Patagonia must remain competitive for climate donation to work: CEO

A Patagonia store sign is seen on Greene Street on September 14, 2022 in New York City. Patagonia founder Yvon Chouinard, his spouse and two adult children have announced that they will give up ownership of the approximately $3 billion company. The company’s privately held stock will now be owned by a climate-focused trust and a group of nonprofits, known as the Patagonia Purpose Trust and Holdfast Collective, and all profits are not reinvested in businesses that will be used to combat climate change.

Michael M. Santiago | Getty Images News | beautiful pictures

Founder of Patagonia Yvon Chouinard and his family are giving their ownership in the outdoor clothing manufacturer they started five decades ago to benefit climate change. But that doesn’t mean the company will become less competitive or more aggressive in meeting its business goals.

CEO Ryan Gellert told CNBC’s “Squawk Box” on Wednesday.

“We’re extremely competitive. Chouinards is extremely competitive for business. We’re focused on making high-quality products, standing behind them to last longer. We’re competitive. compete with every other company in our space, drastically. I don’t” I don’t think we’ve lost that instinct,” said Gellert.

It also means that employee salaries and compensation will not be affected, he said.

“I think this whole thing will fail if we don’t continue to run a business that is competitive and that includes taking care of our employees,” Gellert told CNBC.

Ryan Gellert, now CEO of Patagonia, speaks at the Copenhagen Fashion Summit 2019 at DR Koncerthuset on May 16, 2019 in Copenhagen, Denmark.

Lars Ronbog | Getty Images Entertainment | beautiful pictures

The conversations that led to the decision started internally several years ago.

Should Patagonia decide to list the company or sell a majority or minority stake in the company, “we have little confidence in meeting with quite a few potential investors that the integrity of the company will be preserved.” guard,” Gellert said.

Instead, Patagonia has chosen to place the company’s shares in two trusts, the Patagonia Purpose Trust, which holds all voting shares (2% of the total) and Holdfast Collective, which holds the remainder, voiceless. The Patagonia Purpose Foundation is dedicated to upholding the company’s values, and the Holdfast Collective is a “non-profit dedicated to fighting the environmental crisis and protecting nature,” Chouinard wrote in a blog post. statement describing the decision.

By transferring most of the company to a public benefit trust, Patagonia avoided paying a large tax bill – an issue that was discussed immediately and wildly after the announcement that the Chouinard family would let the company go public. you leave.

Patagonia management had expected discussion of the tax benefits of their new structure, but tax avoidance was a “never” part of the decision to scrap the company, Gellert said.

“With family, it’s never been a conversation for two years,” said the Patagonia CEO. “We don’t lose the tax benefit of passing 501c-4“is the designation of an organization that “must be operated exclusively to promote social welfare” and is therefore exempt from taxes, according to the Internal Revenue Service.

Yvon Chouinard, founder and owner of Patagonia, in front of a tin warehouse in Ventura, California, where he used to forge pitons for mountaineers.

Al Seib | Los Angeles Times | beautiful pictures

“But with the family, it was clear from the start. There were two goals to focus on: Creating a structure that would ensure the integrity and values ​​of Patagonia and cash flow to the environment in line with it. more meaningful ways now,” Gellert said.

Gellert points out that the Patagonia founding family paid $17.5 million for 2 percent of the shares transferred into the Patagonia Purpose Trust.

“Patagonia has a history of always paying us taxes,” says Gellert. “We are a company that believes very strongly in that. We are a company that has avoided complicated structures both in the US and globally to avoid taxes. We are truly one of the few companies. has consistently and openly lobbied for higher taxes, particularly in support of climate legislation.”

Patagonia’s decision to donate the bulk of the company’s profits, estimated at $100 million a year, comes amid intense debate over whether businesses and business leaders must be politically active and how social.

However, Patagonia managed to keep the favorites of both sides of the political divide. Its jacket is the defacto uniform for many investments and venture capital. In every year Axios . Brand Reputation Poll, Patagonia does well on both sides of the political divide, “and that’s really encouraging and somewhat surprising, because we take positions with the environment at the center in a consistent and proper way. “Gellert said. “What I take away from that is people respect that we’re very consistent.”

“In this world, counterfeiting is increasingly difficult,” Gellert said. “And so I think companies that don’t have a deep commitment to the things they love, I think it’s going to collapse pretty quickly.”

Patagonia CEO Ryan Gellert breaks down founder's decision to quit the company

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