In August, I posted a trio of diaries about a pair of brothers who are arguably Howie Rich's two most successful friends, Charles and David Koch, the owners of Koch Industries of Wichita, Kansas. Rich and the Kochs became associated in the 1970s during an ill-fated attempt to take over the National Libertarian Party from the inside. In spite of the public promise of continued funding from David Koch if an anointed slate was elected at convention in 1983, party delegates unceremoniously rejected the wing that included Rich, the Kochs, Eric O'Keefe and Leslie Graves, Ed Crane and others. So it vacated the party and, afterward, various individuals and combinations of them established their own de facto political party structure, sans the bother of delegates, through a nearly inscrutible web of committees, institutes, foundations and university centers - and most recently, a new strain of state-based operatives.
In our introductory text, we explored the ties that bind Rich to the Kochs through their Libertarian experience and the empire-building that followed. In Part I proper of our Koch survey, we learned a little more about Charles and David Koch, the low-profile, multi-billionaire owners of Koch Industries, their family, their history in business and in Libertarian ideology; their penchant for opening special-issue think tanks, institutes and centers with Roman and Latin names; and their long, invisible reach across the nation, around the world, throughout our government, and in a lot of corners of American society's consumer culture. In Part II, we looked at which political candidates, parties and causes are supported by the Kochs - with only a couple of surprises - and what they're well-known for besides counting their money by the metric ton and shoveling it to conservative interests.
Though I pledged to deliver Part III in a couple of days, constant reader, those couple of days became a couple of months as Rich himself and his lesser lights dominated the headlines with their so-called Taxpayer Bill of Rights and their eminent-domain/peek-a-boo/regulatory-takings ballot measures across the nation. That's been a theme park ride, and it's not finished yet. Nonetheless, Part III is delivered unto you.
To refresh the memory, check out our prologue here http://www.dailykos.com/... Part I proper here http://www.dailykos.com/... and Part II here http://www.dailykos.com/....
If we're all strapped in, onward we go.
First, though it's a nasty business, we need to get this out of the way in order to establish a clean slate. The original report comes from CBS News, dated November 27, 2000, and it's titled "Blood and Oil," found here http://www.cbsnews.com/....
"A former employee says the brother who controls the company grew rich through fraud and theft, stealing from the taxpayers of the United States. Unfortunately, for Koch Industries, that disgruntled former employee was Bill Koch, one of the Koch brothers. Koch says that Koch Industries engaged in `(o)rganized crime. And management driven from the top down'."
"I did not want my family, my legacy, my father's legacy to be based upon organized crime," Bill Koch told CBS's "60 Minutes II" correspondent Scott Pelley.
"When Bill Koch's father, Fred Koch, died in 1967, he passed to his sons both the oil company he created and a bit of wisdom - stand up for each other. They took the company - not the advice. For the Koch family, the fight began in 1980. Bill tried to take control of the company, he failed and was forced out by his older brother, Charles - Koch's Chief Executive Officer. Koch Industries told 60 Minutes II that Bill `has clearly decided to destroy what he cannot control'."
Specifically, Bill's charge was that Charles stole oil "from beneath Indian reservations and federal lands - places like national forests. Oil under federal lands belongs to the public. Koch Industries was the middleman - buying oil from the government at the well - then selling it to refineries. Bill Koch says that the company took more oil than it paid for by cheating on measurements."
"Bill Koch filed a lawsuit in federal court claiming that much of the oil collected by Koch Industries was stolen from federal lands. At the trial, 50 former Koch gaugers testified against the company, some in video depositions. They said Koch employees had a name for cheating on the measurements. `We in the company referred to it as the Koch Method because it was a system for cheating the producer out of oil,' said one of these gaugers, Mark Wilson."
"Charles Koch, head of the company, testified that his gaugers weren't stealing, they were making adjustments to compensate for irregularities like sludge or water in the tank. `There's always a problem of accuracy in the oil field in measurement,' says Charles Koch."
"The company used the Koch method with virtually all its customers. In the 1980's alone, Koch records show those so-called adjustments brought the company 300 million gallons of oil it never paid for. And it was pure profit. Bill Koch says that profits from that oil were a minimum of $230 million."
"In a written statement, Koch blames its problems on Bill Koch - calling him a `disgruntled family member' who has waged a `personal vendetta through lawsuits and the media against his brothers' company'."
"But in December 1999, the jury found that Koch Industries did steal oil from the public and lied about its purchases - 24 thousand times. Former EPA administrator Carol Browner announced in 2000 that she was hitting Koch Industries with the largest civil penalty in the history of the federal Clean Water Act: a $30 million fine. She said, Koch Industries spilled over 3 million gallons of crude oil in six states. Koch pipelines make up the largest oil and gas network in the nation. The EPA complaint targeted more than 300 oil spills, some poisoning fisheries and drinking water."
"In a statement, Koch Industries claims that it has spent a billion dollars on environmental improvements and reduced leaks by 96 percent. The company urged us to look at its record at the federal Office of Pipeline Safety. We did and discovered that Koch's records at OPS look good. But we also found that OPS doesn't cover more than half of Koch's lines - including the lines that leaked."
" `Koch Industries has a philosophy that profits are above everything else', says Bill Koch."
In an August 2001 update, CBS reported this: "In May, 2001, Bill Koch and Koch Industries announced a legal settlement of all their disputes, effectively putting an end to the two-decade family feud. The settlement calls for Koch Industries to pay $25 million in penalties to the U.S. government for improperly taking more oil than it paid for from federal and Indian lands. About a third of it goes to Bill Koch or bringing the lawsuit. Koch Industries has faced other troubles with the government since the original broadcast in November. In April, Koch's Petroleum Group was fined 20 million dollars after it released huge amounts of cancer-causing benzene from a Texas refinery and then tried to cover it up."
With all litigation ended, all fines remitted and all accounts settled, Koch Industries had a clean slate once again. And that brings us to February 2004, when Koch Cellulose, a subsidiary of Koch Industries, bought some "non-integrated fluff and market pulp operations," namely mills and stock in Brunswick, Georgia, and New Augusta, Mississippi, from Georgia-Pacific for $610 million. The deal included a "short-line railroad servicing the New Augusta mill and the assets of two international sales offices," according to the Georgia-Pacific press release posted here http://www.gp.com/....
For Koch Industries, this deal may well have been small-fry; we cannot know because Koch remains a privately-owned company, so there are no shareholders, no quarterly reports, no prospecti. It certainly was small compared to its $4.2 billion acquisition of DuPont's Invista in the same year, which was KI's largest acquisition to date. But the negotiation with Georgia-Pacific's CEO "Pete" Correll had clearly been pleasant, and the result was found satisfactory to both interests, because representatives of Koch Industries and Georgia-Pacific were back at the table within 18 months. This time, however, they weren't discussing "fluff."
"Georgia-Pacific, a paper company with operations in Wisconsin that makes Dixie cups and Brawny paper towels, agreed on Sunday to be sold for $13.2 billion to Koch Industries, a family-controlled conglomerate that will become the nation's largest privately held company," reported Andrew Ross Sorkin of the New York Times on November 13, 2005.
"With the addition of Georgia-Pacific, which will become a unit of Koch, the company's revenue will exceed $80 billion, and it will have more than 80,000 employees around the world," Sorkin wrote here http://www.jsonline.com/....
There was only one wrinkle left to be ironed out from Georgia-Pacific's side, Sorkin wrote. "Georgia-Pacific, with about 40% of the commercial tissue market by volume and more than $1.4 billion in sales, is anchored by its Broadway mill located east of Lambeau Field in Green Bay. Acquired through the buyout of Fort James Corp. in 2000, the mill employs about 2,100 workers at an average pay of $45,000. Georgia-Pacific also has a corporate office there with a staff of 550," he said. "Georgia-Pacific announced last month it is cutting 468 jobs in Green Bay. But at the same time, it said it's investing $130 million in new machinery where those workers have been - the former Fort Howard Corp. mill that specializes in toilet paper, napkins and paper towels used in hotels, restaurants and hospitals."
But the news from Georgia-Pacific's corporate headquarters was all good, according to the press release issued with a dual dateline - Atlanta and Wichita - and posted here http://www.gp.com/.... "The company will continue to operate as Georgia-Pacific from its Atlanta headquarters," it declared.
To make it official, "Georgia-Pacific Corp. (NYSE: GP) and Koch Industries, Inc., today announced they have reached a definitive agreement for Koch Forest Products, Inc., a wholly owned Koch subsidiary, to make a $48 per share cash tender offer for all shares of Georgia-Pacific. The transaction has been unanimously approved by the boards of directors of Georgia-Pacific and Koch. The transaction has an equity value of $13.2 billion and a total enterprise value of $21 billion, including all Georgia-Pacific debt. The price to Georgia-Pacific shareholders represents a premium of 39 percent based on the closing price of Georgia-Pacific common stock on Nov. 11."
Koch Industries's own website affirmed Georgia-Pacific's special status as a new subsidiary: "Philosophically and culturally, Georgia-Pacific will likely grow in ways proven successful over the years at Koch companies - based on the fact that the company will be a subsidiary of Koch Industries, assuming successful completion of this merger. However, it is important to remember that Georgia-Pacific will operate independently," it stated here http://www.kochnews.com/....
On the same day that Sorkin published his account in the New York Times, Koch Industries issued a message to current employees of Georgia-Pacific. "We made this step based on our positive experience with the pulp business we acquired from Georgia-Pacific in 2004. That acquisition demonstrated to us the quality of Georgia-Pacific's people and competitively advantaged facilities, and the value and opportunities that can be created by combining our capabilities," it read here http://www.kochnews.com/.... "
"As a private company with revenues in excess of $60 billion and a history of reinvesting 90 percent of its earnings, we have the flexibility and resources to pursue strategies and opportunities that we couldn't as a public company," it continued. "Our history fully illustrates our focus on growing - and creating long-term value. In the past 40 years, our company has grown 1,600-fold, or 15 times the growth of the stock market. We accomplished this by focusing on reinvestment and growth and the application of Market Based Management, our management philosophy. MBM stresses value creation, entrepreneurship, experimental discovery, waste elimination and rewarding employees for their contributions."
"There will obviously be changes. However Pete Correll has agreed to stay on the board and be very involved in the transition. We have no plans to change your name or move your headquarters."
Likely, most Georgia-Pacific employees had never heard of Market Based Management, but the philosophy adapted and revised by Charles Koch himself is well-known among the titans of the business community. But let's not get ahead of ourselves.
The business community reacted with instant buzz.
"The firm's announced acquisition of debt-ridden forestry products giant Georgia-Pacific for $13.2 billion will further extends its empire's revenues to $80 billion," wrote Oligopoly Watch here http://www.oligopolywatch.com/... on November 15. "Georgia-Pacific, which used to be a lumber company, had retreated from that struggling industry recently, selling off its forests and lumber mills. The company is now the world's largest producer of paper products, including cups (Dixie-Cups), bath tissue (Quilted Northern), and paper towels (Brawny). It also has a strong position in cardboard. In addition, it is strong in building products and general-use printing and office paper."
The Atlanta Journal-Constitution, Georgia-Pacific's hometown newspaper, predicted an expansion of Georgia-Pacific's profile in government, thanks to Charles Koch's connections. Koch had hired George W. Bush's deputy director of political affairs to be its own lobbyist in 2004, reported Bob Dart and Elliott Jaspin here http://www.ncrp.org/.... "The firm is also a powerful player in national politics -- but, as in business, it wheels and deals in relative obscurity," wrote Dart and Jaspin.
"They have a very specific legislative agenda. They're concerned about environmental issues, tax policy, energy policy," they learned from Larry Noble, then-executive director of the Center for Responsive Politics, a nonpartisan group that monitors campaign financing. "They want to make sure they have a place at the table when these matters are discussed by Congress and the administration."
And they quoted Bob Williams, author of a Center for Public Integrity investigative report: "Koch Industries could be the biggest oil company you have never heard of -- unless, that is, you hang around the halls of Congress." Williams said Koch "prefers to operate in private when it comes to politics and government."
Dart and Jaspin checked the Kochs' individual and political-action-committee contributions to federal candidates and found donations of "$25,000 to the Republican National Committee this year," plus "$5,000 to the Blue Dog Political Action Committee, which supports the Blue Dog Democrats, a group of moderate, mostly Southern, House members. U.S. Reps. Sanford Bishop and John Barrow of Georgia are among the Blue Dog Democrats."
And David Koch himself "contributed $2,000 to the 2004 campaign for Sen. Johnny Isakson (R-Ga.), and Kochpac gave $1,000 to the campaigns of Georgia Republican Reps. Jack Kingston and Nathan Deal."
Dart and Jaspin recounted the Kochs' connections to the Libertarian Party and reminded readers that "Charles Koch helped found the Cato Institute, and David Koch helped start Citizens for a Sound Economy, research and policy centers that continue to receive their support. The Cato Institute is considered the capital's leading voice of libertarianism, and David Koch was the Libertarian Party's candidate for vice president in 1980."
They repeated David Koch's quote to the National Journal, "My overall concept is to minimize the role of government and to maximize the role of private economy and to maximize personal freedoms," and Cato's stated mission "to broaden the parameters of public policy debate to allow consideration of the traditional American principles of limited government, individual liberty, free markets and peace," and the declaration that Citizens for a Sound Economy, "fights to preserve and restore America's liberty by promoting lower taxes, a limited government, and greater economic freedom."
Dart and Jaspin asked Jeff Krehely, deputy director of the National Committee for Responsive Philanthropy, about the Kochs' charitable giving, and Krehely told them, "We've studied their charitable giving. A large part of their philanthropy is in their self-interest."
"For instance, the Koch foundations give to groups that research and advocate `anti-environmental regulations' that could help their business, he said."
Business Week magazine's coverage in its November 16 edition admired that the Kochs had managed to keep their biggest-ever deal characteristically quiet through the negotiation process. Writer Michael Arndt opened his text, "Charles Koch is a CEO who likes to run his family business the old-fashioned way -- secretively and by his own rules," here http://www.businessweek.com/... and quoted Georgia-Pacific CEO Pete Correll's announcement to his employees: "Koch Industries could possibly be the largest and best-managed company that you never heard of."
Former Georgia Congressman Bob Barr showered the merger with love in a "special to the Atlanta Journal-Constitution" here
http://www.newsbull.com/... calling it a "win-win deal" on November 23.
"I never realized there was actually a good way to conduct a corporate takeover until I began following the news of the Koch Industries merger with Georgia Pacific," he wrote. "...after taking a hard look at the way Koch and Georgia-Pacific have handled their soon-to-be consummated marriage, I have to admit that I'm becoming a huge fan of this particular merger."
"Typically, when corporations merge, a few rich guys get richer and a lot of little guys lose their investments, pensions, customers and jobs. Incompetent or marginally competent executives get huge golden parachutes, and paper-pushing vultures on Wall Street cash in at the expense of the employees who built the company. Exactly the opposite is happening in this case. Existing shareholders were rewarded with a price that allowed them a return on their investments that was more than fair. From Day One, the top priority of management at both companies was not spinning Wall Street analysts, but assuring existing employees that they were highly valued by the merged company."
A reasonable reader can imagine that current Georgia-Pacific employees from coast to coast were pleased to hear Barr's words, that "existing employees" would be "highly valued by the merged company." And rightly so. Following a lot of merger deals, many veteran employees find themselves filing for unemployment. But that wouldn't be the case here, Barr seemed to say.
Barr went on, "In a word, three names explain this success -- Charles Koch, David Koch and Pete Correll. Correll deserves credit for structuring a buyout in good faith and being willing to consider a major change, provided that everyone involved benefited. On the Koch side of the equation, the benefit of the merger is more fundamental. Simply put, the Koch brothers have developed and refined a corporate model that is unlike anything else the world has seen (at least in recent years). While most companies are top-heavy and oriented toward making the most money for the fewest insiders as possible, the Koch boys have applied the core principles of free-market economics to focus relentlessly on building value -- broad-based, lasting value."
"So while the words `corporate takeover' may strike fear into the hearts of millions, this case shows that needn't always be so. When equals negotiate in good faith in an open environment and realize they succeed or fail as a team, the results can be most impressive," he concluded.
So pleased was Barr that he posted his column on his own website for good measure, here http://www.bobbarr.org/....
Meanwhile, one week after the initial announcement, the Atlanta Journal-Constitution was still getting to know the new players. Reporter Patti Bond quipped, "There's nothing like a dose of Austrian economics to juice up the getting-to-know-you process" here http://www.kochind.com/....
"Part philosopher, large part tycoon, Koch has wasted no time introducing himself to the new recruits at Georgia-Pacific. Just two days after privately held Koch Industries announced its eye-popping plans to acquire the Atlanta Fortune 500 company, there was the professorial chairman, at the head of a class, schooling 70 Georgia-Pacific executives in the ways of his Wichita, Kan.-based empire," Bond gushed. "Let other companies have their Six Sigma and one-minute managers. Koch Industries is sticking to a homegrown style that's grounded in the free-market principles espoused by economists Ludwig von Mises and Friedrich von Hayek."
"Add a little psychology and science to the mix and you've got what Charles Koch calls `Market Based Management,' a trademarked set of business principles that he credits with making Koch Industries the $60 billion private powerhouse it is today," she added. "...Koch Industries puts a lot of emphasis on measuring profit or loss --- even at the lowest levels of business, management experts say. Although it's not always possible, the company aims to break down the various bottom lines across its sprawling segments by each and every employee.
Bond quoted Koch Industries spokeswoman Mary Beth Jarvis, "If a business unit has a successful year, the ideal is that you could analyze what each person's contribution was and reward them accordingly. That's very difficult to do, though. It's one of the hardest parts of Market Based Management."
But, Bond wrote, "By midweek, the Koch mantra had made its way onto coffee tables, desks and other surfaces at Georgia-Pacific's headquarters, manifested in stacks of Koch-themed articles from business publications --- including one titled `Creative Destruction 101'."
"Students learn about reacting to change in the form of `creative destruction'," she explained. "At one Koch plant, for example, employees pumped up efficiency so much that they were able to cut the maintenance crew by 50 people."
"Koch promotes performance-based pay, doled out in the form of bonuses and other incentives to people who `create value,' and thereby, profit. Top executives can pull down million-dollar bonuses, but Koch will share the bottom-line love with secretaries, janitors or anyone who comes up with a way to make the company some money," she said.
That concept - "creative destruction" - is included in Number 7 of the "Guiding Principles" posted on the KI website here http://www.kochnews.com/.... These are important to Koch employees, according to the site, as "Employees live by a set of values and Guiding Principles." Number 7 is titled "Change" and it reads, "Embrace change. Envision what could be, challenge the status quo, and drive creative destruction."
On another occasion, I may take time to share what I learned about "creative destruction" from Google.
But following the first flush of praise and buzz about the merger, there came murmurs of anxiety. Western Region Builder News, the largest regional building trade magazine in the nation, expressed the feelings of plant employees around the nation here http://www.buildernewsmag.com/... "Of regional concern are the thousands of GP employees Koch will be adding to its massive payroll. At present Koch employs 30,000 workers in 50 counties and says it `has no plans to trim jobs.' GP currently employs about 4,000 people in Oregon (facilities are located in Albany, Canby, Clatskanie, Coos Bay, Eugene, Fairview, Halsey, Philomath, Portland, Toledo and White City) and 1,700 in Washington (Camas, Bellingham, Issaquah, Olympia and Tacoma)."
Community leaders in one of those Oregon locations imagined that the merger would impact local politics here http://www.wweek.com/.... Willamette Week editors speculated that "Koch Industries' recent acquisition of Georgia Pacific may mark the next chapter in the timber and paper products company's long, indirect influence on Oregon's politics. Stage one came when longtime CEO Robert Pamplin Sr. passed his fortune to Bob Pamplin Jr., one of Oregon's largest political donors (he also owns KPAM radio, The Portland Tribune and numerous suburban newspapers, and Ross Island Sand & Gravel). Now Kansas-based Koch, co-owned by billionaire David Koch, has snapped up GP. Koch founded the powerful anti-tax group FreedomWorks. And given that GP still employs 3,000 Oregonians, expect to see FreedomWorks raise its already high national profile locally."
Bill Berkowitz, writing at MediaTransparency.org, was brusque. "Oil barons Charles and David Koch, two of the nation's worst environmental criminals, now control the country's largest privately held company. In a move that does not bode well for the nation's forests, last month the Koch brothers of Kansas engineered a $13.2 billion buyout of forest products producer Georgia Pacific Corporation..." he wrote here http://www.mediatransparency.org/.... "The Kochs are smart, focused, and incredibly wealthy. For years they've been pushing both a libertarian and free-market agenda through tens of millions of dollars in contributions to conservative causes, candidates and organizations."
Berkowitz quoted the equally bristly Scott Silver, executive director of the environmental group Wild Wilderness of Bend, Oregon: "The ideologues running the land management agencies are the product of the think tanks created by, and funded by, the Koch family. Those ideologues are now in a position to permit Koch's newest acquisition, Georgia-Pacific, to further rape and pillage the public's lands. These think tanks promote the Free-Market ideal when it serves their interests to do so, but in reality, they are firmly committed to the ideal of enriching private interests at enormous direct cost to the American taxpayer."
Silver went on, "Amongst the most important, visible and powerful proponents of public lands privatization are the Cato Institute, the Property and Environment Research Center (formerly known as Political Economy Research Center) and the Reason Institute. Koch funds have played a major role in the operation of each of these organizations."
For Silver, the issue is "logging on public lands," Berkowitz wrote. "The acquisition of Georgia-Pacific, which `does extensive logging on public lands' and `is a heavily subsidized form of corporate welfare,' could accelerate the trend toward the privatization of our national forests."
He quotes Silver, "Logging companies such as Georgia-Pacific strip lands bare, destroy vast acreages and pay only a small fee to the federal government in proportion to what they take from the public. They do not operate in the Free-Market when they log public forests."
Blog for Oregon correspondent Elizabeth Rathbun saw connections between the merger and the work of political action organizations operating in Oregon here http://www.blogfororegon.com/.... "Remember Citizens (to Confound) The Sound Economy? You know the one! The group which sponsored the referendums to oppose tax increases in Oregon? Citizens received lots of help from Koch. For more information about the industry funded organizations which Koch includes, try this link and scroll down the list to click on Cato Institute, Manhattan Institute and Citizens for a Sound Economy. Check funders to see that Koch is included."
She includes this link: http://www.sourcewatch.org/....
Regardless of the cheers and the jeers, the deal was done. Koch Industries replaced Georgia-Pacific's president and CEO, "Pete" Correll, with its own Joseph Moeller, and Kochs' Bill Caffey was seated as executive vice president on December 23, the day that the publicly-traded Georgia-Pacific died and the privately-owned subsidiary Georgia-Pacific was born. "A.D. `Pete' Correll, formerly Chairman and Chief Executive Officer, will continue with Georgia-Pacific as chairman of the board, to assist in the transition," according to the news here http://www.capv.com/....
"As a result of the merger, Georgia-Pacific shares will be delisted from the New York Stock Exchange and cease trading at the close of business December 23."
Within a month, Moeller installed a new team, as described in a press release here http://www.gp.com/.... "Several new members of our leadership team who are joining us from Koch Industries have significant expertise in Koch's core capabilities. These leaders will enable all of us to benefit from Koch's Market Based Management philosophy and capabilities," Moeller said.
Detractors still weigh in. In a column published in April of this year, Jason Miller of Enviros Against War saw no good in the merger. "Charles, David and Cato are no friends to America's working class or minorities. Staunch supporters of social security privatization and property rights, Cato strongly opposes affirmative action and government regulation," Miller wrote here http://www.envirosagainstwar.org/.... Most of his column draws attention to the Kochs' political contributions.
Even more recently, however, despite Bob Barr's soothing words that things would remain the same, an announcement came in June that "Pete" Correll, the Georgia-Pacific CEO who shepherded his company for the past 16 years, would retire but continue to serve as an advisor to the board and its leadership team. He will keep the honorific title, "chairman emeritus," as reported here http://members.whattheythink.com/....
The same announcement included word that David L. Robertson, who served as Koch Industries' president and chief operating officer following Moeller's move to Georgia-Pacific in December 2005, would join Georgia- Pacific's board. "Other members of Georgia-Pacific's board include Charles Koch, chairman and chief executive officer of Koch Industries; Richard Fink, executive vice president of Koch Industries, who focuses on legal and public affairs; Steve Feilmeier, executive vice president and chief financial officer of Koch Industries; John Pittenger, senior vice president of Koch Industries, who provides leadership in strategic planning and business development; Dale Gibbens, Koch Industries' vice president of human resources; Bill Caffey, Georgia-Pacific's executive vice president of operations excellence and compliance; and Moeller, Georgia-Pacific's chairman, president and chief executive officer."
Creative destruction, as described by Charles Koch to Wall Street Journal editorialist Stephen Moore here http://www.opinionjournal.com/... is "where the old and inefficient are ruthlessly swept away by the new."
"Long term success entails constantly discovering new ways to create value for customers and building new capabilities to capture new opportunities," Koch tells Moore. "In this sense, maintaining a business is, in reality, liquidating a business."
Though he admires Koch's success, Moore admits that he's not sold on "Market Based Management."
"Some of the ideas that undergird Market Based Management seem fairly commonsensical to me, and I'm not entirely sold on the notion that this program somehow represents a seismic breakaway from what is taught at Harvard Business School. Some former employees also complain that top management's absolutist devotion to MBM has created a cult-like atmosphere that can be overbearing," he writes.
"To succeed at the company, they say, one has to become a `Koch addict' --which means, in part, buying into MBM. Mr. Koch himself willingly concedes that the ideas don't bear fruit with everyone, and that many times employees simply `memorize and regurgitate the ideas,' rather than apply them on the job. But even the deepest skeptic can't argue with the bottom-line results. Quite simply, Mr. Koch's firm has tripled in size and profitability in the last decade, among its many other achievements."
Yes.
Credits:
http://www.cbsnews.com/...
CBS News, "Blood and Oil"
http://www.gp.com/...
Georgia-Pacific press release
http://www.jsonline.com/...
Reporter Andrew Ross Sorkin
http://www.gp.com/...
Georgia-Pacific press release
http://www.kochnews.com/...
Koch Industries Mission Statement
http://www.kochnews.com/...
Koch Industries Special Message to Employees
http://www.oligopolywatch.com/... on November 15
Column, November 15, 2005
http://www.ncrp.org/...
Reporters Bob Dart and Elliott Jaspin
http://www.businessweek.com/...
Column, November 16, 2005
http://www.newsbull.com/...
http://www.bobbarr.org/...
Opinion-editorial, Bob Barr
http://www.kochind.com/...
Reporter Patti Bond
http://www.kochnews.com/...
Koch Industries Guilding Principles
http://www.buildernewsmag.com/...
Editors, Column
http://www.wweek.com/...
Editors, Willamette Week
http://www.mediatransparency.org/...
Reporter Bill Berkowitz
http://www.blogfororegon.com/...
Weblog of Elizabeth Rathbun
http://www.capv.com/...
News release
http://www.gp.com/...
Georgia-Pacific press release
http://www.envirosagainstwar.org/...
Writer Jason Miller
http://members.whattheythink.com/...
News release
http://www.opinionjournal.com/...
Editorialist Stephen Moore