Patagonia founder puts a spin on capitalism: 'Every billionaire is a policy failure,’ CEO says

One of the Sustainable Development Goals of the United Nations for 2022 is to "take urgent action to combat climate change and its impacts." According to the UN, our window to avoid climate catastrophe, which is humanity's "code red warning," is closing rapidly. In a new multi-agency report coordinated by the World Meteorological Organization (WMO), it has been established that "we are heading in the wrong direction." There is a need for more ambitious actions, without which "the physical and socioeconomic impacts of climate change will be increasingly devastating," the report warns.

Yvon Chouinard, 83, founder of outdoor apparel maker Patagonia, recently announced that he was giving away his company. He wrote in his letter, "Earth is our only shareholder." Chouinard called himself a "craftsman" and not a businessman in his letter. In the 1960s, he was a pioneering rock climber in California’s Yosemite Valley. His modest lifestyle dates back to the time when he lived out of his car eating damaged cans of cat food that he bought for five cents apiece. Even today he wears old clothes and does not own a computer or a cellphone. However, with Patagonia's rising sales, Chouinard's own personal net worth continued to grow, making him uncomfortable. “I was in Forbes magazine listed as a billionaire, which really, really pissed me off,” he said. “I don’t have $1 billion in the bank. I don’t drive Lexuses."

Now with this decision, he hopes to change things and put an unconventional spin on capitalism. Chouinard said, “Hopefully this will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people." Pledging his support he added, “We are going to give away the maximum amount of money to people who are actively working on saving this planet.” But his approach is unique. Rather than selling away the company—valued at about $3 billion—and donating the proceeds or taking the company public, Chouinard along with his wife and children decided to transfer the ownership to a specially designed trust and a nonprofit organization to fight the climate crisis, according to The New York Times.

In the middle of 2020, Chouinard told the chief executive of Patagonia, Ryan Gellert, that he would himself start cold calling billionaires to sell the company. “At that point we realized he was serious,” Gellert said. But when they started evaluating the various options, nothing appeared good enough to meet the goals and priorities Chouinard had on his mind. "So we created our own," he mentions in his letter. To "save our home planet," the family will no longer own Patagonia. They have donated their shares with voting rights to the newly established Patagonia Purpose Trust. The nonvoting shares have been donated to a nonprofit organization called the Holdfast Collective. While Patagonia Purpose Trust has the right to approve key decisions to ensure that the company's values and mission are met, Holdfast Collective "will use every dollar received to fight the environmental crisis, protect nature and biodiversity, and support thriving communities, as quickly as possible."

Given the ideology that he shares with his wife, Chouinard's decision to forfeit his shareholding at Patagonia in this manner is not surprising. The company has given away 1% of its sales for decades, mostly to grassroots environmental activists. Criticizing the models of public companies where the main aim is to maximize profits for the shareholder, Chouinard says, “I don’t respect the stock market at all." Losing control over the company leaves it open to becoming "one of these irresponsible companies.”

The pandemic laid bare the huge difference between the ultrawealthy and the rest of the world. In 2021, taking advantage of the stock market, the wealth of the top 1% increased to the tune of $6.5 trillion, per the Federal Reserve, reports Fortune. Given this, there is a lack of trust in the system that creates these billionaires. A survey from Edelman Trust Barometer in 2020 found that most people felt capitalism does more harm than good. Chouinard's children, Fletcher and Claire, don't disagree. Gellert said that they didn't want the company because they didn't want to be seen as financial beneficiaries. “They felt very strongly about it. I know it can sound flippant, but they really embody this notion that every billionaire is a policy failure,” Gellert said.

Chouinard says that he "didn’t know what to do with the company" because he never wanted a company. "Now I could die tomorrow and the company is going to continue doing the right thing for the next 50 years, and I don’t have to be around," he added. “I feel a big relief that I’ve put my life in order,” Chouinard said. “For us, this was the ideal solution.”