Melinda Gates and MacKenzie Scott have been getting a lot of attention lately, and rightfully so. Both have been busily giving away their fortunes, Gates mainly through the eponymous foundation she shares with her ex-husband, and Scott through gifts to hand-picked organizations totaling nearly $13 billion since 2020. But this is not a story about Gates and Scott. This is a story about two lesser-known billionaire philanthropists, Yvon Chouinard and Barre Seid, both of whom recently donated their companies to charity, stirring up the debate around the outsized influence billionaires exert through their philanthropy.
The first of these two philanthropists, Yvon Chouinard, founded the outdoor clothing and gear purveyor Patagonia back in 1973, currently valued at approximately $3 billion. An avid rock climber who to this day insists he never wanted to be a businessman, Chouinard got his start forging pitons in his parent’s backyard in Burbank, California, earning him enough to free up time for outdoor pursuits. His climbing equipment was a hit, launching him reluctantly into the business world. Indeed, Chouinard, who once referred to himself as an “existential dirtbag,” is not your typical billionaire businessman. He rides around in an old Subaru, surfboard atop, and in his younger years once subsisted on cans of cat food and the occasional squirrel or porcupine while climbing in the Rocky Mountains.
Chouinard recently transferred ownership of his company to a nonprofit organization and a trust, with the aim of using the company’s profits to fight climate change and protect the environment. Patagonia, a certified B Corp and California benefit corporation based in Ventura, has a longstanding commitment to the environment, donating 1% of annual sales to such causes and sourcing environmentally friendly materials. The transfer of ownership to these two entities ensures that the company will uphold these ideals in perpetuity. As Chouinard states on the Patagonia website, “Earth is now our only shareholder.”
The second philanthropist, Barre Seid, is an exceedingly private billionaire who made his fortune manufacturing electrical devices. He came into the spotlight in August of 2022, when it was uncovered that in the prior year he had donated his company Tripp Lite to a new nonprofit called The Marble Freedom Trust. The Trust, headed by the conservative activist Leonard A. Leo, seeks “to maintain and expand human freedom consistent with the values and ideals set forth in the Declaration of Independence and the Constitution of the United States.” While the organization’s mission may seem a bit nebulous, a look at Leo’s prior work provides clues as to its aims. Leo has worked with organizations involved in fighting against reproductive rights, altering voting laws, and working to appoint conservative judges to the Supreme Court.
Both Chouinard, 83, and Seid, around 90, have leveraged their fortunes in order to secure their legacies well beyond their lifetimes, taking unconventional approaches to accomplish this.
This is how the Patagonia donation was structured: The Chouinard family established two entities, the Patagonia Purpose Trust and an environmental nonprofit called the Holdfast Collective. The family donated all of the company’s voting stock to the Trust. The entirety of the company’s nonvoting stock went to the Holdfast Collective, set up as a 501(c)(4), allowing it to engage in political activities.
The Collective will be the recipient of all of Patagonia’s annual profits, an estimated $100 million per year, and “will use every dollar received to fight the environmental crisis, protect nature and biodiversity, and support thriving communities, as quickly as possible.” The Trust will be managed by the family to ensure that Patagonia upholds its values and carries through on these commitments.
The decision to transfer ownership of the company in this way did not come without its costs. The family will pay approximately $17.5 million in taxes on its donation to the Trust, and will receive no tax write-off for its donation to the Collective.
Seid’s donation was equally unusual. In January of 2021, he clandestinely donated all shares of his company to Leo and The Marble Trust. Three months later, Tripp Lite was acquired by the multinational Eaton for a sum of $1.6 billion, all of which went to The Marble Trust. The Trust is also set up as a 501(c)(4) nonprofit, and the donation represents one of the biggest to such an organization.
Although these transactions likely adhered to the letter of the law, both philanthropists have been criticized for escaping possible taxation. Seid was able to avoid paying taxes altogether. Although he wasn’t able to claim an income tax deduction from his donation to the 501(c)(4) Marble Trust, the sale of Tripp Lite after the stocks were gifted to the Trust enabled him to eliminate possible taxes of up to $400 million. In the case of Chouinard, although his family will walk away with a hefty tax bill for their donation to the Patagonia Purpose Trust, since they donated their Patagonia stock instead of selling the company, the family avoided taxes of upwards of $700 million.
But even billionaires want to make the most of their funds, so it seems logical that both would choose to maximize their donations to the causes they care most about. There is also no doubt that clever tax maneuvers such as these leave fewer funds in government coffers to meet basic needs such as education, healthcare, and pothole-free roads. However, the system as it exists is hardly one of progressive taxation. (The billionaire investor Warren Buffet famously said that his secretary was taxed at a higher tax rate than him.) Whoever has the best accountant or lawyer wins. It was reported that The Marble Trust paid upwards of $1 million in lawyer’s fees for services related to the sale of the company.
The funneling of vast fortunes to politically-oriented nonprofits also brings up another set of issues, as it runs counter to the basic democratic values of “one person, one vote.” Speaking to Bloomberg, Boston College Law School professor Ray Madoff commented, “If someone wanted to leave their votes behind after they die, we don’t let people do that,” contending that these types of organizations accomplish something akin to that. “And their money is so much more powerful than a single vote."
This outsized influence is often a source of contention.
For example, while the average voter might view Chouinard’s long history of environmental work as noble, others may object to his efforts to wield political influence more directly. In 2017, he sued the Trump administration for slashing two national monuments in Utah, and in the run-up to the 2020 election, his company sold limited-edition shorts with “VOTE THE ASSHOLES OUT” printed on the tag, a move which surely rubbed many the wrong way.
However, the divergence between megadonors and the average voter is particularly pronounced when the causes they espouse do not reflect the values of the electorate as a whole.
In the 22 years spanning from 1996 to 2018, Seid quietly gave at least $775 million, much of which went to politically unpopular causes, such as fighting efforts to expand Medicaid and widen healthcare access for low-income Americans. Surveys in states such as South Dakota, Kansas, and Alabama reveal strong bipartisan support for Medicaid expansion, which has been adopted in 39 states, both red and blue.
Seid’s support of Leo is also an endorsement of a key player in the battle against reproductive rights. Back in 2016, Leo helped then candidate Trump draw up a list of potential nominees for the Supreme Court. Trump later succeeded in appointing Neil Gorsuch (2017), Brett Kavanaugh (2018), and Amy Coney Barrett (2020), all of whom were instrumental in the Dobbs vs. Jackson Women’s Health Organization decision. A recent report by the Pew Research Center found that 57% of Americans are opposed to the Supreme Court’s decision to overturn Roe v. Wade, and 62% believe that “abortion should be legal in all or most cases.”
It is a given that in a free and democratic society, there should be room for all voices across the spectrum, politically popular or not, a principle which extends to philanthropy. However, a $1.6 billion donation will surely amplify the voice of the giver, and as Madoff pointed out, likely for generations to come. Think of it as a megaphone that makes that voice nearly two million times louder than that of the average donor, who only gives $813.
And what if that megaphone is used for more nefarious aims, like casting doubt on science or hindering efforts to protect public health?
Seid’s giving, mostly anonymous, has extended into areas that he is said to have referred to as “junk science.” In the 1970’s, he funded organizations opposing a ban on the pesticide DDT, despite widescale concerns about its effects on human and environmental health. More recently, although the broad scientific consensus is that human activities have contributed to global climate change, Seid has funded organizations promoting climate denialism.
Perhaps these types of less than altruistic motives help to explain the rise of what GrantStation’s Kevin Peters refers to as “clouds of secrecy” hanging over the nonprofit world.
But in an age of growing polarization, the way that any large donation or billionaire philanthropist is viewed will largely depend on one’s ideological leanings. As David Callahan writes in The Givers: Wealth, Power, and Philanthropy in a New Gilded Age, “If you don’t favor same-sex marriage or charter schools or shutting down coal plants, you might not be too thrilled with how some billionaires have been deploying their money—subsidized, I should add, by your own tax dollars. In many ways, today’s new philanthropy is exciting and inspiring. In other ways, it’s scary and feels profoundly undemocratic.”
More and more, people are questioning the system that gives such a loud voice to the wealthy, leaving the vast majority at the bottom of the power pyramid. Ironically, it was Chouinard’s realization that he was enmeshed in this very system that prompted his decision to donate his company to fight climate change. Speaking to the New York Times, he said, “I was in Forbes magazine listed as a billionaire, which really, really pissed me off. I don’t have $1 billion in the bank. I don’t drive Lexuses.” Reflecting on his decision, he said, “Hopefully this will influence a new form of capitalism that doesn’t end up with a few rich people and a bunch of poor people.”