Billionaire No More: Patagonia

Founder Gives Away the

Company

Natalie Behring for The New York Times

Give this article

By David Gelles
Gelles writes about the intersection of climate and the corporate world and has
covered Patagonia for nearly a decade.

Sept. 14, 2022 Updated 5:10 p.m. ET

A half century after founding the outdoor apparel maker

Patagonia, Yvon Chouinard, the eccentric rock climber who
became a reluctant billionaire with his unconventional spin on
capitalism, has given the company away.

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.”

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Patagonia will continue to operate as a private, for-profit

corporation based in Ventura, Calif., selling more than $1 billion
worth of jackets, hats and ski pants each year. But the Chouinards,
who controlled Patagonia until last month, no longer own the
company.

In August, 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 Chouinard family irrevocably transferred all the company’s voting stock into a newly established entity
known as the Patagonia Purpose Trust in August. Laure Joliet for The New York Times

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.

“There was a meaningful cost to them doing it, but it was a cost
they were willing to bear to ensure that this company stays true to
their principles,” said Dan Mosley, a partner at BDT & Co., a
merchant bank that works with ultrawealthy individuals including
Warren Buffett, and who helped Patagonia design the new
structure. “And they didn’t get a charitable deduction for it. There
is no tax benefit here whatsoever.”

That differs from the choice made by Barre Seid, a Republican

donor who recently gave 100 percent of his electronics
manufacturing company to a nonprofit organization shortly before
the company was sold, reaping an enormous personal tax windfall
and making a $1.6 billion gift to fund conservative causes.

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High stakes. A new scientific assessment suggests that failure to limit global
warming to the targets set by international accords will most likely set off
several climate “tipping points,” thresholds passed which effects of climate
change, from the thawing of Arctic permafrost to the loss of coral reefs, would
probably become irreversible.

By giving away the bulk of their assets during their lifetime, the
Chouinards — Yvon, his wife Malinda, and their two children,
Fletcher and Claire, who are both in their 40s — have established
themselves as among the most charitable families in the country.

“This family is a way outlier when you consider that most

billionaires give only a tiny fraction of their net worth away every
year,” said David Callahan, founder of the website Inside
Philanthropy.

“Even those who have signed the Giving Pledge don’t give away
that much, and tend to get richer every year,” Mr. Callahan added,
referring to the commitment by hundreds of billionaires to give
away the bulk of their fortunes.

Patagonia has already donated $50 million to the Holdfast

Collective, and expects to contribute another $100 million this year,
making the new organization a major player in climate
philanthropy.

Mr. Mosley said the story was unlike any other he had seen in his
career. “In my 30 plus years of estate planning, what the Chouinard
family has done is really remarkable,” he said. “It’s irrevocably
committed. They can’t take it back out again, and they don’t want
to ever take it back out again.”

For Mr. Chouinard, it was even simpler than that, providing a

satisfactory resolution to the matter of succession planning.

“I didn’t know what to do with the company because I didn’t ever

want a company,” he said from his home in Jackson, Wyo. “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.”

‘This might actually work’

“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,” said Mr. Chouinard. Meridith Kohut for The New York Times

In some ways, the forfeiture of Patagonia is not terribly surprising

coming from Mr. Chouinard.

As a pioneering rock climber in California’s Yosemite Valley in the

1960s, Mr. Chouinard lived out of his car and ate damaged cans of
cat food that he bought for five cents apiece.

Even today, he wears raggedy old clothes, drives a beat up Subaru

and splits his time between modest homes in Ventura and Jackson,
Wyo. Mr. Chouinard does not own a computer or a cellphone.

Patagonia, which Mr. Chouinard founded in 1973, became a

company that reflected his own idealistic priorities, as well as
those of his wife. The company was an early adopter of everything
from organic cotton to on-site child care, and famously discouraged
consumers from buying its products, with an advertisement on
Black Friday in The New York Times that read, “Don’t Buy This
Jacket.”

The company has given away 1 percent of its sales for decades,
mostly to grass roots environmental activists. And in recent years,
the company has become more politically active, going so far as to
sue the Trump administration in a bid to protect the Bears Ears
National Monument.

Yet as Patagonia’s sales soared, Mr. Chouinard’s own net worth

continued to climb, creating an uncomfortable conundrum for an
outsider who abhors excessive wealth.

“I was in Forbes magazine listed as a billionaire, which really,

really pissed me off,” he said. “I don’t have $1 billion in the bank. I
don’t drive Lexuses.”

The Forbes ranking, and then the Covid-19 pandemic, helped set in
motion a process that would unfold over the past two years, and
ultimately lead to the Chouinards giving away the company.

In mid-2020, Mr. Chouinard began telling his closest advisers,

including Ryan Gellert, the company’s chief executive, that if they
couldn’t find a good alternative, he was prepared to sell the
company.

“One day he said to me, ‘Ryan, I swear to God, if you guys don’t
start moving on this, I’m going to go get the Fortune magazine list
of billionaires and start cold calling people,’” Mr. Gellert said. “At
that point we realized he was serious.”

Patagonia has become more politically active, going so far as to sue the Trump administration in a bid to
protect the Bears Ears National Monument. Laure Joliet for The New York Times

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 the next 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.

“We kind of turned over every stone, but there just weren’t really
any good options that could accomplish their goals,” said Hilary
Dessouky, Patagonia’s general counsel.

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.”

They also considered simply leaving the company to Fletcher and

Claire. But even that option didn’t work, because the children didn’t
want the company.

“It was important to them that they were not seen as the financial
beneficiaries,” Mr. Gellert said. “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.”

Finally, the legal team and board members landed on a solution.

In December, at a daylong meeting in the hills above Ventura, the

entire team came together for the first time since the pandemic
began. Meeting outside, surrounded by oak trees and avocado
orchards, all four Chouinards, along with their team of advisers,
agreed to move ahead.

“We still had a million and one things to figure out, but it started to
feel like this might actually work,” Mr. Gellert said.

‘The ideal solution’

Mr. Chouinard filmed an announcement for his employees at home in Wyoming. By giving away the bulk of
their assets during their lifetime, the Chouinards have established themselves as among the most
charitable families in the country. Natalie Behring for The New York Times

Now that the future of Patagonia’s ownership is clear, the company

will have to make good on its lofty ambitions to simultaneously run
a profitable corporation while tackling climate change.

Some experts caution that without the Chouinard family having a

financial stake in Patagonia, the company and the related entities
could lose their focus. 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.

“What makes capitalism so successful is that there’s motivation to

succeed,” said Ted Clark, executive director of the Northeastern
University Center for Family Business. “If you take all the financial
incentives away, the family will have essentially no more interest in
it except a longing for the good old days.”

As for how the Holdfast Collective will distribute Patagonia’s

profits, Mr. Chouinard said much of the focus will be on nature-
based climate solutions such as preserving wild lands. And as a
501(c)(4), the Holdfast Collective will also be able to build on
Patagonia’s history of funding grass roots activists but it could also
lobby and donate to political campaigns.

For the Chouinards, it resolves the question of what will happen to

Patagonia after its founder is gone, ensuring that the company’s
profits will be put to work protecting the planet.

“I feel a big relief that I’ve put my life in order,” Mr. Chouinard said.
“For us, this was the ideal solution.”

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