What’s wrong with Charles and David Koch?


In a column on his website, Fran Tarkenton wonders why Charles and David Koch are the targets of so much criticism. He writes: “So why do we vilify people who represent the greatness of America? Is it just because they have different political beliefs? It’s time to stop demonizing people who do things the right way and generate tremendous wealth — and value to all Americans. Those are the people we should celebrate, whether you agree with their politics or not! If we want to preserve America as the great place it is, we need more entrepreneurs, more innovators — and a free market to foster them.”

Tarkenton writes of “how poisonous our political atmosphere is.” Here’s an example: A common complaint by leftists is that Wall Street is overly focused on short-term results — the quarterly profit numbers — rather than on long-term investment and growth. Koch Industries, however, is privately held, and in a recent Wichita Eagle article, a company official said “[private ownership] allows us to focus on the long term as opposed to quarter to quarter.” You’d think liberals would be happy with a company that can afford to ignore the short term and focus on the long term, but instead they criticize Koch for not being public, wondering what it is the company has to hide.

By the way, this focus on the long term may be why since 1960 the value of Koch Industries has increased faster than the value of the broad-based S&P index of the 500 largest U.S. Companies, by a factor of 16 times.

Tarkenton several times mentions Charles and David Koch’s fight against cronyism. Contrast this with General Electric, a company headed by a friend of President Obama. A report from ProPublica shows some of the lengths that GE goes to avoid paying taxes: “General Electric’s tax department is famous for inventing ways to pay Uncle Sam less. So it should come as no surprise that its CEO, Jeff Immelt, is in the crosshairs as the new chairman of the President’s Council on Jobs and Competitiveness. … GE’s tax department is well known for its size, skill and hiring of former government officials. About 20 years ago, GE’s tax employees totaled a few hundred and were decentralized. Today, there are almost 1,000. The department’s strong suit? Reducing the taxes GE reports for earnings purposes.”

A New York Times article explains the lengths that GE went to to protect a tax loophole that it benefited from. The tax system is a major vehicle for the implementation of cronyism.

The shelters are so crucial to G.E.’s bottom line that when Congress threatened to let the most lucrative one expire in 2008, the company came out in full force. G.E. officials worked with dozens of financial companies to send letters to Congress and hired a bevy of outside lobbyists.

The head of its tax team, Mr. Samuels, met with Representative Charles B. Rangel, then chairman of the Ways and Means Committee, which would decide the fate of the tax break. As he sat with the committee’s staff members outside Mr. Rangel’s office, Mr. Samuels dropped to his knee and pretended to beg for the provision to be extended — a flourish made in jest, he said through a spokeswoman.

That day, Mr. Rangel reversed his opposition to the tax break, according to other Democrats on the committee.

The following month, Mr. Rangel and Mr. Immelt stood together at St. Nicholas Park in Harlem as G.E. announced that its foundation had awarded $30 million to New York City schools, including $11 million to benefit various schools in Mr. Rangel’s district.

Other companies that are revered by the political left play the game too. A report from the Urban-Brookings Tax Policy Center explained how Starbucks manipulated the tax system to its benefit: “By shifting paper profits among divisions, firms can reduce their overall tax liability. Such efforts will lead to unnecessary accounting and compliance costs for firms and unnecessary enforcement costs for the IRS. For example, The New York Times reported that Starbucks successfully added a provision to the bill that deems coffee roasting, but not coffee preparation, a manufacturing activity. This provision gives Starbucks a tax incentive to increase the bean prices charged to its retail outlets, making the roasting part of the business more profitable and the retail part of the business less profitable. Such efforts could decrease Starbucks’s tax bill, but serve no other discernable public policy purpose.”

What’s Wrong with the Koch Brothers?
By Fran Tarkenton

To succeed in football and in business, I worked with a lot of people. I learned how to figure out who the great people were, people who were doing the right thing, people with great ethics who I could trust and learn a lot from. I also learned how to identify people who weren’t trying to do the right thing.

It’s very important in business to be able to tell the difference, because a great mentor like Sam Walton, Bernie Marcus, or Robert Woodruff can have a monumental impact, but a bad influence can cause big problems.

This political season, there has been one business name that has been demonized and vilified above all others: the Koch brothers, Charles and David Koch of Koch Industries. They have been demonized as right-wing zealots, and I’ve even seen the work of scholars dismissed just because their organization has some connection to the Koch brothers.

The kneejerk attacks and venom that comes out whenever their names are even mentioned really bothers me, and it’s a sign of just how poisonous our political atmosphere is. I don’t know the Koch brothers personally, but I know people who do, and who know them well. And I’ve also been able to observe the things they do, and the way they conduct themselves publicly. Everything I’m seeing and hearing tells me that these are exemplary business leaders who we should be celebrating, not attacking.

Start by looking at how Koch Industries grew to become the juggernaut it is today. The family patriarch, Fred Koch, built the company on an innovative process he developed in the oil business. Then his sons grew the company the right way. They didn’t cozy up to the government for subsidies, handouts, or preferential treatment. Instead, they came up with great ideas that solved problems in the lives of people, ideas that provided real value. Their business empire was built on innovation, reinvention, and hard work, not cronyism. I greatly admire that! And they’ve donated millions to medical research and the arts, among other causes.

Now, the Koch brothers are more known for the money they spend on political activities. They fund a variety of think tanks and organizations, all dedicated to promoting free market practices and small government. And that is where they are demonized and tarred and feathered by their political opponents. But from everything I have ever seen, what is remarkable is that none of their political activities are dedicated to cronyism, setting their company up for a big windfall if it wins the debate. Rather, they are advocating for more competition, reduced barriers to entry for new players, and less connection between the board room and the DC halls of power, not a special place at the table.

The only reason for doing that is because they really believe in it. Why should we demonize people who deeply believe in something and do whatever they can to promote it? If the Koch brothers spent millions of dollars on politicians who would subsidize their products and outlaw their competitors, that would be wrong. But instead, they advocate for an end to market distortions, government interventions in the private sector, and cronyism in general. They’re not trying to get more of the government pie; they just really believe they have a vision to help America, because they love this country and the values it stands for.

The truth is that everything we have in this country is because of entrepreneurs, large and small. From the corner store up to the most successful business people — whether conservatives like the Koch brothers, liberals like Steve Jobs at Apple, or libertarians like Jeff Bezos of Amazon — the great wealth of this country comes from people helping other people by creating value. Without value, when businesspeople are just in it for themselves and don’t care about value, only about accruing benefits to themselves, everything falls apart — including the business itself! Those who do create value are the reason we have the great society we have. Since their business began, the Koch brothers have been part of the value-creating class, not the crony class of business owners.

So why do we vilify people who represent the greatness of America? Is it just because they have different political beliefs? It’s time to stop demonizing people who do things the right way and generate tremendous wealth — and value to all Americans. Those are the people we should celebrate, whether you agree with their politics or not!

If we want to preserve America as the great place it is, we need more entrepreneurs, more innovators — and a free market to foster them.

And in case you’re wondering, the Koch brothers did not approve this message.


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