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Tuesday, 30 September 2014

Charles de Ganahl Koch

Charles Koch

Charles Koch
Born Charles de Ganahl Koch
November 1, 1935 (age 78)
Wichita, Kansas, USA
Residence Wichita, Kansas, USA
Ethnicity Dutch (grandfather)
Alma mater MIT
Occupation Chairman and CEO of Koch Industries
Net worth Increase US$ 41.6 billion (July 2014)
Chase Koch
Elizabeth Koch
Mary Robinson
Fred C. Koch
Frederick R. Koch
David H. Koch
Bill Koch

Charles de Ganahl Koch (/ˈkoʊk/; born November 1, 1935) is an American businessman and philanthropist. He is co-owner, chairman of the board, and chief executive officer of Koch Industries, while his brother David H. Koch serves as Executive Vice President. Charles and David each own 42% of the conglomerate. The brothers inherited the business from their father, Fred C. Koch, then expanded the business. Originally involved exclusively in oil refining and chemicals, Koch Industries now includes process and pollution control equipment and technologies; polymers and fibers; minerals; fertilizers; commodity trading and services; forest and consumer products; and ranching. The businesses produce a wide variety of well-known brands, such as Stainmaster carpet, the Lycra brand of spandex fiber, Quilted Northern tissue and Dixie Cup.

In 2007, Koch's book The Science of Success was published. The book describes his management philosophy, referred to as "Market-Based Management". In 2012, a series of web videos was compiled into the film Koch Brothers Exposed, accusing Koch Industries of environmental and political misdeeds.

Koch Industries is the second-largest privately held company by revenue in the United States according to a 2010 Forbes survey In February 2014, Koch was ranked 9th richest person in the world by Hurun Report with an estimated net worth of $36 billion. Previously, in October 2012 he was ranked the 6th richest person in the world with an estimated net worth of $34 billion—according to the Bloomberg Billionaires Index—and was ranked 18th on Forbes World's Billionaires list of 2011 (and 4th on the Forbes 400), with an estimated net worth of $25 billion, deriving from his 42% stake in Koch Industries.

Koch supports a number of free market-oriented educational organizations, including the Institute for Humane Studies and the Mercatus Center at George Mason University. He also contributes to the Republican Party and candidates, Libertarian groups, and various charitable and cultural institutions. He co-founded the Washington, DC-based Cato Institute. Through the Koch Cultural Trust, founded by Charles Koch's wife, Elizabeth, the Koch family has also funded artistic projects and creative artists.

Early life, education, and career

Koch was born and lives in Wichita, Kansas, one of four sons of Mary (née Robinson) and Fred Chase Koch. Koch's grandfather, Harry Koch, was a Dutch immigrant who settled in West Texas, founded the Quanah Tribune-Chief newspaper, and was a founding shareholder of Quanah, Acme and Pacific Railway.

Koch was educated at the Massachusetts Institute of Technology. He is a member of the Beta Theta Pi fraternity. He received a Bachelor of Science in General engineering in 1957, a Master of Science in Mechanical engineering in 1958, and a second Master of Science in Chemical engineering in 1960. After college, Koch started work at Arthur D. Little, Inc. In 1961 he moved back to Wichita to join his father's business, Rock Island Oil & Refining Company. In 1967 he became president of the business, which was then a medium-sized oil firm. In the same year, he renamed the firm Koch Industries in honor of his father. In 2006, Koch Industries generated $90 billion in revenue, a growth of 2000 times over, which represents an annual compounded return of 18%. As of 2014, Koch was worth approximately $41.3 billion (in 2013 $36 billion) according to the Forbes 400 list.

Koch has been a Director of Entrust Financial Corp. since 1982 and Director of Koch Industries Inc. since 1982. He is Director of Invista and is a Director of Georgia Pacific Corp. Koch founded or helped found several organizations, including the Cato Institute, the Institute for Humane Studies and the Mercatus Center at George Mason University, the Bill of Rights Institute, and the Market-Based Management Institute. He is a member of the Mont Pelerin Society.

Market-Based Management

Koch's business philosophy, Market-Based Management (MBM), is described in his 2007 book The Science of Success. In an interview with the Wichita Eagle, he said that he was motivated to write the book by Koch Industries' 2004 acquisition of Invista so he could give new employees a "comprehensive picture" of MBM. According to the website of the Market-Based Management Institute, which Koch founded in 2005, MBM is "based on rules of just conduct, economic thinking, and sound mental models", harnessing the dispersed knowledge of employees just as markets harness knowledge in society. "It is organized in and interpreted through five dimensions: vision, virtue and talents, decision rights, incentives, and knowledge processes." In the book, Koch attempts to apply F. A. Hayek's spontaneous order theory and Austrian entrepreneurial theory, such as that of Mises and Israel Kirzner, to organizational management. T. Boone Pickens argues that Koch's business success lends credibility to the book's concept.

Views and intellectual development

Charles Koch is a libertarian. The presidents he most admires include George Washington, Grover Cleveland, and Calvin Coolidge. He grew deeply disappointed by what he saw as the economic and foreign policy failures of the presidency of George W. Bush—in part because he felt that it was these failures that ultimately paved the way for more drastic governmental overspending and decline of the free enterprise system, which he believes will prove detrimental to long-term social and economic prosperity. He is opposed to corporate welfare and 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." He said he worries about too much governmental regulation and wrote that, "We could be facing the greatest loss of liberty and prosperity since the 1930s."

Influences on Koch include Alexis de Tocqueville, Adam Smith, Michael Polanyi, Joseph Schumpeter, Julian Simon, Paul Johnson, Thomas Sowell, Charles Murray, Leonard Read, and F.A. Harper. In an interview with the American Journal of Business, Koch said he owes "a huge debt of gratitude to the giants who created the Austrian School [of economics]. They developed principles that enabled me to gain an understanding of how the world works, and these ideas were a catalyst in the development of Market-Based Management." In particular, he expresses admiration for Ludwig von Mises’ book Human Action, as well as the writings of Friedrich Hayek. Koch said "the short-term infatuation with quarterly earnings on Wall Street restricts the earnings potential of Fortune 500 publicly traded firms". He also considers public firms to be "feeding grounds for lawyers and lawsuits", with regulations like Sarbanes–Oxley only increasing the earnings potential of privately held companies.

Koch disdains "big government" and the "political class". He believes 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'".

In an April 2011 op-ed for the Wall Street Journal Koch wrote: “Government spending on business only aggravates the problem. Too many business have successfully lobbied for special favors and treatment by seeking mandates for their products, subsidies (in the form of cash payments from the government), and regulations and tariffs to keep more efficient competitors at bay. Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.” His opposition to corporate welfare includes lobbying for the end to ethanol subsidies despite the fact that Koch Industries is a major ethanol producer. He is quoted as saying: “The first thing we’ve got to get rid of is business welfare and entitlements.”

Regarding government regulation, Koch has written that he expects his employees to cooperate fully with the law, regardless of personal views:

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.

In an April 2014 Wall Street Journal op-ed, Koch wrote that "...the fundamental concepts of dignity, respect, equality before the law and personal freedom are under attack by the nation's own government." He criticized the Obama Administration, saying that its "central belief and fatal conceit" is that people are not capable of running their own lives. "This is the essence of big government and collectivism," he wrote. He cited the "current health care debacle" as an example of disastrous government control. He complained that he had been the victim of "character assassination." Politifact rated some of Koch's claims about his company's environmental record as "mostly false," saying some of the claims "are at least partially accurate" but that "the EPA was focusing on very limited aspects of Koch Industries and not the company as a whole" and that "Koch Industries has a history with the EPA that was completely glossed over, and it includes multiple violations of rules."

Philanthropic and political activities

See also: Political activities of the Koch brothers
Koch funds and supports libertarian and free-enterprise policy and advocacy organizations such as Americans for Prosperity and the Cato Institute, which he co-founded with Edward H. Crane and Murray Rothbard in 1977. He is a board member at the Mercatus Center, a market-oriented research think tank at George Mason University.

In 2008, Koch was included in Businessweek's list of top 50 American givers. Between 2004 and 2008, Koch gave $246 million, focusing on "libertarian causes, giving money for academic and public policy research and social welfare." Koch was awarded an Honorary Doctorate from George Mason University in recognition of his financial support "through scholarships, faculty recruitment and research grants". Since the 1980s the Koch foundations have "given more than $100 million” to public policy organizations, among them the Heritage Foundation and Americans for Prosperity. A leaked 2012 fundraising plan indicates that the Charles G. Koch Charitable Foundation contributed $25,000 to The Heartland Institute in 2011 and was expected to contribute $200,000 in 2012.

Koch's philanthropic activities have focused on research, policy, and educational projects intended to advance free-market views. He has underwritten scholarships and financed the research of economists such as James Buchanan and Friedrich Hayek. He has also “supported efforts to inspire at-risk young people to consider entrepreneurship, to teach American students the principles of limited government, and to connect recent graduates with market-oriented organizations, in an effort to launch their careers in public policy.”

Two works that have been especially influential upon Koch's philosophy are Ludwig Von Mises' Human Action and F. A. Harper's Why Wages Rise. After reading Harper's book, Koch became involved with Harper's Institute for Humane Studies, of which he became a principal supporter. He has been on the board of IHS since 1966. Since the 1980s, IHS has been increasingly interested in aiding the careers of aspiring educators, journalists, and policy professionals with an interest in classical liberal thought. Among other projects, the IHS runs the Charles G. Koch Summer Fellow Program, which “has supported more than 900 students during eight-week internships at public policy organizations, both in D.C. and around the country.” In addition, almost 200 institutions of higher education in the U.S. are funded by the Charles Koch Foundation. What all the Koch-funded programs have in common is an interest in studying free societies with an eye to understanding how economic freedom benefits humanity.

Through the Koch Cultural Trust, founded by Charles Koch's wife, Elizabeth, the Koch family has provided financial support to promising artists in a variety of fields. More than $1.7 million in grants have been awarded to programs and individuals with Kansas roots.

Koch supported his brother's candidacy for vice president on the Libertarian Party ticket in 1980. 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.

Charles Koch looks upon the Tea Party movement favorably. "The way it's grown, the passion, and the intensity, was beyond what I had anticipated," he told an interviewer. He's funded groups opposed to Barack Obama's administration.

Koch has given money to support public policy research focused on "developing voluntary, market-based solutions to social problems." He has given to the Bill of Rights Institute, a non-profit group that educates teachers, students, and others about the Bill of Rights. He has also given to the Youth Entrepreneurs Kansas, an organization that teaches business skills to at-risk youth in Kansas schools. Koch has also supported the Berkeley Earth Surface Temperature project, a scientific effort to compile an open database of the Earth's surface temperature records.

In 2002, Koch Industries donated $6 million to renovate the Wichita State University basketball arena. The gift was given in honor of Koch, and the arena was subsequently renamed the Charles Koch Arena. In 2011, Koch was awarded the William E. Simon Prize for Philanthropic Leadership. The award honors "the ideals and principles which guided William E. Simon's giving, including personal responsibility, resourcefulness, volunteerism, scholarship, individual freedom, faith in God, and helping people to help themselves."

Personal life

Koch has been married to his wife Liz since 1972 and has two children. Charles and his three brothers have all suffered from prostate cancer. Koch "rarely grants media interviews and prefers to keep a low profile".

TIME 100 Most Influential of 2011

TIME magazine included Charles and David Koch among the most influential people of 2011. According to the magazine, the list includes "activists, reformers and researchers, heads of state and captains of industry." The article describes the brothers' commitment to free-market principles, the growth and development of their business, and their support for liberty-minded organizations and political candidates


Koch has received various awards and honors, including:

  • Honorary Doctor of Science, from George Mason University, for his continued support of the economics program at GMU
  • Honorary Doctor of Commerce from Washburn University
  • Honorary Doctor of Laws from Babson College
  • President's Medal from Wichita State University in 2004
  • The Adam Smith Award from the American Legislative Exchange Council
  • The 1999 Directors' Award for Global Vision in Energy from the New York Mercantile Exchange
  • The 1999 Governor's Arts Patrons Award from the Kansas Arts Commission
  • The 2000 National Distinguished Service Award from The Tax Foundation
  • The Spirit of Justice Award from The Heritage Foundation
  • The Entrepreneurial Leadership Award from the National Foundation for Teaching Entrepreneurship
  • The Brotherhood/Sisterhood Award from the National Conference of Christians and Jews
  • The Distinguished Citizen Award from the Boy Scouts of America
  • The Free Enterprise Award from The Council for National Policy
  • The Herman W. Lay Memorial Award from the Association of Private Enterprise Education
  • The Distinguished Service Citation from the University of Kansas
  • Honorary Life Member in the Washburn Law School Association
  • The Distinguished Citizen Award from Kansas State University
  • Induction into the Kansas Oil and Gas Hall of Fame
  • Induction into the Wichita and Kansas Business Halls of Fame
  • Spirit of Excellence Award from The Urban League of Wichita
  • Outstanding Humanitarian Award from the Greater Wichita Chapter of the National Society of Fundraising Executives
  • Wichita City Medallion
  • Wichita State University Entrepreneur in Residence
  • Wichita District Minority Small Business Advocate of the Year
  • The Individual Recognition Award from the Wichita/Sedgwick County Arts and Humanities Council
  • The Uncommon Citizen Award from the Wichita Chamber of Commerce
  • The 2011 William E. Simon Prize for Philanthropic Leadership from the Philanthropy Roundtable
  • In 2012, ExecReps ranked him number two on their Top Chief Executive List
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