Patagonia founder allocates company to environmental credits

FILE - Yvonne Chouinard, founder and president of Patagonia Inc.  Based in Ventura, on September 28, 2005, at the original Chouinard Equipment blacksmith shop in Ventura, California, where he once rigged boats for mountain climbers.  In a letter posted on the privately-owned company's website on Wednesday, September 14, 2022, Chouinard said the 50-year-old company will transfer 100% of the voting shares to the Patagonia Purpose Trust and 100% of its non-voting shares.  The inventory has been handed over to Holdfast Collective.  (Al Seib/Los Angeles Times via AP, File)
FILE - Yvonne Chouinard, founder and president of Patagonia Inc.  Based in Ventura, on September 28, 2005, at the original Chouinard Equipment blacksmith shop in Ventura, California, where he once rigged boats for mountain climbers.  In a letter posted on the privately-owned company's website on Wednesday, September 14, 2022, Chouinard said the 50-year-old company will transfer 100% of the voting shares to the Patagonia Purpose Trust and 100% of its non-voting shares.  The inventory has been handed over to Holdfast Collective.  (Al Seib/Los Angeles Times via AP, File)
FILE - Yvonne Chouinard, founder and president of Patagonia Inc.  Based in Ventura, on September 28, 2005, at the original Chouinard Equipment blacksmith shop in Ventura, California, where he once rigged boats for mountain climbers.  In a letter posted on the privately-owned company's website on Wednesday, September 14, 2022, Chouinard said the 50-year-old company will transfer 100% of the voting shares to the Patagonia Purpose Trust and 100% of its non-voting shares.  The inventory has been handed over to Holdfast Collective.  (Al Seib/Los Angeles Times via AP, File)

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FILE – Yvonne Chouinard, founder and president of Patagonia Inc. Based in Ventura, on September 28, 2005, at the original Chouinard Equipment blacksmith shop in Ventura, California, where he once rigged boats for mountain climbers. In a letter posted on the privately-owned company’s website on Wednesday, September 14, 2022, Chouinard said the 50-year-old company will transfer 100% of the voting shares to the Patagonia Purpose Trust and 100% of its non-voting shares. The inventory has been handed over to Holdfast Collective. (Al Seib/Los Angeles Times via AP, File)

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FILE – Yvonne Chouinard, founder and president of Patagonia Inc. Based in Ventura, on September 28, 2005, at the original Chouinard Equipment blacksmith shop in Ventura, California, where he once rigged boats for mountain climbers. In a letter posted on the privately-owned company’s website on Wednesday, September 14, 2022, Chouinard said the 50-year-old company will transfer 100% of the voting shares to the Patagonia Purpose Trust and 100% of its non-voting shares. The inventory has been handed over to Holdfast Collective. (Al Seib/Los Angeles Times via AP, File)

“The land is now our sole shareholder,” says Patagonia Outdoors, after the company’s ownership was transferred from founder Yvonne Chouinard and his family to two nonprofits set up to fight climate change.

in a letter Chouinard, posted on the 50-year-old company’s website, said Wednesday night, Patagonia will transfer 100% of its voting shares to the Patagonia Purpose Trust, which was created to support the values ​​of the company long known for its environmental activism. All of its non-voting stock will go to Holdfast Collective, a non-profit organization “dedicated to combating the environmental crisis and defending nature.”

“While we do our best to address the environmental crisis, it is not enough,” Chouinard wrote. “We needed to find a way to invest more money in the face of the crisis while keeping the company’s values ​​intact.”

Patagonia estimates that after some profits are reinvested in the company, about $100 million annually will be distributed to Holdfast Collective in dividends, depending on the health of the company.

Grace Chiang Nicolette, vice president of programming and external relations at the Center for Effective Philanthropy, said the unusual move by the Chouinard family could become a blueprint for company founders looking to donate their work to causes important to them.

“Business owners often face fraught decisions about their company’s future when it’s time to sell,” said Nicolette, who also co-hosts the Really Giving podcast. “The wealthy are also faced with the fact that their net worth is growing faster than they can imagine giving away. This plan makes the company’s social impact its guiding principle and I think we will see more donors follow this approach.”

Chouinard said there are other options for Ventura, California to dedicate to protecting the planet — selling the company and donating the proceeds; Or making the company public – it was not viable to achieve Patagonia’s ultimate goals.

“Instead of extracting value from nature and turning it into wealth for investors, we will use the wealth that Patagonia creates to protect the source of all wealth,” Chouinard wrote.

Chuck Collins, director of the Inequality and the Public Good Program at the Institute for Policy Studies, said Chouinard’s actions reflect a personal connection to the environmental crisis and his desire to bolster his beliefs with his wealth.

“It shows that someone with great wealth is responding with the kind of scale needed to address the problem,” he said. “He works with the tools he has. And it’s a very good response.”

Ryan Gilert, CEO of Patagonia, said in a statement that the Chouinard family challenged him and others at the company to develop a new ownership structure.

“They wanted us to protect the purpose of the business and to immediately and permanently release more funding to combat the environmental crisis,” Gellert wrote. “We believe this new structure fulfills both and hope it inspires a new way of doing business that puts people and the planet first.”

The new Patagonian structure is similar to that created by Paul Newman for his salad dressing company, Newman’s On, said Brian Mittendorf, an accounting professor at Ohio State University who focuses on nonprofits and their financial statements. The profits from the business go to the Newman On Foundation, which donates to nonprofits that support children facing adversity.

The difference is that Holdfast Collective is organized as a 501(c)4 company, according to the New York Times, which first reported the change of ownership. This allows it to lobby politicians, which a public benefit charity like Newman On 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 institution are not clear in this particular case,” Mittendorf said. He noted that the gift tax the Chouinards will pay is on their initial investment in Patagonia, not on its current $3 billion value.

“I kind of see it as a desire to retain control of the company while ensuring that the resources that the company generates are used for a specific 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 giving, including donating 1% of its sales each year to grassroots activists, and remaining in Class B Corp, a classification of companies that prioritize social and environmental standards as well as profits.

Chouinard said he never wanted to be a businessman and started in Patagonia as a craftsman, making climbing equipment for himself and his friends.

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