Koch, pronounced “coke”, is America’s biggest private company after Cargill, another commodities titan. Charles Koch, the second son of the late founder, Fred Koch, is the undoubted boss of the firm. (Insiders joke that Koch stands for “Keep old Charlie happy”.) A younger brother, David, acts as a loyal lieutenant. Two other brothers, Fred junior (the oldest) and Bill (David’s twin), have a more complex relationship with the company that has helped to make them two of America’s richest men. (via Schumpeter: Dissecting the Kochtopus | The Economist)
- Charles runs Koch according to the principles of something he calls market-based management. Employees are expected to read his 2007 manifesto, “The Science of Success”, and attend a two-day seminar on the theory at an in-house academy. Its aim is to bring the efficiency of markets into the company’s internal workings. Competition between different business units and employees is encouraged, and all workers are given broad permission to make decisions without referring upwards.
- The system is highly democratic. Koch has an unusually “flat” organisational structure for a company its size. Workers can earn more than their bosses. High-school-educated farm boys from Kansas can rise faster than Ivy League MBAs and end up running multibillion-dollar divisions. It is also ruthlessly Darwinian. For those who succeed, bonuses running into six or seven figures are the reward; for those who fail, there is no hiding-place.
- The Kochs are also at the heart of one of America’s most powerful political machines. Most businesspeople take a strategic approach to politics: they lobby for special privileges and contribute to both sides of the political aisle. The Koch brothers have ideology in their DNA. Fred senior was a leading light in the anti-communist John Birch Society. David ran as the Libertarian Party’s vice-presidential candidate in 1980, and Charles and David helped to raise an estimated $400m for efforts to defeat Barack Obama’s re-election bid in 2012. Critics fret about the “Kochtopus”—the Kochs and the network of institutions that they finance, ranging from the Cato Institute, an august think-tank in Washington, DC, to Tea Party organisations like Americans for Prosperity.
- Koch Industries has also demonstrated a striking ability to reform itself. Prodded by the spate of legal suits in the late 1990s, the firm introduced a big safety programme. Charles’s corporate mantra was “10,000% compliance with all laws and regulations”, by which he meant 100% compliance from 100% of employees. The company sold the bulk of its pipeline operations and refocused on the far less regulated area of trading commodities and energy. It also hired a small army of former federal-government prosecutors and regulators to help guard the hen house. After wasting millions of dollars trying to defeat Mr Obama in 2012, Charles and David are now applying their re-engineering skills to their gigantic political operation. What does not kill the Kochtopus only makes it stronger.