A Possible Alternative Solution to the Cato vs. Koch Conflict

Many supporters of the Cato Institute in its conflict with the Kochs claim that the latter are trying to transform Cato into a partisan outfit that is less libertarian than the current Cato, and acts to promote the interests of the Republican Party. They worry that the Kochs will stack the Cato board of directors with conservatives, Koch employees, and GOP operatives. The Kochs, for their part, vehemently deny any intent to change Cato’s mission, arguing that they filed suit against Cato only because the Institute’s current leadership violated the Kochs’ shareholder rights. Personally, I am skeptical of claims that the Kochs want to turn Cato into a shill for the GOP. However, I still think that the Koch lawsuit is ill-advised for both public relations and substantive reasons.

The easiest way to address the critics’ concerns would be for the Kochs to drop their lawsuit. But there is another option as well. The Kochs could announce that if they win the suit, they will appoint board members who are well-known independent libertarian academics, policy experts, and activists and are not Koch employees. These people would need to be clearly libertarian and widely respected in their fields. I have in mind big-name libertarian scholars and commentators such as Tyler Cowen, Richard Epstein, Virginia Postrel, and co-blogger Randy Barnett.

Their commitment to libertarianism and longstanding differences with conservatives would assuage any concern that Cato is about to turn conservative or become a cats-paw for the GOP. Their scholarly orientation would ensure that Cato remains an organization focused on ideas and in-depth policy analysis rather than day-to-day partisan politics. And their independence and strong intellectual and academic reputations would make it difficult for any fair-minded observer to conclude that they are merely tools of the Kochs.

If I understand the Institute’s unusual legal structure correctly, the shareholders retain the power to remove board members. So skeptics could still claim that the Kochs intend to replace the independent libertarian board members with conservatives or GOP operatives at some later date. But they would suffer substantial public relations damage if they tried such a purge. Still, if there is a widespread belief that further safeguards are needed, the Kochs could act to change the shareholder agreement and give Cato a more conventional nonprofit structure under which the board is self-perpetuating rather than chosen by shareholders. As I understand it, this could be done by a unanimous agreement of the shareholders. And the non-Koch shareholders would likely be amenable to such a change should the Kochs succeed in their lawsuit. If I am wrong about the legal details here, I welcome correction from people who know more about the relevant law than I do.

Obviously, such an announcement would not resolve the legal dispute between Cato and the Kochs; nor would it completely eliminate all the bad blood between the two sides. But it would go a long way towards addressing the concerns of the libertarian community, and ensuring that Cato remains a politically independent, intellectually serious voice for libertarianism regardless of who wins the legal battle. It would also give weight to the Kochs’ contention that their purpose in filing the lawsuit was to protect their shareholder rights rather than alter Cato’s mission. By quelling the perception that they intend to transform Cato into a fundamentally different institution, the Kochs would also reduce the likelihood that many of Cato’s top scholars and staff would depart in the event of a Koch victory, thereby leaving the putative victors in control of an asset that has lost much of its value.

CONFLICT OF INTEREST WATCH: I described my connections to the two sides in this dispute here.