Discovery
january 2012 THE QUARTERLY NEWSLETTER OF KOCH COMPANIES The challenge of success For many Koch companies – and for Georgia-Paci c’s gypsum and wood And then there is the age-old problem of Koch Industries overall – 2011 was a products businesses – both of which rely overcoming success. record year. on new building construction – su ered Charles Koch, KII’s chairman and CEO, Flint Hills Resources led the way, helped as the construction slump in the United has repeatedly warned about complacency by record results from Pine Bend and a States continued. or smugness a er achieving record results. signi cant increase in South Texas crude Similarly, INVISTA’s residential oor- He did so in his 2007 book, e Science oil production that bene ted its Corpus ing business struggled. With new home of Success, and in his very rst Founder’s Christi re neries. construction in the U.S. at historic lows, Day video, recorded eight years ago. demand for carpet ber is depressed. FHR’s lubricants business also had a record “It is all too easy,” Koch said recently, “to year, and results for the asphalt and chemi- Prolonged drought in the Midwest and assume that things will keep going your cals businesses improved signi cantly. wild res in Texas were serious issues for way, or that markets will remain strong Koch Pipeline was busy expanding its e Matador Cale Company. and your competitive advantages will system, especially in South Texas, where And results for Koch Supply & Trading never erode. the Eagle Ford Shale play is boosting and Koch Minerals were nowhere near “Even worse is becoming arrogant or domestic production and bringing new the record highs seen a few years ago. thinking you’re smarter than you really are. crude supplies to Corpus Christi. It’s important to note that all of Koch’s “We must never abandon our principle of High grain prices and low natural gas pric- primary companies were pro table, even humility. To think we can ever know it all es led to strong demand and margins, and if some subsidiaries weren’t. But it would or a ord to ignore change is delusional. a record year for Koch Fertilizer. (Natural be a mistake to say that 2011 was a year It is also dangerous.” gas is o en the feedstock for fertilizer.) of uniformly smooth sailing. As Charles Koch emphasizes in his edito- INVISTA enjoyed its best year ever as Warning signs rial on page 12, the best antidote to this a Koch company. is was true despite problem is a commitment to our MBM® so ening demand which became apparent As more and more economies slip back Guiding Principles – beginning with during the laer part of the year. into recession – especially in the European Union, the world’s largest market – 2012 integrity and compliance. Koch Chemical Technology Group had is likely to be much more challenging. Given last year’s record results, he also its second-best year ever (on an oper- emphasizes the need for humility. ating basis), with Optimized Process Some of Koch’s biggest businesses have Designs turning in a record performance. already reported a slowdown in demand “Our goals are unachievable if we let from international customers. any success we achieve go to our head.” Exceptions In the U.S., the outcome of the Novem- Charles Koch’s great-great-grandfather, ere were, however, several Koch busi- ber election could have a profound e ect William Ingraham Kip, was the rst nesses that struggled in 2011. on all Koch companies. Episcopal bishop of California. As FHR’s North Pole re nery was unpro t- Whether that e ect will be for beer or Bishop Kip liked to stress: “Pride goeth able for much of the year, hampered by worse depends on if lawmakers implement before destruction, and a haughty spirit high energy prices and other constraints. policies promoting economic freedom. before a fall.”
this issue… International growth pg 3 2011 Year in Review pg 5 Unequal playing fields pg 9 Perspective: Charles Koch pg 12 Postal Pipeline
I am writing this for a friend of mine, Please accept my thanks Mr. Edward Manzano Sr., a Korean War and appreciation for the veteran who served in the U.S. Army. contribution made by Although Mr. Manzano was unable to Flint Hills Resources aend the dedication ceremony of the on behalf of the Coastal Coastal Bend State Veterans Cemetery Bend State Veterans on Dec. 7, 2011, he did visit a few days Cemetery. later to witness rsthand the great work Providing veterans with done thus far. a nal resting place is A er a couple of pictures and a stroll more than a need. It is through the Memorial Walk, we stopped an obligation. I am glad for awhile to watch some maintenance FHR took the lead on Corpus Christi – More than 1,000 people gathered for the dedication of the new workers preparing for a funeral service. this worthy project. Coastal Bend Veterans Cemetery, built on 55 acres of land donated by FHR. Mr. Manzano is in his early 80s and It also makes me proud as ever to be a former Koch Materials still is a very strong person. I have only My dad, Gary Woodman, recently retired Company employee. seen him with tears in his eyes a couple a er 31 years at Koch – almost as long as I of times. His recent trip to the new Gary Noller have been alive. He has talked about Koch veterans cemetery was one of them. Kerrville, Texas Industries for as long as I can remember.
He wanted me to tell you he is especially I don’t know if any of the 70,000 people proud of Flint Hills Resources for mak- I wanted to take a moment to say how you employ have said thank you, but ing the land available for this cemetery. much I enjoyed Steve Feilmeier’s speech I would like to take this opportunity Like Mr. Manzano, I am proud to have at the Wichita Economic Conference. to do so – especially as we arrive upon served in the military, and also proud to anksgiving time. In our industry, we, too, are experiencing work for the company responsible for crippling regulations that have so many Dad’s salary met all our needs for a family making this veterans cemetery possible. harmful unintended consequences for of six, and a Fred C. and Mary R. Koch My wife and I have already submied the the consumer. scholarship helped me to pay my way paperwork to be laid to rest here. through college. (I graduated from ank you for puing so much into ank you, Flint Hills Resources, for Wichita State University with a degree this presentation. making this happen. in dental hygiene.) James Rivera Mary K. Wehner, CFO ank you for supplying my dad with the Central Star Credit Union Flint Hills Resources earnings to make my life a truly wonder- Wichita, Kan. Corpus Christi, Texas ful one, full of very happy memories, Steve Feilmeier, CFO of Koch Industries, has written health, education and a humbled heart. This donation by FHR, valued at $1.2 million, was the two recent editorials in Discovery (October 2011 and May you have many more prosperous largest in its history. There are an estimated 29,430 April 2010). To read them, visit www.kochind.com/ years at the company I’ve grown up loving. veterans in Nueces County, including more than 100 newsroom/discovery.aspx who are employees of Flint Hills Resources. Beth Du Wichita, Kan. I want to thank you for the Fred and Mary Koch Foundation scholarship. It Letters and other submissions become the property of Koch means so much to me to have someone Industries, Inc., and may be reproduced in whole or in part, believe in my future. including your name, for any purpose and in any manner. Letters may be edited for length or clarity. I am aending the University of Wis- consin-Stevens Point for a bachelors in Discovery January 2012 | Volume 18 | Number 1
computer information systems. Editorial board Questions? Comments? Philip Ellender Contact: Rod Learned With this scholarship, I can think less Rich Fink 316.828.6136 Jeff Gentry [email protected] about nances and more about my studies. Dale Gibbens Publication design Greg Guest Amber Vogts Again, thank you. Charles Koch Koch Creative Group Natalie Jansen Jim Mahoney Dave Robertson www.kochind.com Edward Manzano, U.S. Army veteran. Wisconsin Rapids, Wis. ©2012, Koch Industries, Inc. Koch is an EOE. M/F/D/V 2 2011 global expansions, · John Zink, a Koch Chemical Technology Group company, acquired Hamworthy Combustion. Hamworthy equipment acquisitions, investments, has been installed in more than 100 countries. · A Koch Fertilizer subsidiary acquired J&H Bunn Ltd., one of donations and awards Britain’s largest (and oldest) independent fertilizer distributors.
· INVISTA launched its global engineering polymers brand in Germany.
· Koch Fertilizer donated $10,000 to upgrade the Brandon, Manitoba, airport landing system. · Koch Minerals’ terminal in Lyon, · The mayor of Kingston, Ontario, France, set a new record for recognized the INVISTA Centre for tonnage transferred. achieving the prestigious Leadership in Energy and Environmental Design Gold Certification.
· Construction is underway on a new spandex plant in Paulínia, Brazil, to be completed by the end of 2012.
· Koch Fertilizer opened a new regional headquarters in Montevideo, Uruguay.
3 International News
· Following an expansion and several capital investments, · Koch Industries donated a total of $1 million to the American KS&T’s Rotterdam refinery in the Netherlands achieved a Red Cross and Salvation Army in support of disaster relief in record year for productivity, despite a challenging market Japan following a massive earthquake and tsunami in March for European refineries in general. that left almost 20,000 dead or homeless. · In addition, Georgia-Pacific donated paper products, tableware and other relief aids via Convoy of Hope and Feed the Children.
· A John Zink flare tip, installed at the Samsung Total Daesung plant 21 years ago, was retired and placed in a special exhibit outside the plant. It was replaced by a new, state-of-the-art John Zink XP flare tip.
· INVISTA opened its expanded Foshan spandex venture site in April and is moving forward with plans for a state-of-the-art nylon 6,6 plant in Shanghai. · An important MBM® video (filmed at GP-Green Bay) was translated and shared with INVISTA employees in China.
· INVISTA partnered with Canterbury of New Zealand · INVISTA’s venture plant in Tuas, to develop state-of-the-art jerseys for the 2011 Singapore, received INVISTA STAR Rugby World Cup winners. certification for exceptional health and safety performance. This designation is modeled after OSHA’s VPP program in the U.S. PLAN NOW TO ATTEND 2012 Global EH&S Conference · Koch-Glitsch doubled employment at its newly · Koch Fertilizer added two additional terminals in Brisbane expanded Savli facility in India. and Adelaide. Together with its existing Geelong location, the company can now service most of the Eastern Australia market. May 7-10 Atlanta, Ga.
4 photo: Dominick Reuter
MARCH
1 An op-ed by Charles Koch is published in the Wall Street Journal.
4 David Koch attends the MIT ribbon-cutting of an integrative cancer research center named FEBRUARY in his honor.
11 The biggest earthquake in Japan’s 15 John Zink acquires U.K.-based recorded history leaves more than Hamworthy Combustion. JANUARY 20,000 dead or missing, triggers a 30-ft. tsunami and severely damages 17 FHR acquires a wharf and pier for a series of nuclear reactors. 6 Flint Hills Resources donates expanding its terminal operations in $50,000 to Fiesta De Los Niños Corpus Christi. in Corpus Christi, Texas. FHR has 11 A Koch Fertilizer subsidiary acquires J&H Bunn Ltd., one sponsored the event benefiting 17 FHR acquires ethanol plants in Fairbank of Britain’s largest independent Driscoll Children’s Hospital for and Iowa Falls, Iowa. 19 years. fertilizer distributors. 23 The price of crude oil hits $100 per 14 Three FHR fuel terminals in barrel for the first time since 2008. Wisconsin celebrate earning VPP Star status. 27 Wildfires in West Texas burn 25,000 acres of the historic Matador Ranch. 17 Martin Luther King Jr. Day: Georgia-Pacific donates to hundreds of needy students as part of its Schoolbox Supplies campaign. 20 by 2020 Energy Goal
can make a difference. At INVISTA, we produce innovative fibers and fabrics while conserving resources, minimizing waste and protecting the environment. Now, we are pursuing a goal of reducing our energy intensity by 20% before 2020.
Take the initiative to show how a little change can make a huge impact. www.INVISTA.com/energygoal JUNE
MAY 1 GP’s new, stronger, Brawny® paper APRIL towels hit store shelves. 1 Osama Bin Laden is killed in 9 Koch Pipeline’s Bethany, Mo., Abbottabad, Pakistan. station earns VPP Star status. 6 Koch Pipeline Company employees set a company safety record: 16 INVISTA announces a $100 20 GP participates in an airlift of 10 years (7 million work-hours) million expansion at its Paulínia, relief supplies to Joplin, Mo., without a lost-time incident. Brazil, spandex facility. and other tornado-ravaged communities across the 20 Koch Fertilizer acquires Nitamin® 22 The deadliest tornado in U.S. southern U.S. and Nitamin Nfusion® slow-release history kills 160 in Joplin, Mo. fertilizers from Georgia-Pacific 26 INVISTA’s spandex facility in Chemicals. 25 Koch Industries is given the Paulínia, Brazil, celebrates its Defender of Justice Leadership 37th year without a lost-time 29 Silver sells at a record $50 per Award by the National Association injury (the longest streak of ounce, up 81 percent in three of Criminal Defense Lawyers. any Koch manufacturing facility). months. (Prices dropped 25 percent the following week.)
YEAR IN REVIEW 20 by 2020 Energy Goal
can make a difference. At INVISTA, we produce innovative fibers and fabrics while conserving resources, minimizing waste and protecting the environment. Now, we are pursuing a goal of reducing our energy intensity by 20% before 2020.
Take the initiative to show how a little change can make a huge impact. www.INVISTA.com/energygoal
JULY
12 Koch Pipeline activates a crude oil pipeline segment in San AUGUST Patricio County, Texas, to serve Eagle Ford producers. 1 GP announces a four-year, nationwide 14 INVISTA sets a goal of reducing agreement with the United Steelworkers. SEPTEMBER its overall energy intensity 20 percent by 2020. 2 Matador Ranch receives the top regional environmental stewardship 23 Charles Koch’s Founder’s Day message, 19 Koch Pipeline and NuStar award from the National Cattlemen’s recorded at GP headquarters in Atlanta, Logistics reactivate a 30,000 Beef Association. is distributed worldwide. barrel-per-day pipeline serving Eagle Ford producers. 4 Standard & Poor’s downgrades the 28 After an upgrade from Moody’s, credit rating of the United States Georgia-Pacific is rated investment from AAA to AA+. grade by all major ratings agencies.
30 A Koch Fertilizer subsidiary acquires Agrotain International, the world’s largest producer of controlled-release fertilizers.
YEAR IN REVIEW NOVEMBER
OCTOBER 10 Ford Motor Co. wins a top prize for its fuel- saving plastic dashboard, made from a special polypropylene supplied by FHR. 31 New domestic crude oil production and increased transportation options 11 GP announces an agreement to sell its allow FHR’s Corpus Christi refineries consumer products businesses in Europe, to reduce foreign oil refining by the Middle East and Africa. more than half. 18 Reiss Remediation changes its name to DECEMBER 31 UNESCO estimates the world’s Koch Remediation & Environmental Services. population has reached 7 billion. 19 Dedication of the Koch Family Sculpture 1 Koch Pipeline’s Helena, Texas, terminal opens. Garden at the Wichita Center for the Arts. 7 Dedication of a 55-acre veterans cemetery 30 FHR receives approval to buy a Nebraska in Corpus Christi, Texas. The land, worth biodiesel plant. $1.2 million, was donated by FHR.
31 Koch companies earned 121 environmental, safety, community stewardship, innovation and customer service awards in 2011, and a total of 444 awards since January 2009. Unequal playing fields Although the word “subsidy” is not in the Subsidies can also involve rebates and When the change was announced, tens United States Constitution, the federal loans at below-market rates. of thousands of students rioted, destroy- budget is loaded with subsidy programs Examples of this in the U.S. have in- ing or vandalizing landmarks and aack- – more than 2,000 of them at last count. cluded student loans, home loans, the ing a royal convoy. Subsidies are also a major focus of the 2009 “cash for clunkers” program and Rioters began rebombing Athens, European Union, especially for agricul- homeowner tax credits for installing Greece, last October a er the govern- ture. Out of the €57 billion the EU spent solar panels. ment announced new austerity proposals on agricultural development in 2010, To an economist, a subsidy is something that included reductions in subsidies. direct subsidies accounted for €39 billion. that distorts the market price of goods Small change or services to the Forty- ve cents may sound like pocket bene t of a special change, but paying that much for every interest. Subsidies gallon of ethanol produced in the U.S. typically guarantee a added up to more than $6 billion in pro t to the recipient. subsidy payments to the corn ethanol e sheer number industry last year. of federal subsidies In Iowa, the epicenter of ethanol and always seems to be biodiesel production, more than half of increasing. In fact, all state aid handed out since 2003 has the number of U.S. gone to biofuel companies. federal subsidy pro- grams has more than For decades, traditional fossil fuel pro- doubled since 1980. duction, nuclear energy plants and a wide variety of solar and wind energy projects is has been true have been subsidized with billions of tax- regardless of which payer dollars. But much of that economic political party was in landscape is now changing. the White House or had the majority in Last October, the Department of Energy’s the U.S. Congress. loan guarantee program for solar compa- nies expired (although certain tax credits e Chinese government has created e only notable exception to this trend remain). Less than two months later, countless subsidies for state-owned en- was during the Reagan administration. Congress allowed the Volumetric Ethanol terprises. Many view this as much more Doing without damaging to the global economy than Excise Tax Credit to expire. arti cially low exchange rates. Eliminating subsidies can be painful in Brad Razook, president of Flint Hills the short run, but is almost always ben- Resources, applauds those developments. Some subsidies seem to have no borders. e cial in the long run. However, reduc- When Brazil complained about U.S. sub- “Even though we own several ethanol ing or taking away a subsidy is seldom plants, we believe allowing the ethanol sidies for domestic coon production, popular and can even be dangerous. the U.S. began paying subsidies to South subsidy to expire was a step in the right “Rice riots” erupted in Liberia when the American coon producers, too. direction,” Razook said. government’s rice subsidy changed and “We’re con dent that our renewables In Britain, two-thirds of all wind turbines prices rose almost 20 percent. At least have foreign ownership. ese non- businesses can compete in any market 40 rioters were killed and $40 million in environment, subsidized or not, and that resident owners receive more than half a damage done to private property. billion pounds in annual subsidies, paid our base optimization and innovation More recently, the withdrawal of several for by taxpayers in the U.K. e orts will continue to create long-term subsidies in Europe has also provoked value in the marketplace. What is a subsidy? violent responses. “But to be clear, we think it’s best not to In their simplest form, subsidies are cash Last year, the cash-strapped British have any subsidies or mandates.” payments made by a government to an government decided to repeal a 1998 individual or organization, such as a subsidy program that capped student Competitive disadvantages farmer who is paid to grow (or not grow) tuition payments at £1,000 per year and If Koch opposes subsidies and mandates, certain crops or an airline that is paid to allowed at least one-third of university why have several Koch companies – in- serve smaller communities. students to pay no tuition at all. cluding FHR, INVISTA, Koch Minerals 9 and Georgia-Paci c – accepted a variety Koch said, “rather than by fairly compet- is stied and American competitiveness of government subsidies? ing in a free market where consumers – and prosperity are undermined. e answer is simple: competition. not governments – choose the winners.” “In a pro t-and-loss system, there is “We would be at As a recent always the risk of downside, whether a serious com- “We oppose subsidies even when example of this, we realize it or not. petitive disad- we benefit from them.” -Charles Koch he points to the “If the government ensures that there’s vantage – and put proposed NAT no penalty for failure, why worry about thousands of jobs at risk – if we ignored GAS Act (H.R. 1330), currently awaiting succeeding or creating real value?” action in the U.S. Congress. the realities of today’s government-inu- Unreality enced marketplace,” Razook said. is legislation would give billions of “For example, the government’s ethanol dollars in tax credits to those who buy Dave Robertson, president and COO mandate is a signi cant reason we’re in natural gas-powered vehicles or invest in of Koch Industries, is especially concerned the ethanol business. We’re required by natural gas refueling stations. Its many about the government’s tendency to make law to blend millions of gallons of etha- supporters say it would be a boon to the poor choices in the energy sector. nol at our re neries each year. economy and the environment. “ e Obama Administration says it has “In order to continue operating our “ e NAT GAS Act may be well-inten- spent $100 billion on renewable energy re neries, it became a question of what tioned,” Koch said, “but in essence sources,” Robertson noted. “But these is more cost-e ective: buying the etha- it’s a misguided proposal. Passing it sources provide less than 3 percent of all nol or producing it? would give the natural-gas industry U.S. energy. Is that really a wise policy? enormous new subsidies.” “So, for the sake of our business and our “We should allow providers to compete competitive position, we need to be “ ink about it for a moment,” Fink said. on equal terms and encourage consumers involved in that industry at some point “Instead of let- to choose what in the value chain. ting consumers works best for choose what them, based on “We will always follow the rules the gov- kind of fuel they price, environmen- ernment has established, but that doesn’t want to use or tal standards or mean we have to like or approve of those vehicle they any other legiti- policies. In fact, we oppose subsidies want to drive, mate criteria. because we think they hurt the economy the govern- and our political system. “But that’s not a ment would be reality today. Gov- “ is is why we continue to seek invest- dictating again, ernment interven- ments in assets that can create long-term picking and tions are raising the value by economic, not political, means.” choosing win- cost of energy and A matter of principle ners and losers, taking us further in just like it did debt in the process.” For decades, Koch leaders have consis- with ethanol. tently spoken out in opposition to subsi- “There should be a level playing field with Robertson believes “If natural gas dies, based on a belief in free markets. an emphasis on satisfying customers.” the government vehicles are truly should eliminate As KII board member Richard Fink puts advantageous and -Dave Robertson it: “We oppose subsidies because they all subsidies and economically ecient, producers already preferential treat- distort markets. We maintain that the have the incentive to supply them without marketplace, while not perfect, is the ment, including credits, loans, mandates political mandates that exhaust more and favorable tax incentives. best mechanism for allocating resources. taxpayer dollars.” “Leing people, rather than the govern- “If you level the playing eld and quit Koch and Fink agree that subsidies playing favorites,” Robertson said, “every- ment, choose what to purchase is best do more than undermine economic for consumers and the country.” one has a chance to bene t – not just the well-being; they also corrupt culture in chosen few. Charles Koch, chairman and CEO of society and create a moral hazard. “ e very best thing Washington could Koch Industries, has frequently com- “When our government guarantees mented on the problem of subsidies. do is take a big step back and allow the pro ts for a select few and prolongs the market to work.” “Subsidies are usually promoted by those bene ts of political cronyism, we all suf- who seek to pro t by political means,” fer,” Koch said. “Entrepreneurship www.kochfacts.com | www.kochviewpoint.com 10 Looking Back
Noteworthy
Civilization: e West and the Rest – by Niall Ferguson Why has Western civilization – rather than The Wood River refinery, designed by religious empires or ancient dynasties – Fred Koch, was completed in 1941. dominated world history the past 500 years? Ferguson, a popular historian who works at Harvard, Oxford and Stanford, manages Christmas quarrel to answer that question by distilling ve centuries’ worth When the Wood River Oil and Re ning should be paid and the reasons why they of reasons into six Company (now known as Koch Indus- had earned a bonus. simple arguments. tries) nished building its independent ose mentioned in his leer ranged from Competition, re nery in 1941, the company’s biggest engineers, chemists and electricians to science, the rule of problem was political. barge loaders, welders and oce clerks. law, consumerism, e U.S. Congress, shortly a er declaring One man was called “the best operator I modern medicine war on Japan and its allies that year, passed have ever seen.” Another was described and the work ethic, an excess pro ts tax on corporations. as “very capable” and “a great value to us.” he says, have made at tax was levied at a rate all the di erence of 90 percent on every dol- “I would prefer that [these bonuses] be taken out of in the West. lar of pro t that exceeded my salary rather than them not to get it.” -Fred Koch Instead of promot- pre-war averages. A year ing isolationism, prohibiting new ideas or later, the rate was increased to 95 percent. Altogether, wrote Fred, these employees monopolizing property, Western nations is punitive tax rate le Wood River “have been very loyal and have worked have, as a whole, embraced change, created struggling to retain an acceptable pro t – long hours and over weekends.” opportunity and established widely accepted even though the re nery was considered Koch concluded the leer by writing: rules of just conduct. a vital supplier of high-octane aviation fuel. “I would prefer that [these bonuses] be As a result, the quality of life in the West But there was another, less obvious taken out of my salary rather than them has become the envy of much of the world. struggle going on within the company not to get it.” during its earliest days. Civilization is not a dry and tedious history Interest in principles book. Ferguson’s writing is vivid and engag- ‘Tis the season ing. It is also sobering. Given the di erences of opinion at Wood As 1941 drew to a close, Fred Koch, River, perhaps it’s not surprising that the Even as the West increasingly turns its who owned a 28 percent share of Wood partnership didn’t last. (Neither did the back on these six keys to success, Ferguson River, suggested that the company pay excess pro ts tax, which was repealed, notes, other countries and cultures are now a Christmas bonus to several employ- e ective Jan. 1, 1946.) embracing them. ees who had worked so hard to get the Two of Wood River’s original sharehold- is, he predicts, will have grim results for re nery up and running. ers departed in 1943. e other primary the West if it does not recover faith in itself at suggestion was opposed by shareholder, Hank Ingram, parted ways and the principles that made it great. another shareholder, prompting Koch with Fred, amicably, in 1950, the same to handwrite a four-page leer to I. A. year the Wood River re nery was sold. O’Shaugnessy, one of the company’s e principle that Fred Koch stood up co-founders. “The first lesson of economics is scarcity. for 70 Christmases ago – that employees There is never enough of anything to fully “I regard it as a maer of great impor- should be rewarded with a portion of satisfy all those who want it. The first tance for Wood River,” Koch said, “so I the value they create – is now embedded lesson of politics is to disregard the first am writing you explaining the situation.” in Koch corporate culture as the h
Too True Too lesson of economics.” In his leer, Koch listed several employ- dimension of MBM®, Incentives, and - Thomas Sowell ees by name, the amount he thought they Guiding Principle 10: Ful llment. 11 Charles Koch Perspective Chairman and CEO, Koch Industries, Inc.
Instead of dwelling As I wrote in my book: “ ere is no Given the barrage of criticism and misin- on what might hap- excuse for failing to take a critical action, formation we were subjected to last year, pen in 2012 – as so even in areas of shared responsibility.” it doesn’t take a gi of prophecy to know many people are Failure to take responsibility “can be that such aacks will only intensify and doing this time of devastating, as when a government increase this year. year – it is essential report is lled out improperly because In a perverse way, these aacks show that for all of us to focus the business leader, operations supervi- we are making progress, otherwise we on something at sor and compliance specialist all assume wouldn’t be criticized so much. least as important: someone else is responsible.” our MBM® Guiding You should know that we will remain Principles. If there are any gray areas involving com- steadfast in our support of economic pliance – things that might depend on freedom, and of the greatest possible Abiding by these interpretation or even opinion – we must prosperity for all Americans. principles should be especially careful. always be at the But our e orts to advance the cause of top of our to-do Cost of growth economic freedom will be diminished if we shoot ourselves in the foot by not list, but especially in the heated political Last year’s results con rmed we are do- paying aention to our principles. environment we’re seeing today. ing many things the right way. In fact, We are now – as we have been for many several of our businesses enjoyed record To-do list months – under intense scrutiny. Our results and signi - In addition to abiding by our Guiding critics include many policymakers It is essential that we cant growth. Principles, there are two things all of us who seek to punish their opponents at kind of growth can do to improve our future. for purely political reasons. attract employees typically leads to e rst is to elect leaders who under- In circumstances such as these, ac- who are committed job creation. stand the principles of economic freedom tions, not intentions, are what count. to our principles. According to an and will do their very best to implement No maer how well-intentioned independent study those principles as policymakers. we may be, if we are careless or make a last year, we already support at least e second is to keep pressure on them mistake, we make ourselves an easy target 203,000 jobs in the U.S. More jobs are to remain true to these principles. for our critics. on the way. What I said in my October 2010 Per- is has been true for many years. But in As of Jan. 1, 2012, we had more than spective editorial is still true: “If you today’s divisive environment, the conse- 2,500 open positions (200 of them inter- are concerned about creating jobs, quences of any mistakes are likely to be national) across all Koch companies. At growing our ampli ed even more. least one-third of these are new positions. economy and Getting started e essential challenge for our Human enhancing our MBM® Guiding Principles Our goal as a company is to create real, Resources team is not just hiring enough quality of life, long-term value for society, and to do so people, but hiring the right people – then you need 1 Integrity in a principled way. namely, those who not only have the to be concerned 2 Compliance talents and knowledge we require, but about electing at’s why our list of principles begins with candidates that 3 Value Creation integrity, followed by compliance. Both of who also share our values and vision. support economic 4 Principled these are required for true value creation. e right combination of virtues and tal- freedom.” ents is essential for success. Having one Entrepreneurship™ If we lack integrity or disregard laws and We must op- regulations, we not only won’t create without the other is not only insucient, 5 Customer Focus but potentially dangerous (especially if pose those who long-term value, we won’t be in business promote run- 6 Knowledge for very long. we hire talented people who lack virtue). away government 7 Change is is why, if you see a problem that needs What to expect spending, destruc- 8 Humility to be corrected, or have a genuine concern Despite the value we create, the jobs we tive overregulation about a possible compliance issue, you support, our many charitable contribu- and cronyism. 9 Respect must call aention to those issues. tions or the hundreds of awards we have It is not too early 10 Fulfillment Lack of authority is no excuse for inac- won in recent years, we remain a target to start doing your tion when it comes to compliance. of orchestrated aacks. homework.
12