Patagonia’s Founder Just Gave Away His $3 Billion Company. Here’s Why That’s Not as Crazy as It Sounds

Yvon Chouinard, who founded Patagonia 52 years ago, just made a stunning announcement. The 83-year-old entrepreneur and his family have given away their $3 billion company–all of it–to a special trust and a foundation created to combat climate change and protect nature. Chouinard always said he didn’t especially like being a billionaire. Now he no longer is one.

There’s no question that Chouinard is an outlier. Most entrepreneurs have no objection to being billionaires. And most entrepreneurs would choose a more traditional exit for their companies and themselves–selling it to another organization, taking it public, leaving it to their families, or even giving it to their employees. 

But there are reasons Chouinard chose none of these routes. And–even though you may not want to do what he did–his reasons should resonate with every company founder and every business leader.

“What a disaster that would have been.”

Why not just sell Patagonia and donate the proceeds to environmental causes? “We couldn’t be sure a new owner would maintain our values or keep our team of people around the world employed,” Chouinard explained in a statement on the company’s website.

Then how about choosing the other typical exit strategy and take the company public? “What a disaster that would have been,” he wrote. “Even public companies with good intentions are under too much pressure to create short-term gain at the expense of long-term vitality and responsibility.” Go public, and whatever your stated purpose is, and whatever you want it to be, your shareholders will expect and demand that everything you do is geared to helping them make money on their investment. Do anything else, and they’re likely to come after you. They may even try to wrest your company away from you.

In other words, Chouinard was up against a simple and brutal equation. The moment you accept any money for your company, you begin giving up control of it. The more money you receive, the less control you have. Most founders who succeed in building successful companies struggle to find ways to live with this equation. Sometimes it works for them; often it doesn’t. Founders wind up leaving the companies they started. Or worse, they get thrown out, as happened to Steve Jobs, who was fired from Apple in 1985 (and returned in 1997 after it turned out the company really needed him).

For Chouinard, that equation always had a simple solution. Control was more valuable to him than investment dollars, so he and his family retained absolute control of Patagonia. The problem is that, now in his 80s, Chouinard knows he can’t run the company forever. And although his children Fletcher and Claire are on the company payroll and will help determine its direction, neither of them wants to own it.

So Chouinard, his family, and his lawyers faced down that money-vs-control equation one last time. And after looking hard at the problem, they realized that if they gave up the money, they could maintain control, and a firm commitment to Patagonia’s core principles, pretty much forever.

“To save our home planet.”

Here’s how it works. The Chouinard family has donated 100 percent of Patagonia’s voting shares, or about 2 percent of its shares overall, to the new Patagonia Purpose Trust. The Trust will be managed by the Chouinard family and their advisors, and their intention is to make sure that Patagonia stays true to its purpose–“to save our home planet.”

The other 98 percent of shares, which are non-voting shares, have been donated to the Holdfast Collective, which Chouinard describes as, “a nonprofit dedicated to fighting the environmental crisis and defending nature.” And from here on out, any profits Patagonia makes will be paid to the Holdfast Collective as a dividend. That will make the nonprofit a major player in combating climate change. As Chouinard put it in his statement, “Earth is now our only shareholder.”

By giving up the money forever, the Chouinards have gained permanent control of Patagonia. It will keep fulfilling its intended purpose for as long as the company remains profitable and independent, which could be a very long time.

Very few other founders, or maybe none at all, would choose to give away ownership of their companies. But next time you think about pitching VCs or asking for investment, or launching an IPO, keep that pesky equation in mind. The more investment money you take in, the more control you lose. How much of that control are you willing to give up?

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