Yvon Chouinard is an environmental activist and outdoor enthusiast who began mountain and rock climbing decades ago. At the same time he converted his missionary zeal for environmental protections and preservation when he began to design and manufacture outdoor equipment and clothing for persons like himself who wanted to experience the same commitment to nature and outdoor life in a protected natural environment.
Chouinard began making outdoor equipment at home for friends, relatives and neighbors who like himself enjoyed outdoor adventures. Eventually he expanded his business and called his new company Patagonia, for a small mountain community in South America where he spent much of his time mountain climbing. After several decades the company grew significantly to the point where it had generated billionaires of dollars as revenues and millions of dollars as profit, all of which went to the Chouinard family which held all of the nonvoting and voting stock.
As the company became worth more than a billion dollars, Yvon Chouinard became increasingly uncomfortable with the enormous amount of wealth in his possession. Chouinard had always been very active in the movement to combat man-made climate change and support environmental justice. He gave away much of his wealth to support those causes, but he believed it wasn’t enough, especially as he became older he was concerned that if anything happened to him the company’s assets and revenue would be transferred to others who wouldn’t be as supportive of environmental causes as he was.
Chouinard’s solution to his dilemma was to place all of his stock and all of the stock owned by his family in the company, voting and nonvoting, in a trust called the Patagonia Purpose Trust. The Trust itself would be managed by the Chouinard family and reliable board members dedicated to the purpose of the Trust to use Patagonia’s assets and surplus revenue to benefit the environment and combat man-made climate change. Any surplus revenue derived from the sale of Patagonia products would be deposited to an account controlled by the Holdfast Collective, a 501(c)(4) organization whose mission is to protect the environment and resist manmade climate change. Funds deposited to the organization will be used to promote awareness of environmental issues and support for protecting the planet’s resources.
There will be some tax benefit to the Chouinard family for donating their stock to the Patagonia Purpose Trust, but that tax benefit is small compared to the benefits derived from donating to a tax-exempt charitable organization. The advantage of keeping the company intact, while controlled by a board of trustees composed primarily of the Chouinard family and their closest, most trusted advisors, is that the sale of Patagonia products will provide a continuous, permanent and substantial stream of revenue which will then be deposited to the Holdfast Collective. The Collective, in accordance with its stated mission, will then use that money to benefit and advocate for environmental protection and resistance to manmade climate change.
There will always be concerns and some skepticism from activists and environmental advocates about how the company is governed and how much surplus revenue is actually contributed to environmental cause. As in any non-profit, mission-oriented organization, even charitable and advocacy groups, there is always a risk of mismanagement and misappropriation of funds. And there is also some reasonable concern over Yvon Chouinard’s advanced age (83 years), and how this may affect governance of the Trust and the Holdfast Collective if he is no longer able to effectively participate in the group’s management. As to relationships with workers, Patagonia has always had a strong reputation for worker satisfaction and retention. By all measurements worker satisfaction at the company is much higher than most other businesses, and the turnover rate is by all standards very low. This is expected to continue after the conversion process is finished.
Despite the lack of specificity and guarantees of future performance, the conversion of a billion dollar company Patagonia from a privately owned and managed for-profit corporation to a trust fund governed by a board of trustees for a specific purpose to protect the environment is definitely a first step in the right direction toward a more just and productive economy. Although not a perfect solution, Chouinard himself best summed up the approach to solving his dilemma of reconciling Patagonia’s wealth and income with the imperative goal of providing a reliable financial source to support programs and policies that are friendly to the environment; “Truth be told, there were no good options available. So, we created our own. If we have any hope of a thriving planet – much less a business – it is going to take all of us doing what we can with the resources we have. This is what we can do. Earth is now our only shareholder.”
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