Billionaire No More: Patagonia Founder Gives Away the Company

“I didn’t know what to do with the company because I didn’t ever want a company. I didn’t want to
be a businessman. Now I could die tomorrow and the company is going to continue doing the right
thing for the next 50 years, and I don’t have to be around.”

- Yvon Chouinard, founder of Patagonia

A. Background on Patagonia

• Patagonia (founded: 1973) is an American retailer of outdoor clothing. It has hundreds of stores
in 10+ countries, with annual revenues of ~$1.5 Bn and annual profits of ~$100Mn.
• Founded by Yvon Chouinard, who, aside from being a rock climber, is an avid environmentalist
and philanthropist.
• Patagonia, which reflected Chouinard’s own idealistic priorities, was an early adopter of
everything from organic cotton to on-site child care, and famously discouraged ‘fast fashion’
through its ad campaign “Don’t Buy This Jacket.”
• Patagonia is known for its activism:
o It commits 1% of total revenues every year to environmental groups, through “One
Percent for the Planet”
o Has been recognized for its innovative family / maternity leave policies. In 2021,
Patagonia announced it would "not be bound by convention" and would close stores
and give employees vacation from December 25 to January 2
o Patagonia is a Certified B Corporation (awarded to companies for social and
environmental performance)
o It suspended advertising on Facebook and Instagram in 2020 as part of the “Stop Hate
for Profit” campaign, which received widespread acclaim.
o Patagonia has recently become politically active, for instance suing the Trump
Administration in a bid to protect the land around Bears Ears National Monument.

B. Reason for the Shift – Chouinard’s philosophy

• As a pioneering rock climber in California’s Yosemite Valley in the 1960s, Chouinard lived out of
his car and ate damaged cans of cat food that he bought for five cents apiece.
• Even today, he wears old clothes, drives a beat-up Subaru and splits his time between modest
homes in Wyoming. Chouinard does not own a computer or a cellphone.
• As Patagonia’s sales soared, Chouinard’s own net worth continued to climb, creating an
uncomfortable conundrum for someone who abhors excessive wealth.
• In mid-2020, Chouinard began telling his closest advisers, including Ryan Gellert, CEO, that if
they couldn’t find a good alternative, he was prepared to sell the company. He mentioned that
he was ready to start cold-calling billionaires from Forbes / Fortune lists.

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C. Finding the right Method

• Using the code name Project Chacabuco, a reference to a fishing spot in Chile, a small group of
Patagonia lawyers and board members began working on possibilities.
• Over several months, the group explored a range of options, including selling part or all of the
company, turning Patagonia into a cooperative with the employees as owners, becoming a
nonprofit, and even using a special purpose acquisition company, or SPAC.
• 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.
o Chouinard says, “I don’t respect the stock market at all. 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.”
• They also considered simply leaving the company to the children, Fletcher and Claire. But even
that option didn’t work, because the children didn’t want the company.
o CEO Ryan Gellert says, “It was important to them that they were not seen as the financial
beneficiaries. They felt very strongly about it. I know it can sound flippant, but they really
embody this notion that every billionaire is a policy failure.”

D. Transfer of Ownership

• The Chouinard family, in Aug 2022, donated all the company’s voting stock (2% of overall shares)
into the Patagonia Purpose Trust.
o The Trust, overseen by family members and advisers, is intended to ensure that
Patagonia satisfies its commitment of running a socially responsible business.
o Because the shares were donated, the family will pay ~$18Mn in taxes on the gift.
• Later on, the Chouinard family donated the other 98% of Patagonia (common shares) to a non-
profit called the Holdfast Collective
o This non-profit will be the recipient of all profits of Patagonia, and will use it for
combating climate change.
o As the Holdfast Collective is a 501(c)(4) company, which allows it to make unlimited
political contributions, the family received no tax benefits here either.
• Patagonia has already donated $50Mn to the Holdfast Collective, and expects to contribute
another $100Mn in 2022.
• While the children remain on Patagonia’s payroll and the elder Chouinards have enough to live
comfortably on, the company will no longer be distributing any profits to the family.

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