- Date of birth: November 1, 1935
- Profession: Businessperson, Chief Executive Officer
- Board member for: Koch Industries
- Spouse: Liz Koch
- Parents: Mary Robinson Koch, Fred C. Koch
- Nationality: American
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Early life, education, and career
Koch was born and lives in Wichita, Kansas, one of four sons of Mary Robinson and Fred C. Koch;[4][5] Koch's grandfather was a Dutch immigrant who settled in West Texas.[6] Koch's academic life was spent at the Massachusetts Institute of Technology. In 1957 he received a bachelor'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.[7] In 1967 he became president of his father's business, which was then a medium-sized oil firm.[8] 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%.[10]
[edit] Market-Based Management
Koch's strategy for running a business, Market Based Management (MBM), is described in his 2007 book The Science of Success.[9] Koch Industries' 2004 acquisition of Invista "pushed him to write the book" in order to reach new employees with the philosophy.[9]
In the nearly 40 years that Koch has run Koch Industries, the company's revenue increased from $70 million to $90 billion.[11]
He supports "decision rights," which Koch says empowers employees to manage assets as if they were their own.[11] 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.[11]
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."[11]
He believes that Berkshire Hathaway is another company that follows his principles of caring more about the long, rather than the short, term.[11] 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." [12]
[edit] 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.[15] Other influences on Koch include F.A. Hayek, Alexis de Tocqueville,[16] Adam Smith, Michael Polanyi,[7] 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.[17]
To Koch, "the short-term infatuation with quarterly earnings on Wall Street restricts the earnings potential of Fortune 500 publicly traded firms".[8] 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.[8]
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".[8] 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'".[18]
Koch was careful to make clear that while he often disagrees with political decisions, Koch Industries does not try to skirt them. He writes in The 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.[19]
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