Making Earth the Only Shareholder

Best-selling author Daniel Goleman highlights how Patagonia’s big decision may be setting the tone for a new wave of purpose-driven entrepreneurs.

Daniel Goleman is a senior consultant at Goleman Consulting Group, author of the best seller Emotional Intelligence, and host of the podcast First Person Plural: Emotional Intelligence and Beyond. He is a regular contributor to Korn Ferry. 

Breaking news on the purpose front this month:  Patagonia’s founder, Yvon Chouinard, bestowed ownership of the company to the Patagonia Purpose Trust and Holdfast Collective, a nonprofit dedicated to defending nature. Valued at roughly $3 billion, the 50-year-old outdoor apparel company is now in a trust that will ensure profits go towards fighting the climate crisis.

“Earth is now our only shareholder,” reads the headline on Patagonia’s website, where Chouinard shares more about his motivation for the restructure.

Patagonia, which opened their first retail store in 1973, has long been the poster child for purpose-driven business. The original mission – “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.” – morphed in 2018, when the company boiled their purpose down into a short and simple statement: “We’re in business to save our home planet.”

That purpose is the north star Patagonia lives by – and in doing so, they have bucked some discouraging trends. One study found that while 82% of U.S. workers affirmed the importance of purpose, only 42% said their company’s stated “purpose” had any real impact. Meanwhile, research done at Harvard in 2020 found that of the 180 CEOs who signed the Business Roundtable’s Statement of Purpose in 2019 (rejecting the long-held idea that a corporation’s principal purpose is maximizing shareholder return), most weren’t actually doing much to follow through on their commitments.

While larger organizations (or even those adjacent to Patagonia but situated within larger conglomerates) may find it challenging to mimic this kind of decision. By shortening the gap between word and deed, Patagonia is setting the tone for the next wave of entrepreneurs.

"Instead of 'going public,' you could say we're 'going purpose,'” said Chouinard in a statement.

Chouinard is what Korn Ferry has come to describe as an Enterprise Leader. In their CEOs for the Future study, over 85% of CEOs agreed that the historical “line” between business and society is growing more and more permeable: The Enterprise Leader is one who responds to the porous boundary by thinking and acting across the broader ecosystem. They are the few who transform their organizations by taking into account the societal and cultural impact of their strategic decisions.

Patagonia has long been a brand dedicated to the natural world. Funneling profits to protect the environment isn’t just a kindness, it’s a strategic way of responding to the economic reality of climate change. Global warming isn’t cheap. The Coastal Protection and Restoration Authority (CPRA) is slated to spend $1 billion a year on mitigation projects – a cost that will continue, if not increase, for the next 50 years. Across the US, nearly 162 million people will experience more heat and less water – some to the extent of needing to relocate.

Putting Patagonia into a trust addresses a pressing societal need while protecting the company’s values and culture. Selling Patagonia and donating the money wouldn’t have guaranteed new ownership would keep their culture intact or their people employed. Taking the company public would have made Patagonia too vulnerable to shareholder pressure, exposing them to a world that too often puts short-term gain ahead of long-term responsibility.

“Truth be told, there were no good options available,” shares Chouinard, “So, we created our own.”

While some speculate that Chouinard may be trying to avoid a major tax bill, his 50-year career would signal otherwise. Purpose has never been an add-on for Patagonia, it’s been fully embedded into their way of doing business. It is what has inspired them to take risks and try new things – to innovate in the way most organizations crave to.

Click here to learn more about Daniel Goleman's Building Blocks of Emotional Intelligence.