Yvon Chouinard, the billionaire founder of sustainable outdoor clothing & gear brand Patagonia, gave his entire company away to a fund and a nonprofit to fight climate change. The move, announced on Sept. 14, aims to direct all of the company’s profits toward saving the planet.
The rock climber-turned-businessman, who told the New York Times being listed as a billionaire “pisses him off,” transferred his company to the Patagonia Purpose Trust and the nonprofit Holdfast Collective, which will distribute Patagonia’s profits to help fight the climate crisis.
“As of now, Earth is our only shareholder,” the company – valued at about $3 billion – announced. “ALL profits, in perpetuity, will go to our mission to ‘save our home planet’.”
The 83-year-old Chouinard, together with his wife, two adult children, and company lawyers, worked on creating a fund and a nonprofit that would allow Patagonia to still operate as a for-profit business while directing all of its proceeds to climate efforts.
“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,” said Chouinard in a statement.
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While the Patagonia Purpose Trust remains the company’s controlling shareholder, it will only own 2% of Patagonia’s stock, while 98% will go to the Holdfast Collective, a nonprofit, which will invest the money in fighting environmental crisis, protecting nature and biodiversity, and supporting communities.
According to Patagonia’s statement, this unique structure was designed to avoid going public or selling the fashion brand, which could have meant a change in values.
Ever since its establishment in 1973, Patagonia has become an example setter for environmental activism in the business world, with a self-imposed “Earth tax” of 1%, which goes toward environmental NGOs and which has resulted in $140 million in donations for environmental action.
Chouinard’s recent move, however, also drew criticism, with some saying it would allow him to avoid taxes for hundreds of millions of dollars while still keeping control of the company within the family.
Patagonia’s transfer also means Chouinard will not have to pay the federal capital gains taxes he would have owed if he had decided to sell the company. The founder will also avoid paying the U.S. estate and tax gift, which is 40% levy on big fortunes when they are passed on to heirs.
This may have some worrying implications for democracy, Ray Madoff, a professor at Boston College Law School told Bloomberg. “We are letting people opt out of supporting all the expenses of government to do whatever they want with their money,” he said. “This is highly problematic from the point of view of democracy, and it can mean a higher tax burden for the rest of Americans.”
Patagonia did not respond to Bloomberg’s request for comment.
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