What do Hobby Lobby and Patagonia's CEO have in common? Besides being founders of billion-dollar brands known by many U.S. consumers, both CEOs recently announced that they plan to hand over ownership of their respective companies.
Patagonia's CEO, Yvon Chouinard (aged 83), plans to shift ownership to the newly established Patagonia Purpose Trust and Holdfast Collective.
His reasoning? Combat climate change.
In a personal statement, Chouinard stated, "I never wanted to be a businessman. I started as a craftsman, making climbing gear for my friends and myself, then got into apparel..."If we have any hope of a thriving planet-much less a thriving business-50 years from now, it is going to take all of us doing what we can with the resources we have. This is another way we've found to do our part".
The Holdfast Collective will deploy $100 million in annual profits to "to fighting the environmental crisis". In the meantime, his family's voting stock (equaling 2% of total shares) will sit in the Patagonia Purpose Trust.
While all this seems greatly benevolent, an analysis conducted by Bloomberg News found that Chouinard saved an estimated $700 million in capital gains taxes by transferring 98% of his shares to a nonprofit. Him and his family will continue to maintain control of Patagonia without having to pay the capital gains had he decided to sell the company, an exit route that he considered.
Hobby Lobby's CEO, David Green (aged 80), cited the "curse of wealth" as his motive, stating, "Patagonia's founder recently made news when he gave away the ownership in his company to allow the mission and purpose to remain intact... I experienced a similar decision-making process with my ownership of Hobby Lobby; I chose God."
Green has long been a controversial figure due to treatment of workers, decision to keep stores open during the pandemic, as well as strong religious rhetoric off of which he based his actions towards employees and company operations. The company itself has also been at the center of much controversy and scandal in the past.
Are these two examples a sign of corporate social responsibility or of leveraging tax loopholes to preserve their wealth? It's difficult to say at face value. What is more clear is that corporations are often intertwined with political, cultural, and religions discussions. The opinions of company leaders are no longer seen as their own but as a reflection of where the company stands on various matters.
Research shows that ~70% of consumers want to see their favorite brands address social and environmental issues, while ~50% of those pay close attention to whether these brands stay true to their word and take action. Job applicants are no longer looking at the role description, salary / benefits, and team culture but also at whether the firm's values and political views align with theirs.
As we have moved into a knowledge economy where our job no longer starts and ends when we clock in and out of work. We are virtually always "on" through Slack (NYSE: CRM), Outlook (NASDAQ: MSFT), and Zoom (NASDAQ: ZM) and therefore our personal and professional identity are more intertwined than ever. Consumers and employees are speaking up, and companies are no longer able to avoid the topics they have always strayed away from.