Outdoor equipment company Patagonia says ‘the earth is now our sole shareholder’ after transferring ownership of the company from founder Yvon Chouinard and his family to two nonprofits set up to fight change climatic.
In a letter posted on the 50-year-old company’s website on Wednesday evening, Chouinard said Patagonia would transfer 100% of its voting stock to the Patagonia Purpose Trust, created to uphold the values of the company long known for its activism environmental. All of his non-voting shares will go to the Holdfast Collective, a non-profit organization “dedicated to tackling the environmental crisis and defending nature.”
“Although we are doing our best to deal with the environmental crisis, it is not enough,” Chouinard wrote. “We had to find a way to invest more money in the fight against the crisis while preserving the values of the company.”
Patagonia estimates that after reinvesting a portion of profits back into the business, about $100 million per year will be distributed to the Holdfast Collective as a dividend, depending on the health of the business.
Grace Chiang Nicolette, vice president of programming and outreach at the Center for Effective Philanthropy, said the unusual move by the Chouinard family could become a model for business founders looking to donate their businesses to causes important to them.
“Business owners are often faced with tough decisions about the future of their business when it comes time to sell,” said Nicolette, who also co-hosts the “Giving Done Right” podcast. “The very wealthy also face the fact that their net worth is growing faster than they can conceive of giving it away. This plan makes corporate social impact its guiding principle and I think we are going to see more donors follow this approach.
Chouinard offered other options for the Ventura, Calif.-based company to focus on protecting the planet: sell the business and donate it; or taking the company public – were not viable 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, director of the Inequality and Common Good Program at the Institute for Policy Studies, said Chouinard’s actions reflect a personal connection to the environmental crisis and a desire to back up his beliefs with his wealth.
“It shows that someone with substantial wealth is responding with the kind of scale needed to solve the problem,” he said. “He works with the tools he has. And that’s a very good answer.
Patagonia CEO Ryan Gellert said in a statement that the Chouinards challenged him and others at the company to develop a new ownership structure.
“They wanted us to both protect the corporate purpose and immediately and perpetually release more funds to address the environmental crisis,” Gellert wrote. “We believe this new structure delivers on both and we hope it inspires a new way of doing business that puts people and planet first.”
Brian Mittendorf, an accounting professor at Ohio State University who focuses on nonprofits and their financial statements, said Patagonia’s new structure is similar to the one Paul Newman created for his salad dressing company, Newman’s Own. Profits from the company go to Newman’s Own Foundation, which donates to nonprofits that support children facing adversity.
The difference is that the Holdfast Collective is organized as a 501(c)4 company, according to The New York Times, which first reported the change in ownership. This allows him to lobby politicians, something a public-benefit charity like Newman’s Own Foundation is not allowed to do.
“What I don’t think gets enough attention here is that the tax advantages of choosing a donation to a charity over a social welfare organization are just not as pronounced in this particular case. “, said Mittendorf. He noted that the gift tax the Chouinards will pay is on their original investment in Patagonia, not its current value, estimated at $3 billion.
“I view this as a desire to maintain control of the business while ensuring that the resources generated by the business are used for a particular purpose,” he said.
Patagonia makes outdoor clothing, gear and accessories for everything from skiing to climbing and camping. The company said it would continue its previous charitable donations, including donating 1% of its sales each year to grassroots activists and remaining a B Corp, a designation for companies that prioritize social and environmental standards as well. only 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.
#Patagonia #founder #donates #company #environmental #trusts