The New York Times this morning has the story of Yvon Chouinard, founder and owner of Patagonia, and how, "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.
"The unusual move comes at a moment of growing scrutiny for billionaires and corporations, whose rhetoric about making the world a better place is often overshadowed by their contributions to the very problems they claim to want to solve.
"At the same time, Mr. Chouinard’s relinquishment of the family fortune is in keeping with his longstanding disregard for business norms, and his lifelong love for the environment.
"'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,' Mr. Chouinard, 83, said 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'."
In August, the Times writes, "the family irrevocably transferred all the company’s voting stock, equivalent to 2 percent of the overall shares, into a newly established entity known as the Patagonia Purpose Trust.
"The trust, which will be overseen by members of the family and their closest advisers, is intended to ensure that Patagonia makes good on its commitment to run a socially responsible business and give away its profits. 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."
- KC's View:
Remarkable man, remarkable family, and a remarkable company.
In some ways, it is this last bit that I find most impressive - that after going through an enormously complex process of figuring out how to divest themselves of the company in a way that was consistent with their priorities, the Chouinards saw no tax benefits from the move - they just paid their taxes.
There also was another passage from the story that stuck out for me:
"The easiest paths, selling the company or taking it public, would have given Mr. Chouinard ample financial resources to fund conservation initiatives. That was the strategy pursued by his best friend, Doug Tompkins, founder of the clothing companies Esprit and The North Face.
"But Mr. Chouinard had no faith that Patagonia would be able to prioritize things like worker well-being and funding climate action as a public company.
"'I don’t respect the stock market at all,' he said. 'Once you’re public, you’ve lost control over the company, and you have to maximize profits for the shareholder, and then you become one of these irresponsible companies'."
That's a broad brush, but I don't think he's wrong - especially about the part in which he suggests that public companies end up putting their shareholders ahead of their customers.