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September 19, 2022
Patagonia founder Yvonne Chouinard announced last week that he is dedicating his company to climate change.
Mr. Chouinard and his family have transferred ownership of the privately held company, valued at about $3 billion, to a trust and nonprofit organization. “
The trust, controlled by family members and close advisers, holds two percent of Patagonia’s stock, but all voting shares and responsibility for protecting Patagonia’s existing values ​​and independence. Patagonia expects to generate and donate about $100 million annually, depending on the health of its business.
Mr. Chouinard wrote about “Rethinking Capitalism”: “While we are doing our best to solve the environmental problem, it is not enough.” We had to find a way to save more money to fight the crisis while keeping the company’s values ​​intact. One option was to sell Patagonia and donate all the proceeds. But we can’t be sure that a new owner will maintain our values ​​or continue our team of people around the world.
“The other way was to take the company public. What a disaster that would be. Even well-intentioned public companies are under tremendous pressure to make short-term profits at the expense of long-term viability and responsibility.”
“To be honest, there were not good options. So we created our own.
The 49-year-old brand will remain for-profit and continue to be led by CEO Ryan Gellert.
However, the maneuver helps the Choinards avoid taxes. Bloomberg “The deal was structured in a way that would give him and his family control of Patagonia and other benefits for the billionaire while protecting him from potentially hundreds of millions of dollars in tax bills,” he wrote.
The elder Chouinards may lose motivation without the extra distributions. Ted Clark, executive director of Northeastern University’s Family Business Center, said New York Times“If you take away all the financial incentives, the family will have no interest but longing for the good old days.
Discussion Questions: Did Yvon Chouinard have better options? Transfer ownership of Patagonia to a non-profit organization to fight the climate crisis? Do you see that the move could have a negative impact on the business?
“In the end, this is Yvon Chouinard’s company, and he decides how to move forward, I appreciate his intentions.”
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