Charles G. Koch

Charles de Ganahl Koch (pronounced /ˈkoʊk/; born November 1, 1935) is chairman of the board and chief executive officer of Koch Industries, Inc. Koch and his brother David built the family business into the second largest privately held company by revenue in the United States, and as of 2010 his personal worth was about $21.5 billion. His strategy for running a business, Market Based Management (MBM), is described in his 2007 book The Science of Success, which promotes long-term planning for success even at the expense of short-term gains. Koch is a libertarian and his philanthropy includes co-founding the Cato Institute, theInstitute for Humane Studies, and the Mercatus Center.

Early life, education, and career

Koch was born and lives in Wichita, Kansas, one of four sons of Mary Robinson and Fred C. Koch;Koch's grandfather was a Dutchimmigrant who settled in West Texas. Koch's academic life was spent at the Massachusetts Institute of Technology. In 1957 he received abachelor's degree in general engineering, a master's degree in mechanical engineering in 1958, and a masters degree in chemical engineering in 1960.^[4] Koch first started working at Arthur D. Little, Inc.; Koch moved back to Wichita and joined Rock Island Oil & Refining Company in 1961. In 1967 he became president of his father's business, which was then a medium-sized oil firm. In the same year, he renamed the firm Koch Industries in honor of his father.^[9] By 2006, Koch Industries had a $90 billion revenue and had grown by more than 2000 times under Koch with an annual compounded return of 18%.

Market-Based Management

Koch's strategy for running a business, Market Based Management (MBM), is described in his 2007 book The Science of Success. Koch Industries' 2004 acquisition of Invista "pushed him to write the book" in order to reach new employees with the philosophy.

In the nearly 40 years that Koch has run Koch Industries, the company's revenue increased from $70 million to $90 billion.

He supports "decision rights," which Koch says empowers employees to manage assets as if they were their own. Koch holds his employees to a high standard after Koch was required to pay $30 million in government fines for an oil spill. "If somebody intentionally commits a compliance violation, they're gone," he told The Houston Chronicle.

Too many companies, Koch says, focus on short-term gains rather than their long-term success. In Koch's view, companies ought to reinvest in their earnings in their future, and shareholders should "be willing to forgo larger dividends in the short term to enable the growth that would lead to much greater dividends over the long term." 

He believes that Berkshire Hathaway is another company that follows his principles of caring more about the long, rather than the short, term. For that reason, he's against going public, saying that Koch Industries would go public "over my dead body." He saluted people running public companies. "My hat is off to people running public companies because there's such pressure to keep the stock price up. It's such a blessing being private." 

Views

Koch's views are described as libertarian. He told the National Journal that his "overall concept is to minimize the role of government and to maximize the role of private economy and to maximize personal freedoms."^[13] Today, he worries about too much governmental regulation, writing, "We could be facing the greatest loss of liberty and prosperity since the 1930s."^[14]

Philosophically Koch owes "a huge debt of gratitude to the giants who created the Austrian School" of economics.^[7] Koch was especially impressed by Ludwig von Mises' Human Action, and sought to apply its ideas to his business practices early in his career. Other influences on Koch include F.A. Hayek, Alexis de Tocqueville^[16], Adam Smith, Michael Polanyi, Joseph Schumpeter, Julian Simon, Paul Johnson, Thomas Sowell, Charles Murray, Leonard Read, and F.A. Harper.^[8] Brian Doherty, author of Radicals for Capitalism, and an editor of Reason, stated Robert LeFevre was an anarchist (autarchist) figure who won Koch's approval.

To Koch, "the short-term infatuation with quarterly earnings on Wall Street restricts the earnings potential of Fortune 500 publicly traded firms". Koch also considers public firms to be "feeding grounds for lawyers and lawsuits", with regulations like Sarbanes–Oxley only increasing the earnings potential of private firms.

In an interview article for the Wall Street Journal, Stephen Moore writes "Charles Koch—no surprise—disdains government and the political class."^[8] Koch thinks the billionaires Warren Buffett and George Soros, who fund organizations with different ideologies, "simply haven't been sufficiently exposed to the ideas of liberty" Koch thinks "prosperity is under attack" by the Obama administration and "warns of policies that 'threaten to erode our economic freedom and transfer vast sums of money to the state'".

Koch was careful to make clear that while he often disagrees with political decisions, Koch Industries does not try to skirt them. He writes inThe Science of Success that in light of increased regulation,

We needed to be uncompromising [with our workforce], to expect 100 percent of our employees to comply 100 percent of the time with complex and ever-changing government mandates. Striving to comply with every law does not mean agreeing with every law. But, even when faced with laws we think are counter-productive, we must first comply. Only then, from a credible position, can we enter into a dialogue with regulatory agencies to demonstrate alternatives that are more beneficial. If these efforts fail, we can then join with others in using education and/or political efforts to change the law.

Political activities

Koch funds and supports libertarian and free-market policy and advocacy organizations such as the Cato Institute,^[18] which he co-founded with Edward H. Crane and Murray Rothbard in 1977,^[20] and is a board member at the Mercatus Center, a market-oriented research think tank at George Mason University. Since the 1980s the Koch foundations have "given more than $100 million” to such organizations, among these other conservative think tanks like the Heritage Foundation, as well as more recently funding tea party groups like Americans for Prosperity. Koch supported his brother's candidacy for vice president on the Libertarian Party ticket in 1980.^[17] After the bid, Koch told a reporter that conventional politics "tends to be a nasty, corrupting business ... I’m interested in advancing libertarian ideas". In addition to funding think tanks, Charles and David also support libertarian academics and Koch funds the Charles G. Koch Summer Fellow Program through the Institute for Humane Studies which recruits and mentors young libertarians. Koch also organizes twice yearly meetings of Republican donors.

New Yorker article by Jane Mayer

In the August 30, 2010, New Yorker, Jane Mayer writes that "As their fortunes grew, Charles and David Koch became the primary underwriters of hard-line libertarian politics in America."^[17] The article states the Koch brothers fund a multitude of groups opposed to government in general and Obama administration policies in particular.

Erick Erickson, founder of the conservative blog site RedState and CNN contributor, wrote that he believes the New Yorker piece is part of an attempt by Obama and left wing journalists to discredit the Kochs as part of a "character assassination."

Ira Stoll says that Charles Lewis is not an objective "nonpartisan" as is said in the article; he says that Lewis's Center for Public Integrity is funded by George Soros's Open Society Institute and Barbra Streisand's Streisand Foundation, and that Mayer simultaneously praises Soros's more extensive political spending while criticizing the Kochs.^[24]

Andrew Sullivan, writing for the Daily Dish at The Atlantic magazine, wrote that while he respected Mayer, "as best I can tell, the Koch brothers are legitimately upset by some aspects of the piece, and anyone who reads it should also look at the rebuttals from libertarians who are persuasively pushing back against some of its conclusions."^[25]

Koch Industries posted an extensive refutation on their website that acknowledged funding libertarian and conservative causes,^[26] and identified several inaccuracies and distortions in the Mayer article, as well as Mayer's failure to identify several conflicts of interest among the people she quoted.

Criticism by Obama administration

Charles, along with his brother, David, have been criticised by members of the Obama administration for their political spending. In a September 23, 2010 op-ed in The Washington Post, Obama senior adviser David Axelrod accused Americans for Prosperity of being a "front group" that was "hijacking our elections" by "promot[ing] Republican candidates who support their right-wing agenda and corporate interests."^[28] The article also compared the brothers unfavorably to past robber barons. An alternative interpretation is that the Kochs are acting against their economic interest in promoting "getting government out of the business of running the economy. If they were truly interested in protecting their profits, they wouldn’t be spending so much to shrink government; they’d be looking for a bigger slice of the pie for themselves. Their funding is devoted to promoting free-market capitalism, not crony capitalism."^[29]

Philanthropy

Koch has given money to support educational, academic and public policy research focused on "developing voluntary, market-based solutions to social problems."^[30] He has given to the Bill of Rights Institute, a non-profit that educates teachers, students, and others about the Bill of Rights.^[30][31] He has also given to the Young Entrepreneurs Kansas, an organization that teaches business skills to at-risk youth in Kansas schools.

Personal life

As of 2010, Koch was worth approximately $21.5 billion according to the Forbes 400 list. Koch "rarely grants media interviews and prefers to keep a low profile".^[9] Koch has been married to his wife Liz for 38 years and has two children

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