Image Source: AP News
Written by: Abdullah Al-Ejel
September 18th, 2022
Recently, a surprising move has been made by Patagonia, an outdoor clothing corporation, and its founder, Yvon Chouinard. After 49 years since the founding of this company, Chouinard, his wife, and their two children have transferred their ownership, worth $3 billion, to a nonprofit organization.
Aimed at fighting climate change, Patagonia declared “the earth is now our only shareholder”. Although this may seem like a random, shocking decision, Chouinard has a history of supporting the environment, sharing 1% of sales profits every year since 1985 for the environment, and donating millions. “Chouinard and his family transferred their voting stock to the newly established Patagonia Purpose Trust, which will ensure that Patagonia maintains its commitment to corporate responsibility and donating its profits. The rest of the company, about 98% of its shares, was donated to the Holdfast Collective, a nonprofit organization that will receive all of the company’s profits, roughly $100 million a year, and use them to fight climate change.” (LA Times)
However, skeptics have questioned the motives behind this decision. Transferring this ownership will grant Chouinard and his family a $700 million tax break, causing people to question whether this is entirely in good faith or if the intentions were for financial reasons (Bloomberg). Additionally, this avoids the US estate and gift tax. This could be for tax write-offs, but Patagonia’s charitable history says otherwise.
This is a huge step in climate activism, hopefully setting new standards and expectations for companies around the world. It will be interesting to see if bigger companies follow suit. And if they do, would the market and their shareholders respond in a positive or negative manner? Only time will tell.