combat climate change.
In a letter posted Wednesday evening on the 50-year-old company’s website, Chouinard said Patagonia will transfer 100% of its voting shares to the Patagonia Purpose Trust, created to uphold the values of the company long known for its environmental activism. All of its non-voting shares will go to Holdfast Collective, a non-profit organization “dedicated to fighting the environmental crisis and defending nature”.
“Even if we are doing our best to address the environmental crisis, it is not enough,” wrote Chouinard. “We needed to find a way to invest more in fighting the crisis while keeping the company’s values intact.”
Patagonia estimates that after reinvesting some profits into the company, approximately $ 100 million annually will be distributed to the Holdfast Collective as a dividend, depending on the health of the company.
Grace Chiang Nicolette, vice president of programming and external relations at the Center for Effective Philanthropy, said this unusual move by the Chouinard family could become a project for company founders who wish to donate their businesses to causes that matter to them.
“Entrepreneurs often face tough decisions about their company’s future when it’s time to sell,” said Nicolette, who is also co-host of the “Giving Done Right” podcast. “The wealthiest also face the fact that their net worth is growing faster than they can imagine giving it away. This plan makes the company’s social impact its guiding principle and I think we will see more donors pursuing this approach. “
Chouinard said other options for the Ventura, Calif. Company can devote to protecting the planet: selling the company and donating the proceeds; or make the company public – they were not feasible for Patagonia’s ultimate goals.
“Instead of extracting value from nature and turning it into wealth for investors, we will use the wealth created by Patagonia to protect the source of all wealth,” Chouinard wrote.
Chuck Collins, the Institute for Policy Studies director of the Program on Inequality and the Common Good, said Chouinard’s actions reflect a personal connection to the environmental crisis and a desire to bolster his beliefs with his wealth.
“It shows that someone who has substantial wealth is responding with the kind of scale needed to address the problem,” he said. “He is working with the tools that he has. And that’s a great answer. “
Patagonia CEO Ryan Gellert said in a statement that the Chouinards challenged him and other company members to develop a new ownership structure.
“They wanted us to protect the purpose of the business and immediately and perpetually release more funds to fight the environmental crisis,” Gellert wrote. “We believe this new facility offers both and we hope it inspires a new way of doing business that puts people and the planet first.”
Brian Mittendorf, an accounting professor at Ohio State University who focuses on nonprofit organizations and their financial statements, said the new Patagonia facility is similar to the one created by Paul Newman for his salad dressing company, Newman’s Own. The profits from the business go to the Newman’s Own Foundation, which donates donations to nonprofits that support children facing adversity.
The difference is that the Holdfast Collective is organized as a 501 (c) 4 corporation, according to the New York Times, which first reported the change of ownership. This allows him to put pressure on politicians, which a charity such as the Newman’s Own Foundation is not allowed to do.
“What I don’t think is getting enough attention here is that the tax advantages of choosing a donation to a charity over a welfare organization aren’t as pronounced in this particular case,” Mittendorf said. She noted that the donation tax the Chouinards will pay is on their initial investment in Patagonia, not on its current value, which is estimated at $ 3 billion.
“I only see it as a desire to maintain control over the company by ensuring that the resources the company generates are used for a particular purpose,” he said.
Patagonia manufactures outdoor clothing, gear and accessories for everything from skiing to climbing and camping. The company said it will continue its previous charitable donations, including donating 1% of its sales annually to grassroots activists and remaining a B Corp, a designation for companies that prioritize social and environmental standards beyond to profits.
Chouinard said he never wanted to be a businessman and started Patagonia as a craftsman, making climbing gear for himself and his friends.