Patagonia Chairman Explains His Company's View of Capitalism: Nonfamily chair Charles Conn addresses the owners' decision to make Earth the company's only shareholder.

• Author: Hayes, Bill

In September 2022, the then-owners of Patagonia--Yvon Chouinard; his wife, Malinda Chouinard; and their two adult children--delivered a shock to the business community, announcing that rather than taking the business public or selling the company, they had decided to transfer ownership of the company, valued at approximately $3 billion, to a nonprofit organization and a specially designed trust. The move will ensure that all of the company's profits, which accumulate at around $ 100 million per year, will be used to fight the effects of climate change and protect natural places on a global basis.

At the heart of the company's decision-making is Charles Conn, chair of the Patagonia board. In this exclusive interview, which can be viewed in its entirety at www.directorsandboards.com, he discusses the roots of Patagonia's work toward environmental protection, why he thinks Milton Friedman's beliefs about shareholder capitalism were well-reasoned but wrong and why Patagonia ultimately decided to put its money where its mouth was in the fight to save the home planet.

Directors & Boards: Can you tell us about Patagonia's decision to become a benefit corporation? What led to that decision and what impact has it had on how the company is managed?

Charles Conn: We were the first benefit corporation in California, and that was really important to the founders, Yvon and Malinda Chouinard. The thing that appealed to them about the benefit corporation certification and the annual process that goes along with it is that being a benefit corporation allows you to enshrine in your charter goals other than profit maximization. Regular companies incorporated in Delaware only have profit maximization as their potential objective. So, for all the conversation about stakeholder capitalism, non-benefit corporations actually are required to do profit maximization. The Chouinards really wanted to enshrine in Patagonia's charter both their environmental aims and aims around their employees and the communities in which they operate.

DB: Could you take us behind Patagonia's decision to make the Earth its only shareholder? What was the decision process like, and why did Patagonia ultimately make that decision?

CC: It was a long process. I think Malinda would tell you they've been thinking about this for 30 years. The founders knew they would get older. And they care very deeply about how the company is run. Both of their now-adult kids work in the company, but they also wanted to have a really permanent solution to Patagonia's long-term stewardship. So we were solving for two things. One is, how do we provide long-term or permanent stewardship for a values-based company? Second, how could we release more value to fight the environmental crisis, which is incredibly important to the...