On the surface it is easy to dismiss the drama as a simple case of an irresistible force meeting an immovable object. The Kochs have been spectacularly disciplined in building one of the most successful private corporations in the world, and this kind of success doesn’t come without vision, persistence, drive, and — let’s not sugarcoat it — some ruthlessness along the way. Show me any successful person or business where this isn’t true and I’ll show you a parallel universe where human nature has changed. (Though I should add here that I’ve had several small independent oil producers in the Midwest tell me that Koch Industries is a first-choice refinery, because Koch always honors the contract terms promptly and fully, with no funny business after the fact. Thus, you can see how the Kochs’ insistence on following precisely the original shareholders’ agreement is not out of character.)
Down on Massachusetts Avenue, one finds a parallel in Ed Crane, who is, above all others, responsible for building the Cato Institute into the powerhouse it has become. As Charles Murray argued on the Corner the other day, by the Lockean principle of property rights derived from the mixing of labor and capital (a concept dear to libertarians), the ownership of Cato changes from year to year, depending on the people who are currently mixing their time and treasure to keep Cato going.
A clash between the Kochs and Crane over personalities and business principles is not hard to imagine. In my very limited exposure to Charles and David Koch, I have found them to be thoughtful and genuinely pleasant people, and nothing like the Dr. Evil caricatures the Left has created. On the other hand, while Crane has always been courteous and decent to me, even when we were pitted in debate against each other, I can also see how Crane can make Steve Jobs look warm and cuddly by comparison. (I suspect Ed will regard this as a compliment.) If this were a simple personality contest, it might be easy to come down on the side of the Kochs. Yet it would be a great tragedy if Cato comes apart chiefly over a personality clash.
Fortunately it is not necessary to decide the issue in order to get at aspects of the problem of power and ideas that this controversy has raised. Even if there is truth to the charges each side is making against the other — that the Kochs wish to control or change Cato, or that Cato’s management is dismissive of the legal structure of Cato’s shareholders — this axis of the dispute does not get to the deeper issues of the dilemmas of power and ideas faced by every institution and philanthropist.
In public statements the Kochs say their only motivation is to ensure that Cato becomes “increasingly effective” and that the “original intent and vision for the organization” is preserved, adding that “they feel the shareholder structure is important to preserve donor intent.” A memo to Koch program alumni compares Cato’s disregard for the shareholder framework to President Bush’s claim that he had to abandon free-market principles in order to save the free market in the banking crisis of 2008, and, further, that they want to prevent Cato from the kind of ideological corruption that transformed the Ford Foundation, the Pew Foundation, and “others that have strayed when they deviated from their founding principles.”
But contesting a peculiar shareholder agreement because it would now allow remaining shareholders to appoint a majority of board members uncongenial to incumbent management hardly seems on par with the corruption of Pew and Ford, or President Bush’s casual abandonment of free-market principles. If a company’s management is performing poorly, appointing board members uncongenial to the incumbent management is of course perfectly reasonable in the private sector. But where is the evidence, aside from the legal dispute, that Cato’s management is performing poorly and needs to be corrected by hostile directors? And especially on the substance of Cato’s intellectual work, is there any indication that Cato is degenerating or betraying the libertarian tradition? No examples are given.