He is no longer a billionaire

The founder of Patagonia announced Wednesday to part ways with his company. A look back at Yvon Chouinard's extraordinary journey.

Half a century after founding outdoor clothing manufacturer Patagonia, Yvon Chouinard, the eccentric mountaineer who became a billionaire in spite of himself, thanks to his unconventional approach to capitalism, sold his company.

Rather than sell the company or take it public, Yvon Chouinard, his wife and two adult children transferred their ownership of Patagonia, valued at around $3 billion, to a specialized trust and non-profit 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 fight climate change and protect unused land around the world.

The unusual move comes at a time when billionaires and corporations are coming under increasing scrutiny, with their talk of making the world a better place often overshadowed by their contribution to the problems they claim to want to solve.

Mr. Chouinard's abandonment of the family fortune is consistent with his long-standing disregard for business standards and lifelong love for environmental protection.

"Hopefully it will influence a new form of capitalism that doesn't end with a few rich and a bunch of poor," Chouinard, 83, from Lewiston, Maine, said in an interview.

In August, the family irrevocably transferred all voting shares of the company, or 2% of all shares, to a new entity called Patagonia Purpose Trust.

This trust, which will be overseen by family members and their closest advisors, is intended to ensure that Patagonia fulfills its commitment to operate a socially responsible business and distribute its profits. Because the Chouinards donated their shares to a trust, the family will pay approximately US$17.5 million in taxes on this donation.

The Chouinards then donated the remaining 98% of Patagonia, or its common stock, to a newly created non-profit organization called Holdfast Collective, which will now receive all of the company's profits and use the funds to combat climate change. Because the Holdfast Collective is a 501(c)(4) organization, which allows it to make unlimited political contributions, the family received no tax benefit for their donation.

“It cost them dearly, but it was a cost they were willing to incur to ensure this company stayed true to its principles,” said Dan Mosley, partner at BDT & Co, a merchant bank. who works with very wealthy people, including Warren Buffett, and who helped Patagonia design the company's new financial structure

But the Chouinards, who controlled Patagonia until last month, no longer own the company.

The cost ofzprinciples

In August, the family irrevocably transferred all voting shares of the company, or 2% of all shares, to a new entity called Patagonia Purpose Trust.

And they didn't get a charitable deduction for it. There is not the slightest tax advantage here.

Dan Mosley, Partner at BDT & Co

Barre Seid, a Republican donor, is the only other example in recent memory of a wealthy business owner who donated his business to philanthropic and political causes. But Barre Seid took a different approach by donating 100% of his electronics business to a nonprofit, reaping a huge personal tax gain as he donated $1.6 billion to fund conservative causes, including efforts to prevent action on climate change.

A unique story

By donating most of their assets during their lifetime, the Chouinards – Yvon, his wife Malinda and their two children, Fletcher and Claire, both in their 40s – have established themselves as one of the most charitable families in the country.

Patagonia has already donated $50 million to the Holdfast Collective and plans to donate an additional $100 million this year, making the new organization a major force in the field of climate philanthropy.

Mr Mosley said the story was unlike any he had seen in his career. "In my more than 30 years of estate planning, what the Chouinard family has done is truly remarkable," he said.

It is an irrevocable commitment. They can't take it off anymore and they never want to take it off again.

Dan Mosley, Partner at BDT & Co

For Mr. Chouinard, it was even simpler; this offered a satisfactory resolution to the issue of succession planning.

"I didn't know what to do with the business because I never wanted a business," he said from his home in Jackson, Wyoming. I didn't want to be a businessman. Now I could die tomorrow, the company will keep doing the right thing for the next 50 years, and I don't need to be here. »

“It might actually work”

In a way, the dispossession of Patagonia is not terribly surprising coming from Mr. Chouinard.

As a rock climbing pioneer in California's Yosemite Valley in the 1960s, Mr. Chouinard lived out of his car and fed on battered 5-cent cans of cat food.

To this day, he still wears tattered old clothes, drives a beat-up Subaru, and divides his time between modest homes in Ventura and Jackson. Mr. Chouinard does not own a computer or cell phone.

Patagonia, founded by Mr. Chouinard in 1973, has grown into a company that reflects his own idealistic priorities, as well as those of his wife. The company was an early adopter of all kinds of products or practices, from organic cotton to on-site childcare, and became famous for discouraging consumers from buying its products. We will remember in particular a Patagonia advertisement in the New York Times during Black Friday which said: “Don't buy this jacket. »

For decades, the company has donated 1% of its sales primarily to environmental activists who work in the field. And in recent years, the company has become more politically active, going so far as to sue the Trump administration in an effort to protect the Bears Ears National Monument.

Yet as Patagonia's sales skyrocketed, Mr. Chouinard's net worth continued to soar, creating an uncomfortable situation for a misfit who abhors excess wealth.

In Forbes magazine , I was listed as a billionaire, which really, really pissed me off. I don't have a billion dollars in the bank. I don't drive a Lexus.

Yvon Chouinard

The Forbes rankings and then the COVID-19 pandemic helped set in motion a process that unfolded over the past two years and ultimately led the Chouinards to sell their business.

In mid-2020, Mr. Chouinard began telling his closest advisers, including Ryan Gellert, the company's CEO, that if they couldn't find a good solution, he was ready to sell the company. company.

"One day he said to me, 'Ryan, I swear to you that if you don't start taking action, I'm going to get Fortune magazine's list of billionaires and start calling people without them asking. ”, said Gellert. At that moment, we understood that he was serious. »

The ideal solution

Now that the future of Patagonia's ownership is clear, the company will have to realize its big ambitions of running a profitable company while fighting climate change.

Some experts warn that without the Chouinard family's financial stake in Patagonia, the company and related entities could lose sight of their purpose. Although the children remain employees of Patagonia and the Chouinards have enough to live comfortably, the company will no longer distribute profits to the family.

"What makes capitalism successful is that there is a drive to succeed," said Ted Clark, chief executive of the Northeastern University Center for Family Business.

If you remove all the financial incentives, the family will essentially have no interest in it, other than a nostalgia for the good old days.

Ted Clark, CEO of the Northeastern University Center for Family Business

As for how the Holdfast Collective will distribute Patagonia profits, Chouinard said much of the focus will be on nature-based climate solutions, such as preserving wild lands. As a 501(c)(4) organization, the Holdfast Collective will also be able to draw on Patagonia's experience in funding grassroots activists, but it will also be able to lobby and donate to political campaigns. .

For the Chouinards, this resolves the question of what will become of Patagonia after the death of its founder, ensuring that the company's profits will be used to protect the planet.

"I feel a great relief to have put my life in order," said Mr. Chouinard. For us, it was the ideal solution. »

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