Patagonia founder giving his company away is performative virtue signaling

Did any media source actually read whats happening here?

He transfered all voting stock to a trust which his family controls.  The trust oversees how much profit (AFTER investment in Patagonia the company itself) get allocated to environmental causes.  Patagonia was already donating a portion of profits to such causes.  The founder simply transferred his ownership to a trust(which he owns and controls).  Now he instead of being a paper billionarie, he can claim to be poor (but in sole control of a billion plus trust).

But it played well to all the limousine liberals in the upper west side that wear 200 dollar Better Sweater fleeces to their high paying tech or wallstreet job.  We did it Patagonia! A new inclusive capitalism that will save the earth!

Comments (41)

  • Analyst 2 in IB - Gen
4mo 

The Patagonia CEO / Founder is probably one of the few people in the world who actually walks his talk. This is an all time bad take 

Most Helpful
  • VP in IB - Gen
4mo 

Guy built a multi-billion dollar company and could've cashed out by selling shares but instead is donating them to a trust where he can't get it back from and expects it to generate $100mm in annual contributions to climate change but a junior analyst in Wall Street is apparently in the position to judge his true motivation.  If doing all that is virtue signaling, where does that leave your contribution to society?

4mo 
NoEquityResearch, what's your opinion? Comment below:

That analyst has a better understanding of why trusts are structured in certain ways than this VP in IB - Gen. Also, interesting that he has decided to form this trust at age 83 which is a convenient way to avoid a sizeable inheritance tax. Also a good reason to form a trust.

Whether you think the guy is altruistic or not, the main goal of this structure achieves one thing: the avoidance of taxes. Furthermore to the analyst's point, he gets to keep indirectly controlling the trust and continues to give money to charities which interest him while circumventing Uncle Sam.

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  • Works at Goldman Sachs
4mo 

NoEquityResearch

That analyst has a better understanding of why trusts are structured in certain ways than this VP in IB - Gen. Also, interesting that he has decided to form this trust at age 83 which is a convenient way to avoid a sizeable inheritance tax. Also a good reason to form a trust.

Whether you think the guy is altruistic or not, the main goal of this structure achieves one thing: the avoidance of taxes. Furthermore to the analyst's point, he gets to keep indirectly controlling the trust and continues to give money to charities which interest him while circumventing Uncle Sam.

Hey team thanks for opinion. Interesting points. I haven't read anything nor do I want to waste any time doing so. So can you create one simple analysis for me:

no donation scenario

- can we look at (I) cash flows after tax to founder from running the business for 7 years (assume flat growth and 30% taxes for simplicity and 100% distributed) and assume founder dies at 90 and then  (ii) cash flows to children from inheritance (assume immediate sale upon inheritance at 15x ebitda and 40% inheritance tax above tax free threshold). Calculate sum of (I) and (ii) no need to discount just want to see simple aggregate flows. 

donation scenario

- same analysis as above for (I). But for (ii) let's instead look at a simple perpetuity growth based on 7th year cash flows if the children expect to receive cash (can you dig into structure to see if they expect / can get dividends and/or if they're employed incl their income in this analysis in the perpetuity). Similarly sum cash flows

then can we compare the two outputs? Please feel free to tweak if I've missed something. Available on my cell. Please footnote any key assumptions. 

4mo 
Roger Sterling, what's your opinion? Comment below:
NoEquityResearch

That analyst has a better understanding of why trusts are structured in certain ways than this VP in IB - Gen. Also, interesting that he has decided to form this trust at age 83 which is a convenient way to avoid a sizeable inheritance tax. Also a good reason to form a trust.

Whether you think the guy is altruistic or not, the main goal of this structure achieves one thing: the avoidance of taxes. Furthermore to the analyst's point, he gets to keep indirectly controlling the trust and continues to give money to charities which interest him while circumventing Uncle Sam.

I like the idea of the money going to charity rather than taxes.

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Controversial
  • Senior VP in PE - Other
4mo 

LOL, everything is virtue signaling to the GOP these days. Maybe, just maybe, 2022 liberals are indeed more morally virtuous than 2022 republicans. It's gotta be exhausting to be a young nihilistic Republican who assumes everyone operates with the same selfish bad-faith motives as they do. See also: Desantis trafficking asylum seekers to a remote seasonal island 2,000 miles from the border, and the local residents helping them anyway.

4mo 
jackdags, what's your opinion? Comment below:

If by helping you mean ceaselessly complaining on every platform possible about being turned into a border town. 
 

And if by morally virtuous you mean supporting 25 years of overseas wars all around the world same as the republican establishment then sure.

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  • Senior VP in PE - Other
4mo 

jackdags

If by helping you mean ceaselessly complaining on every platform possible about being turned into a border town.   

And if by morally virtuous you mean supporting 25 years of overseas wars all around the world same as the republican establishment then sure.

I know that's what you and other Republicans desperately WANT to be true, but it's simply not the reality on the ground - https://www.cnn.com/2022/09/16/us/marthas-vineyard-community-response-migrants/index.html

From the pro-life party who brought you "Lock Kids in Cages" launches their hit 2022 single, "Trafficking asylum seekers 2,000 miles away to own the libs!" 

But hey, Desantis learned from the best. History always repeats itself.

.

4mo 
monkey0114, what's your opinion? Comment below:

Yeah man it's definitely not virtue signalling for Martha Vineyard residents to make sure to film themselves helping out fifty (50) immigrants and then kicking them out 24 hours later when the cameras are off despite being a self proclaimed sanctuary city

4mo 
AlphaMale69, what's your opinion? Comment below:
[Comment removed by mod team]
4mo 
GeorgeSorosFinanceMaster, what's your opinion? Comment below:

It's gotta be exhausting to be a young nihilistic Republican who assumes everyone operates with the same selfish bad-faith motives as they do.

The worst part is they're young.  It's not a case of older people mad at younger people because X which happens every generation.  These people are going to spend the next 50 years or more raging about any and every social or political change that Fox tells them to.

4mo 
chromium73, what's your opinion? Comment below:

Wow you are a sad POS. Try reading his book (let my people surf) and then see if you still feel high and mighty 

4mo 
famejranc, what's your opinion? Comment below:

it's fucking stupid, I will agree that it is fucking stupid (idk about him being a hypocrite or something) - just another 'good' person who wants to feel good cause they did something 'good'.

4mo 
PrivateTechquity 🚀GME+BBBY🚀, what's your opinion? Comment below:

You're not wrong. What do people think the Gates and Rockefeller foundations are for? It puts their fortunes into untaxable, ever growing trusts that can be directed at their discretion towards causes they choose. Just like any charity, the idea that 100% of that money is actually going to go to the causes they claim to support is next to 0. What would've been amazing would be if he gave it all of the employees or literally distributed ownership of the company in the form of shares to a bunch of nonprofits that already exist and manage their own portfolios, letting them take direct ownership of the cash generated by the business in the form of dividends.

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4mo 
NoEquityResearch, what's your opinion? Comment below:

+1 SB. The many bananas in the comments above just show that people don't understand trusts and why they are structured. It's not a topic usually covered in undergrad so about 95% of this website won't get it.

Along with your ideas, why not establish this trust at 50 years old versus 83....imagine how much more wealth could have been compounded tax free. While any charity is a good thing, I'm not jumping up and down to applaud someone's charitable giving literally on their death bed. As you note, even now, he could have structured it to give more control to actual charities rather than to family ties. Why did he not choose that route huh?

It reminds me of the following reading from the Bible:

"Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. But a poor widow came and put in two very small copper coins, worth only a few cents.

Calling his disciples to him, Jesus said, "Truly I tell you, this poor widow has put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything-all she had to live on." - Mark 12: 41-44

When you're giving away your excess wealth at 83 when you're already done using it all, I mean it's a nice thing but would have been more righteous to give it away when it hurts to do so like the poor widow.

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4mo 
Altrem, what's your opinion? Comment below:

OK so be the poor widow in your story and give all your money so you can be celebrated everywhere! 

He could have given more money, true.  But he could also have kept all of it to build a useless rocket to go to the moon or something. He did save on  taxes, but how is that a bad thing? I thought the government was too big and wasteful anyway? Can't have it both ways. You're shitting on the wrong guy my friend. 

4mo 
financeabc, what's your opinion? Comment below:
NoEquityResearch

+1 SB. The many bananas in the comments above just show that people don't understand trusts and why they are structured. It's not a topic usually covered in undergrad so about 95% of this website won't get it.

Along with your ideas, why not establish this trust at 50 years old versus 83....imagine how much more wealth could have been compounded tax free. While any charity is a good thing, I'm not jumping up and down to applaud someone's charitable giving literally on their death bed. As you note, even now, he could have structured it to give more control to actual charities rather than to family ties. Why did he not choose that route huh?

It reminds me of the following reading from the Bible:

"Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. But a poor widow came and put in two very small copper coins, worth only a few cents.

Calling his disciples to him, Jesus said, "Truly I tell you, this poor widow has put more into the treasury than all the others. They all gave out of their wealth; but she, out of her poverty, put in everything-all she had to live on." - Mark 12: 41-44

When you're giving away your excess wealth at 83 when you're already done using it all, I mean it's a nice thing but would have been more righteous to give it away when it hurts to do so like the poor widow.

This is a finance website right?  Why do you assume that 95% of people here do not understand anything about estate planning?  One if the main benefits to setting up an irrevocable trust is reducing estate tax.  This strategy appears to have benefits for his  estate and for his causes in that, I think, distributions would be tax free.  He could have devised a tax strategy that would only benefit his family but he did not.  That would not have been charitable at all.  

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4mo 
ImALawyer, what's your opinion? Comment below:

I agree with you. A lot of these philanthropists are giving with one hand what they take with another.Their money and their choice, but it is hypocritical especially those that contribute towards socioeconomic causes.

In this case, maybe the company can decrease its margins on it's eco friendly products to increase adoption by consumers?

4mo 
Hayek, what's your opinion? Comment below:

They've donated a lot of money to environmental causes over the years and are taking steps to do even more now, so it's clearly can't be "signalling" if they're putting their money where their mouth is.

  • 1
4mo 
Sequoia, what's your opinion? Comment below:

Libs love virtue signaling, true. That said in this case the motivation I think is genuine given the long history of prioritizing the environment the company has 

4mo 
IncomingIBDreject, what's your opinion? Comment below:

His intent or genuine or is it just his business model and he has to remain on brand by giving to charity?

Array

4mo 
Faustian, what's your opinion? Comment below:

Ignorant take. There is way too much virtue signaling happening these days, but Patagonia has always put their money where their mouth is.

4mo 
GeorgeSorosFinanceMaster, what's your opinion? Comment below:

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4mo 
Anonymous Monkey, what's your opinion? Comment below:

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