Building a Forever Company

How Purpose Trusts Ensure Mission Outlives Founders

While the big money boys of the Silicon Valley set are trying to figure out how to live forever, there’s a certain class of mission-driven founders who are finding ways to forge their company’s purpose in perpetuity.

They’re doing that through what’s called a “perpetual purpose trust.” 

You may have heard about this legal structure a couple of years ago when Yvon Chouinard announced that he had given away his company, Patagonia.  He did this through a sophisticated structure where his family’s shares were contributed to a trust. The Patagonia Purpose Trust is now charged with carrying out the purpose of Patagonia.  This action made big news around the globe.

The real OG in the perpetual purpose trust (PPT) world is another OG – Organically Grown Company (OGC) of Eugene, Oregon.  They pioneered this steward ownership structure in 2018.

In brief, here’s how PPTs work.

Let's start with traditional trusts. A regular trust manages assets that are spelled out by a legally binding agreement, and then distributes assets to beneficiaries over a set period. You've heard of the term "trust funders," right?

A PPT riffs on this as a starting point.  In a PPT, ownership of the company is transferred to a trust that is constructed to exist indefinitely – in essence, forever – and to serve a specific organizational purpose and not as a vehicle to benefit individual owners or heirs.

A trust stewardship committee generally is formed (made of humanoids) to ensure that the trust and its operating entity are hewing to the purpose.

PPT’s were developed as a vehicle for organizational transitions, often occasioned by the succession planning of founders who wanted to ensure that their baby – their company – would continue pursuing a mission without the potential interference of new owners, in essence, benefiting a purpose rather than a person.

The founders’ shares are typically purchased by the trust, which often finances this through debt, equity, or a combination of both. (Chouinard's family simply donated its Patagonia stock to the PPT.)

While the number of PPTs is still small, a growing number of companies are adopting this structure as their owners retire, from the fabled deli at Zingerman’s of Ann Arbor, MI, to the amazing baked goods of Grand Central Bakery in the Pacific Northwest.

And there’s my favorite, Concept2, the Vermont-based manufacturer of indoor rowing machines and other exercise equipment, which became a PPT earlier this year.  (I’ve been rowing a Concept 2 for four decades, and you will find a great listen in their story on How I Built This with Guy Raz, during which time they were in the process of determining an appropriate succession vehicle.)

And lest you think this is just a purpose product for “woke” companies, the conservative retailer Hobby Lobby has become a stewardship trust, a near-cousin to PPTs.

You can find a business directory of PPTs and other trust-owned companies here.

If you’d like to learn more about PPTs, I’d recommend contacting Purpose Owned – which is a consulting network of pro’s in the PPT space:  Natalie Reitman-White of Purpose Owned, Peter Koehler of Stronghold Ownership, and Alex Martinez of Foreground Group.

And there's Purpose Trust Ownership Network, a new nonprofit "dedicated to supporting the growth of purpose trust ownership and employee ownership trusts in the United States."

Godspeed, friends.

Russ

💬 Think About It

"Instead of 'going public,' you could say we’re 'going purpose.' Instead of extracting value from nature and transforming it into wealth for investors, we’ll use the wealth Patagonia creates to protect the source of all wealth." Yvon Chouinard, founder, Patagonia

💥 Quick Hits

• A BIG shout-out – Thanks go to Kim Allchurch-Flick of Mighty Epiphite in Portland, OR, for joining as a paid supporter. Can't do it without your help! 🙏
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