Koch v. Cato

Yesterday the Washington Post‘s “ThinkTanked” blog reported that Charles and David Koch have filed a lawsuit to take control of the Cato Institute, the nation’s most prominent libertarian think tank.  Although it is a non-profit, as initially incorporated, Cato is effectively owned  by a board of shareholders.  Until recently, this board consisted of Cato President and founder Ed Crane, Charles Koch, David Koch, and the late William Niskanen, each holding equal shares in the corporation.  According to the Kochs’ complaint, when Niskanen died his shares should have been returned to the corporation, giving the Kochs majority control on the board of shareholders.   Instead, the shares were transferred to Niskanen’s widow, Kathryn Washburn.

The lawsuit has already generated substantial commentary.  Here is a fuller Washington Post story, background from David Weigel (drawing on Brian Doherty’s history of the libertarian movement, and commentary by Jane Mayer of the New Yorker (who has a thing about the Kochs).   The Kochs maintain their suit is simply about enforcing the shareholder agreement.  The Post quotes Charles Koch saying ““We support Cato and its work.  We want to ensure that Cato stays true to its fundamental principles of individual liberty, free markets, and peace into the future, and that it not be subject to the personal preferences of individual officers or directors.”  Cato’s Crane and Cato Chairman Bob Levy charge the suit is about transforming Cato into a less independent and more political (if not also more partisan) institution.  Others speculate the suit could have its roots in a longstanding feud between Crane and one or both of the Koch brothers.

Whatever the merits of the Kochs’ claim, I cannot understand how their actions can, in any way, advance the cause of individual liberty to which they’ve devoted substantial sums and personal efforts over the years.  Even assuming their legal claim has merit, a legal victory will permanently injure the Cato Institute’s reputation.

Many libertarian-leaning organizations receive money from the Kochs and their foundations and are attacked on this basis.  Such attacks can be deflected, as financial support is not the same thing as control.  But if the Koch brothers themselves represent the controlling majority of an organization’s board, that organization is, by definition, a Koch-run enterprise.  Progressive activists and journalists will have a field day with this.  They will forevermore characterize the Cato Institute as “Koch-controlled” — and, as a legal matter, they will be correct.  No efforts to re-establish the Institute’s credibility or independence will overcome this fact.

The Koch brothers may well have legitimate concerns about how the Cato Institute is managed.  I don’t know.  They may have good ideas about how to make the Institute more effective.  Again, I don’t know.  From my perspective, it seems that Cato’s work nicely complements the efforts of more activist organizations the Kochs support, but I may not see the whole picture.  That’s not the point. Even if one assumes that the Kochs have better ideas for how Cato should direct its resources, know more about how to advance individual liberty, and are correct that the Institute is too ” subject to the personal preferences of individual officers or directors,” any benefit from whatever changes they could make will be outweighed to the permanent damage to Cato’s reputation caused by turning it into a de facto Koch subsidiary.  In short, they will have destroyed the Cato Institute to save it.


[DISCLOSURE: Some twenty-plus years ago I interned at the Cato Institute, I currently serve on the academic advisory board of the Cato Supreme Court Review, and have written articles for various Cato publications, including Regulation, for which I received payment.  I am also working on a book manuscript in which the Institute has expressed interest.  I have also spoken at various Koch-sponsored programs, for which I received modest honoraria, and have solicited and received grants for projects from the Charles Koch Foundation, the most recent of which funded this roundtable (but for which I received no compensation).]

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