Abstract

The case discusses US based outdoor apparel company Patagonia’s new ownership model designed to uphold the company’s values, support environmental causes, and fight climate change. Yvon Chouinard, founder of Patagonia, and his family gave up ownership of Patagonia to two new entities. The first was the Holdfast Collective, a new 501(c)(4) nonprofit organization that would privately control 98% of Patagonia’s stock. The remaining 2% of shares, consisting entirely of voting stock, would go into the Patagonia Purpose Trust, a more legalistic structure created to protect the company’s values and mission. This case describes Chouinard’s commitment to environmental and social responsibility and how he transformed Patagonia into a world leader in environmental sustainability. However, Chouinard felt that Patagonia’s dedication to the environment was not enough to combat global warming and ecological destruction. In an effort to address environmental crises and protect the company’s purpose, Chouinard decided to give away ownership of the company. The case discusses the reason behind the bold move and its implications. The move immediately came under fire from critics who claimed that it was a convenient way for the Chouinard family to effectively maintain control over Patagonia, almost entirely avoiding taxes in the process. Moreover, some analysts felt that the transfer of ownership of Patagonia could lead to a possible conflict in future between the trust, the beneficiaries of the non-profit, and the employees. The case questions whether Patagonia’s new ownership model would become a new gold standard for business responsibility and mark any fundamental change to the system and the way businesses take responsibility for their impact on people and planet.

Learning Objectives

The case is structured to achieve the following Learning Objectives:

• Study the characteristics of a socially responsible company.
• Understand the issues and challenges in leading an organization responsibly.
• Understand the concept of Creating Shared Value (CSV).
• Evaluate Patagonia’s new ownership structure and the criticism and challenges the company faced with regard to its new structure.
• Explore the strategies and approaches that Gellert can adopt to align Purpose with Profits and achieve growth while protecting the company’s values of sustainability.

Keywords

Corporate Sustainability; Ownership Structure; Responsible Leadership; Profit vs Purpose; Corporate Social Responsibility; Steward Ownership Model; Creating Shared Value (CSV); Responsible Business; Environmental Responsibility; purpose-driven company; Trust Foundation Model