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Former Patagonia owner Yvon Chouinard has a long history of environmental conservation action.
By Catelyn Fitzgerald ’23
Science and Environment Editor
Yvon Chouinard, dubbed a “reluctant billionaire” by The New York Times in a Sept. 14 article, recently donated Patagonia, his multi-billion dollar outdoor clothing company, to help fund environmental initiatives. According to the New York Times article, the company will continue to operate under the new ownership, but all of its profits, equalling an estimated $100 million annually, will go towards protecting the environment.
The Times article explains that the company’s stock was donated to two organizations created specifically to manage Patagonia’s assets: the Patagonia Purpose Trust and the Holdfast Collective. The Patagonia Purpose Trust took only two percent of the company and is intended to hold the company to its commitment to being a “socially responsible business” as it operates going forward, The New York Times reported. The article went on to explain that the remaining shares of the company, equal to nearly $3 billion, will be given to the Holdfast Collective, a nonprofit organization created to direct the money towards “nature-based climate solutions,” such as preservation efforts.
In the same New York Times article, Chouinard explained the inspiration behind his decision to give the company away, saying that his frustration with his own billionaire status was a major factor behind the decision. “I was in Forbes magazine listed as a billionaire, which really, really pissed me off,” Chouinard said in his interview for The Times. “I don’t have $1 billion in the bank. I don’t drive Lexuses.” he continued.
According to an article in Forbes Magazine, Patagonia has a long history of supporting climate initiatives. The article cites the donation of one percent of the company’s total sales to support grassroots activism, as well as the donation of $10 million, a sum saved from the lowering of corporate taxes by former President Trump in 2018, to climate change-focused organizations. The company has also made efforts to encourage long-term use of its products, Forbes said.
Coverage of Chouinard’s decision to donate Patagonia ranges from praise to criticism. Several news sources, including Axios, Bloomberg and Quartz, have called the move a tax-avoidance strategy.
According to Bloomberg, if Chouinard had decided to sell the company, he would have had to pay federal capital gains taxes that could have been more than $700 million. Bloomberg explained that by choosing to donate the company shares to the Holdfast Collective, Chouinard owes no capital gains taxes and is exempt from the gift tax, which he would have been subject to had the company been passed down to an heir. Bloomberg points out another key aspect of the Holdfast Collective — its status as a 501(c)(4) organization. 501(c)(4) nonprofits can make limitless political donations. With the addition of the family-run Patagonia Purpose Trust meant to help manage the company’s assets, the arrangement allows the family to continue to control the business while avoiding significant taxes, the article said.
Axios echoed this sentiment, calling the donation “the ultimate billionaire tax dodge” in an article published last week. The article predicted that Chouinard’s actions might create a blueprint for other billionaires looking to make large charitable donations while maintaining influence over how that money is used.
Quartz News interviewed New York University law professor Daniel Hemel on the subject, who agreed that the donation of the company’s voting shares to the Patagonia Purpose Trust was to ensure that the Chouinard family could continue “calling the shots” for the company. Hemel said the decision was made “to avoid taxes and use the money for political causes.”
He added that donating the company’s funds to support environmental causes was admirable, but “one doesn’t want a constructed tax system predicated upon everyone being like the Chouinards.” The article concludes with Hemel expressing that climate change is an urgent issue, but that doesn’t exempt billionaires from paying their fair share in taxes.