Many business leaders that I work alongside have long referred to Patagonia as an aspirational example… a family-owned company that is run on its values, and known for this in a way that connects with consumers; its actual authenticity makes it enormously successful and profitable. The latest move by the Chouinard family cements their trailblazing approach to a new form of values-led capitalism, and there are lessons here for all of us.
Since I heard the news about the founder of outdoor apparel maker Patagonia, Yvon Chouinard, giving up ownership of his family’s company, it has stayed with me.
Many business leaders that I work alongside have long referred to Patagonia as an aspirational example… a company that is run on its values, which connects with consumers and actually leads to its success and profitability. The latest move by the Chouinard family cements their trailblazing approach to a new form of values-led capitalism, and there are lessons here for all of us.
If you haven’t read the details of the exit or Chouinard’s message to Patagonia employees, I highly recommend digging in. The cliff notes are:
- Chouinard is 83, and his family and the board have been wrestling with what would happen to Patagonia after his death for years. The company was 100% owned by the Chouinard family (Yvon, his wife Melinda, and their two children).
- The family has created a unique structure in which they have donated 2% of the company (the voting shares) to a trust, and the rest of the common shares to a new 501(c)4.
- The trust serves as a governing board for the company, and ensures that all excess profits (about $100 million annually) of the business are donated to the nonprofit in order to support a variety of environmental and grassroots programs and organizations.
As Chouinard put it: “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.”
Lesson #1: Constraints beget creativity
One of the most inspiring aspects of this story for me was the reminder that limits or constraints can actually make us more creative.
As business leaders, we often complain about needing more time, more money, more options… and we forget that sometimes less time, less money, fewer options are actually where our genius and the genius of our team can shine.
Chouinard put very specific constraints on the team that was in charge of coming up with a satisfactory transition option. They needed to come up with a solution that met the non-negotiables to ensure that the purpose and ethos of the company would not be lost, and that the proceeds not just benefit the family, but the planet.
As David Gelles points out in The New York Times article that broke the news, the easiest paths, selling the company or taking it public, would have enabled Chouinard to fund conservation initiatives from the proceeds.
But Yvon did not believe that Patagonia would be able to prioritize things like worker well-being and funding climate action as a public company.
“I don’t respect the stock market at all,” Chouinard said. “Once you’re public, you’ve lost control over the company, and you have to maximize profits for the shareholder, and then you become one of these irresponsible companies.”
Chouinard even added some time pressure to the team to find a suitable alternative for his ownership succession. As the CEO, Ryan Gellert recounts: “One day he said to me, ‘Ryan, I swear to God, if you guys don’t start moving on this, I’m going to go get the Fortune magazine list of billionaires and start cold calling people. At that point we realized he was serious.”
By taking traditional solutions off the table and making the issue both urgent and important, Chouinard forced Patagonia to blaze a new trail that satisfied all of the Chouinard family’s values-led requirements.
Lesson #2: What makes you different is where your value lies.
Companies often think that their strategic advantage is in being “better.” Better tasting. Healthier. Cheaper. More efficient. In reality, your strategic advantage is in being different.
“This family is one of one… People are gut-checking this move because it is so unusual,” Gelles noted in a Vox interview. “This family operates on a different wavelength.”
The Chouinard children, Fletcher and Claire, essentially renounced their inheritance of billions of dollars, and share their parents’ disdain for billionaires.
My expectation isn’t that family enterprises all over the globe start emulating the Chouinard’s exact structure or willingness to donate their fortune to a cause. But they do act as an exceptional example of when having extreme values and personalities can work in a company’s favor.
It is a stark reminder to own this truth: The quirks of a family can actually create value in the brand and have positive ripple effects. By operating at extremes, they attract customers and employees who share their values, but lack the Chouinard’s capital to act on them.
Embracing personality, values, and profitability as ingredients for a successful business, instead of choices to be made is a liberating concept. This is something that makes me excited about the unique ability of family-owned and closely held businesses to truly make meaningful change in the world.
Patagonia is not a perfect company, and Yvon Choinard is not a perfect man. He wrestles with his own values. His company manufactured products that created waste, but the proceeds allowed his family to protect undeveloped lands. They had to deliberately slow the growth of the company at times and pull out of markets where they felt their products were being purchased by people who did not share their values.
One of the things that sets the leadership of Patagonia apart is that they are willing to engage in conversations around contradiction and complexity. They embrace it. And that is something that we all can do.