Yvon Chouinard Just Gave Patagonia Away to Help the Environment

Yvon Chouinard no longer owns Patagonia. Nearly 50 years after founding the enormously successful apparel company, now worth around $3 billion, the 83-year-old came up with an unusual solution to ensure that it continues in a way that aligns with his values and funds important environmental conservation work.

All ownership has now been transferred from Chouinard and his family to two entities—the Patagonia Purpose Trust and the Holdfast Collective. The Patagonia Purpose Trust, created to protect the company's core values, holds 100% of the company's voting shares. The Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis and defending nature, holds 100% of the nonvoting shares. 

As Chouinard explained in an open letter, funding will continue to come from Patagonia: "Each year the money we make after reinvesting in the business will be distributed as a dividend to help fight the crisis." The annual dividend is estimated to be roughly $100 million annually, depending on how well the business is doing.

While Chouinard and his wife Malinda will keep enough money to live on, and their two children Fletcher and Claire, who are in their forties, will remain on Patagonia's payroll, it's fair to say that the family has relinquished its fortune. Shocking as it may sound, it's not terribly surprising to people who are familiar with Chouinard's unorthodox approach to entrepreneurship. He says he "never wanted to be a businessman," that he started as a craftsman and always tried to "do the right thing while making enough to pay the bills.

Patagonia has developed a respected reputation for seeking out sustainable materials for its products, repairing and selling secondhand gear, seeking solutions to the plastic microfibers problem, donating large amounts of money to environmental conservation efforts, including 1% of sales every year, becoming a certified B corporation, working to build a more sustainable food system with its Patagonia Provisions company, and even suing the Trump administration in an attempt to save the Bears Ears National Monument. It has done an impressive job of proving that a for-profit company can, in fact, make capitalism work for the planet.

Chouinard told the New York Times that he was uncomfortable with Patagonia's soaring value—and his association with it. "I was in Forbes magazine listed as a billionaire, which really, really pissed me off. I don't have $1 billion in the bank. I don't drive Lexuses." In fact he splits his time between two modest residences in Jackson, Wyoming, and Ventura, California, and apparently drives an old Subaru and wears "raggedy old clothes." 

In his letter, Chouinard explained that he faced a tricky dilemma. He didn't want to sell Patagonia and donate all the proceeds, as "we couldn't be sure a new owner would maintain our values or keep our team of people around the world employed." Going public wasn't an option, either: "What a disaster that would have been. Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility."

So, Chouinard and his team had to create their own alternative for the company's future—this unusual blend of maintaining the current leadership and board, while divesting of all private ownership—to ensure Chouinard's ambitious vision can continue for decades to come. He wrote in his letter that Patagonia's experiment in responsible business is just getting started: "If we have any hope of a thriving planet—much less a thriving business—50 years from now, it is going to take all of us doing what we can with the resources we have. This is another way we've found to do our part." 

Dan Mosley, a partner at BDT & Co. who helped Patagonia to design its new structure, said this story is different than any other he's ever seen or heard. "In my 30 plus years of estate planning, what the Chouinard family has done is really remarkable. It's irrevocably committed. They can't take it back out again, and they don't want to ever take it back out again."

This move provided no tax benefits to the family; in fact, they had to pay $17.6 million in taxes on the gift of their shares to the trust they created. This, Mosley said, had "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." It differs from charitable contributions by other wealthy individuals, who may donate large amounts that only represent a small fraction of their net worth. 

Patagonia's claim that "the Earth is now our only shareholder" is fairly accurate, too. As deputy general counsel Greg Curtis explained, the Patagonia Purpose Trust has no individual beneficiaries and its stock can never be sold: "There is no financial incentive, or structural opportunity, for any drift in this trust's purpose." It will be interesting to see if this new model will influence any other responsibly-minded business owners to take similar steps.

Chouinard, in the meantime, is satisfied. He told the New York Times, "I feel a big relief that I've put my life in order. For us, this was the ideal solution."