Yes and Not Yes

The American interviews Charles Koch, the CEO of Koch Industries, the largest privately owned company in the U.S.  Some facts about the size of the company: for starters, if it were a public company, Koch would rank about 16th on the Fortune 500 list, ahead of Proctor & Gamble and Boeing.  And since Kock joined the company, the value of Koch Industries has risen 2,000-fold, compared with 110-fold for the average S&P 500 firm.  Quite impressive. 

The interview itself, though not as in-depth as I had hoped it would be is still very illuminating.

THE AMERICAN: Charles, why have you never gone public?

It is very difficult to do what we do as a public company. By being private, we can focus almost solely on maximizing long-term value and applying our philosophy of principled entrepreneurship.

A public company has to cope with the extreme focus of the analysts and the equities market on quarterly earnings. Somebody misses quarterly earnings projections by a penny, and their stock goes down 10 percent.

Another concern of a public company is to have a high price-to-earnings ratio. This causes all sorts of weird behavior. For example, you cannot be in certain businesses that are considered cyclical or out of favor with Wall Street. You have to handle your business in just the right way with steadily increasing quarterly earnings. Also, the public wants vision that can be grasped in sound bites, and not all companies work that way.

More companies are going private. Is increased regulation driving the trend?

Yes, plus litigiousness. We had class-action lawsuits against us in our acquisition of Georgia-Pacific, claiming that we did not disclose enough or misled investors. We put everything in the documents. They were like a doctoral thesis, but still, we were hit with strike suits to see if lawyers could extract something from us.

Investment bankers told us, “Gosh, you only got two suits. Usually, we have four or five, and we pay them all off.” Well, we did not pay any of it because we would be paying blackmail. It feeds on itself.

Please read the full thing.