Why Patagonia’s Billionaire Founder Just Gave Away His Company

Patagonia Founder Yvon Chouinard
Patagonia Founder Yvon Chouinard

Patagonia Founder Yvon Chouinard speaks onstage during the Inaugural Tribeca X: A Day of Conversations Celebrating the Intersection of Entertainment and Advertising sponsored by PwC on April 26, 2019 in New York City. Credit - Ben Gabbe/Getty Images for Tribeca X)

Outdoor retailer Patagonia has never been shy about its corporate activism. Its founder Yvon Chouinard has now shown that he is willing to put his money where his mouth is, by giving the company away in an effort to fight environmental crises.

Nearly 50 years after Chouinard, himself a rock climber, founded the company, he has taken a unique approach to exiting the business. Rather than selling the company to a private owner or trading it publicly for a profit, Chouinard has given Patagonia to two groups that are dedicated to ensuring that the company remains aligned to its environmental justice goals. Chouinard explained in a statement on the company’s website that Patagonia’s dedication to the environment through initiatives such as donating 1% of sales each year and sourcing ethical materials, wasn’t enough to combat ongoing global warming and ecological destruction.

“While we’re doing our best to address the environmental crisis, it’s not enough,” he wrote. “We needed to find a way to put more money into fighting the crisis while keeping the company’s values intact,” Chouinard wrote.

Read More: Patagonia CEO: Business Leaders Must Do Better to Protect Our Planet

Although selling Patagonia and donating all the profits to environmental causes was one option to have impact, Chouinard could have pursued, he shared his concerns that private ownership could deviate from Patagonia’s environmental values and threaten the company’s existing employees’ jobs. Public ownership, too, could be disastrous, Chouinard wrote, given the pressure that public companies face to prioritize short-term profit gain at the expense of “long-term vitality and responsibility.”

“Instead of ‘going public,’ you could say we’re ‘going purpose.’ Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth,” Chouinard wrote.

Chouinard, his wife and two children transferred their ownership of the $3 billion company to a nonprofit organization, Holdfast Collective, and the specially created Patagonia Purpose Trust, as first reported by the New York Times. The Holdfast Collective controls 98% of the company, all of Patagonia’s nonvoting stock, while the Patagonia Purpose Trust took over the other 2% of the company, which makes up all of Patagonia’s voting stock.

Read More: ‘Rampant Consumerism Is Not Attractive.’ Patagonia Is Climbing to the Top — and Reimagining Capitalism Along the Way

This distribution will give the Holdfast Collective the bulk of the company’s profits, distributed as an annual dividend, which Patagonia said the group will spend fully on environmental causes, such as protecting nature and biodiversity and funding advocacy and political candidates as “investments in our planet.”

The Patagonia Purpose Trust has key decision-making power regarding the company’s values and mission including the board of directors’ seats, Patagonia’s legal charter and B-Corp commitments (B-Corp places importance on labor practices, supply chain, the community and the environment in a company’s performance, in addition to profit.)

Chouinard is a reluctant billionaire, telling the New York Times that being featured in Forbes’ rich list frustrated him. “I never wanted to be a businessman,” he wrote in his statement. “I started as a craftsman, making climbing gear for my friends and myself, then got into apparel.”

The Chouinard family will guide the Patagonia Purpose Trust as well as the Collective’s philanthropy. Patagonia’s CEO, Ryan Gellert, and other existing company leaders will continue to run the company with the same commitments and business goals as before.

“The new ownership structure provides a way to put the value that comes with responsible growth to work fighting the climate crisis,” Patagonia says. “Patagonia is 50 years into an experiment, and plans to stay in business, operating profitably in line with our values, for the next 50 years and beyond.”