The article in the url below provides some details on the opaque organizing structure that Yvon Chouinard created for Patagonia when he relinquished control of the company, in 2022 (different, but no doubt related, to its decision to restructure as a Benefit Corporation, in 2021; see Strategic CSR – Patagonia). As Chouinard announced at the time (somewhat inaccurately, but still worth reading), "Earth is now our only shareholder." I noted the decision when it became public, but did not understand anything about the scale and potential impact of the decision – something Patagonia deliberately does not advertise and, as illustrated in Chouinard's original statement, left vague:
"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."
Right, as clear as mud, which brings us back to the article that is the focus of today's newsletter, which is the first somewhat detailed analysis of how things have been working out, ever since:
"Patagonia, the outdoor apparel brand, is funneling its profits to an array of groups working on everything from dam removal to voter registration. In total, a network of nonprofit organizations linked to the company has distributed more than $71 million since September 2022."
And from, moving forward:
"Patagonia paid an initial $50 million dividend to Holdfast in 2022. It made another payment to Holdfast last year. … Each year going forward, Patagonia will transfer all the profits it does not reinvest in the company to Holdfast."
Given the amount of money that is being distributed, along with the ideological nature of the causes, Hodfast's activity is beginning to attract some attention:
"Holdfast Collective created and manages five nonprofit groups — Holdfast Trust, Chalten Trust, Sojourner Trust, Wilder Trust and Tail Wind Trust. They are registered under a section of the tax code, 501(c)(4), that allows them to make unlimited political donations, provided their primary purpose is social welfare. The nonprofit groups, which pay management fees to Holdfast Collective, hold 98 percent of Patagonia's nonvoting shares. The shares are valued at $1.7 billion but will not be sold."
One of the founding principles of the structure is that it has to distribute all the money it receives from Patagonia, every year, and does not try and carry over any funds. This means they are able to distribute broadly to other organizations deemed sympathetic to the causes Chouinard cares about, even if they don't directly work to sustain the environment:
"And there was a slew of political contributions last cycle, including $100,000 each to Senate Majority PAC and House Majority PAC, which work to elect Democrats to Congress, as well as smaller gifts to groups such as the Black Voters Matter Fund, the Center for American Progress Action Fund and the Georgia Investor Action Fund."
There are lots more details about Holdfast's activities in the article, but I primarily enjoyed learning more about how it came about, and the selfless act by Chouinard to protect what he and his wife had created, for the foreseeable future:
"Because the Chouinards did not sell the company and retain the proceeds or leave the company to their children, they did not face a significant tax bill. And because they donated the shares to 501(c)(4) organizations, they did not receive a substantial tax write off. Instead, the family paid about $17.5 million in taxes to facilitate the transaction in 2022."
Take care
David
David Chandler
© Sage Publications, 2023
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At Patagonia, Profits Fund Preservation
By David Gelles and Kenneth P. Vogel
February 12, 2024
The New York Times
Late Edition – Final
B1, B2
