As Fashionista reports, almost half a century since American rock climber-turned-businessman Yvon Chouinard founded Patagonia, his worldwide outdoor clothing and gear company, he’s announced an unconventional sort of exit plan.
In the company’s own words, it’s “going purpose” instead of “going public.” In lieu of selling the company or going public, the reluctant billionaire is transferring all ownership to two new entities: a trust and a nonprofit organization.
“If we have any hope of a thriving planet 50 years from now, it demands all of us doing all we can with the resources we have,” Chouinard says in reference to the shift in ownership. “Instead of extracting value from nature and transforming it into wealth, we are using the wealth Patagonia creates to protect the source. We’re making Earth our only shareholder. I am dead serious about saving this planet.”
Here’s how it works: 100% of the company’s voting stock transfers to the Patagonia Purpose Trust, created to protect the company’s values; and 100% of the nonvoting stock had been given to the Holdfast Collective, a nonprofit dedicated to fighting the environmental crisis and defending nature. The funding will 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.
What that means is, effective immediately, the company has given all of its voting stock (which is equivalent to 2% of overall stock) to the newly formed Patagonia Purpose Trust, which will keep Patagonia accountable to its mission statement and values. The trust is overseen by members of Chouinard’s family and their closest advisers. Because the money is donated to a trust, the family will actually lose about $17.5 million in taxes from the gift. The rest of the stock (98%) is owned by Holdfast Collective, a newly established nonprofit organization.
In a press release, Patagonia vowed to distribute all profits that are not reinvested back into the company toward fighting the climate crisis and sustainability measures. Patagonia estimates that this will come out to roughly $100 million annually. The Holdfast Collective will oversee these philanthropic initiatives.
“The current system of capitalism has made its gains at an enormous cost, including increasing inequality and wide scale uncompensated environmental damage,” Charles Conn, chair of the board at Patagonia says in the press release. “The world is literally on fire. Companies that create the next model of capitalism through deep commitment to purpose will attract more investment, better employees and deeper customer loyalty.”
According to Fashionista, the forfeiture of Patagonia is in many ways a reflection of Chouinard and Patagonia’s lifelong dedication to tackling environmental issues. Since 1985, the company has pledged to give 1% of its sales annually to grassroots activists, which it will continue to do as a certified B Corp. The company has become known for its discouragement of over-consumption as well as its disregard for capital.
The decision also helps put to rest the question of Patagonia’s fate without its founder, a question most large companies have to resolve. For Patagonia, if all goes according to plan, the successor will be the planet.
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