Discovery MAY 2013

A clear leader

When tourists gaze at New York City from the observation deck of the Empire State Building, they are looking through specialized glass made by Guardian Industries. Guardian glass also adorns the Guggenheim Museum in Bilbao, Spain, and the tallest building in the world – the 160story Burj Khalifa in Dubai, UAE. Like Koch, Guardian is a privately held company. Last December, Koch Industries acquired a minority stake of about 45 percent in Guardian Industries.

THE QUARTERLY NEWSLETTER OF KOCH COMPANIES

such as specialized plastic coatings made at sites in the U.S. and Europe. Today, Guardian is the world’s leader in coated, value-added glass, including energy-efficient solar-control coatings. It is a truly global corporation with diversified products and nearly 1,000 patents.

If it ain’t broke...

On Jan. 1, Ron Vaupel, the former leader of Koch Industries’ business development group, became the president and CEO of Guardian Industries. Embracing change Guardian was on Ron Vaupel’s “radar screen” Many of the world’s most popular smartlong before he came to the company. phones, copiers and scanners rely on “I had been following Guardian IndusGuardian products. There’s also a good tries for at least eight years,” Vaupel said. chance the chrome-plated plastic parts “I felt Guardian’s culture and businesses on your favorite car, truck or washing would be a tremendous investment opmachine were made by Guardian. portunity for Koch.” But when the company was founded as During his first two months on the job, Guardian Glass Co. in 1932, its primary Vaupel visited more than 16 Guardian product was automotive glass, sold to plant sites in five countries, including Brazil, corporate customers in nearby Detroit Luxembourg and Russia. Most of that time and Flint, Mich. Years later, the company was spent listening and learning, and then acquired an automotive trim fabricator. sharing a vision for Guardian. In 1970, Guardian began manufacturing “Wherever I go, I have the same question float glass, a product made by literally for our employees,” Vaupel said. “First floating a layer of molten glass on a bath and foremost, I want to know how well of liquid tin. (A modern float glass plant, they understand Guardian’s vision and such as the one Guardian opened last No- their role in helping the company achieve vember, can produce 900 tons of flawless that vision. product per day.) “I’ve learned that behaving ethically while The 1980s and ‘90s brought further diversi- competing to win is very much a part fication into fiberglass insulation and build- of the Guardian way,” Vaupel said, “as is ing materials distribution, and the develop- entrusting people with responsibility for which they can then be held accountable.” ment of high-tech, value-added products,

this issue…

2012 Koch jobs report Original ideas

pg 2 pg 6

What’s next? Although he is now a Guardian employee, Vaupel often emphasizes a major focus area for Koch companies: innovation. “I’m always reminding employees that we need to improve continually, innovate and embrace change if we want to enjoy even more success,” Vaupel said.

Guardian, which made the glass for this stairway, has about 19,000 employees working in 22 states and 25 countries.

“When we talk about innovation, it’s not just about the latest coating at the Guardian Science & Technology Center. “Innovation is about how you come to work every day, about doing your job better and doing it more efficiently. “We do a lot of things very well,” Vaupel concluded, “but we still need to strive to improve everything we do. “Guardian Industries is a company that really knows how to create value. And I’m going to do everything I can to help it continue to succeed even more.” www.guardian.com

Carbon concerns pg 4 The President who could say “no” pg 7

Postal Pipeline KOCH COMPANIES 2012

JOBS & ECONOMIC IMPACT STUDY

KOCH COMPANIES 2012 JOBS AND ECONOMIC IMPACT STUDY 47,000+

143,000+

DIRECT JOBS

4.2B

INDIRECT JOBS

Through the years, Koch companies have experienced significant growth and today employ more than 47,000 people in all 50 United States and the District of Columbia.

6.7B

$

$

DIRECT COMPENSATION

This analysis, completed in January 2013 and based on data for the year ended December 31, 2012, was conducted by Harrah Analytics. It details the economic impact of Koch companies on the U.S. and individual state economies.

www.kochind.com/files/KochCompaniesJobStudy2012.pdf

INDIRECT & INDUCED COMPENSATION

NEARLY

200,000 $IIBILLION

TOTAL JOBS ACROSS ALL 50 STATES IES TR Y US CALL ND I H I TO R C KO S H I S ST E D HA INVE RE

%

TOTAL COMPENSATION & BENEFITS

90

S ING R N O I TS EA T OF K IN ES S C BA INES S BU

EACH KOCH COMPANY

JOB SUPPORTS

ABOUT THREE ADDITIONAL JOBS IN THE U.S.

TOP 10 STATES

6,972

Texas

Kansas

Wisconsin

2,897

Arkansas

2,624

Alabama

2,419

Oregon

2,232

South Carolina

2,092

Oklahoma

1,790

Virginia

1,607

37,679

10,344

9,214

12,268

10,265

7,611

6,023

5,674

Joel Schaefer Andover High School Andover, Kan.

Texas

$

$

Arkansas

211M

$

518M

461M

187M $

$

154M $ 340M

$

$

543M

DIRECT TOTAL DIRECT, INDIRECT & INDUCED

M MILLION B BILLION

142M $ 354M

132M $

384M

Data source: Harrah Analytics, data as of Dec. 31, 2012. Direct jobs include those at Koch companies in the 50 states and the District of Columbia. Total jobs were calculated using RIMS II multipliers produced by the U.S. Department of Commerce, Bureau of Economic Analysis. Shareholders and executives of Koch companies are not included in jobs totals.

2

To “like” and follow Koch companies and leaders – including Georgia-Pacific, INVISTA, Flint Hills Resources, Matador Ranch, Koch Pipeline and Charles Koch – visit Koch Industries’ Facebook and Twitter pages. Letters and other submissions become the property of Koch Industries, Inc., and may be reproduced in whole or in part, including your name, for any purpose and in any manner. Letters may be edited for length or clarity.

661M

191M $

Oregon

South Carolina

223M

$

$

2.08B

371M $ 597M

$

Wisconsin

Oklahoma

1.85B

628M $

$

Alabama

Minnesota

746M $

$

Kansas

6,459

2,827

$

Georgia

28,320

6,557

Today, my students and I were discussing aspects of the American Revolution. It was great how many of them recounted particular documents – including Common Sense, letters from a Pennsylvania farmer and the Declaration of Independence – when addressing the founding of our nation. I know the 50 students I bring to Saturday Academy have loved being able to attend this winter. They really enjoy the program. I want to express my appreciation for all that the Fred & Mary Koch Foundation has done for these unique opportunities. Thank you again for all the support!

COMPENSATION & BENEFITS

JOBS Georgia

The following letter is from a history teacher whose students attend weekend classes organized by the Gilder Lehrman Institute and sponsored by the Fred and Mary Koch Foundation. (See story, page 7.)

Discovery Editorial board Philip Ellender Rich Fink Jeff Gentry Dale Gibbens Greg Guest Charles Koch Jim Mahoney Dave Robertson

May 2013 | Volume 19 | Number 2 Questions? Comments? Contact: Rod Learned 316.828.6136 [email protected] Publication design Amber Vogts Koch Creative Group www.kochind.com

©2013, Koch Industries, Inc. Koch is an EOE. M/F/D/V

International News

Kingston – INVISTA has renewed its sponsorship of this popular Barcelona – One of Spain’s most famous fashion Westminster – Koch Membrane Systems has been honored recreation complex in eastern Ontario. designers and LYCRA® fiber celebrate 50 years together. for helping to keep Ireland “green.”

Canada – Ontario is home to three important INVISTA facilities: an air bag fiber manufacturing site, a research and development center and a specialty chemical manufacturing operation. With more than 900 employees working at those three sites, INVISTA is the largest industrial employer in eastern Ontario. But for citizens in the Kingston area, the company’s best-known site is the INVISTA Centre, a popular recreation facility. In March, Steve Kimpton, INVISTA’s Kingston site manager, announced the company is renewing its naming rights sponsorship for the INVISTA Centre, which the company originally sponsored in 2008, the year the facility opened. “Given the long-term vision for our Kingston site,” Kimpton said, “and the hundreds of INVISTA employees who enjoy using this regional recreation facility, we thought it was important to renew our corporate sponsorship.” The facility has four NHL-sized ice pads, a mini-rink, pro shop and an elevated gallery for viewing the skaters. The INVISTA Fitness and Wellness Centre, which adjoins the rink, is a popular workout site with more than 1,000 memberships. Just as INVISTA has a goal of reducing its overall energy intensity by 20 percent by 2020, the INVISTA Centre is also energy efficient. Its dressing rooms use radiant in-floor heating elements powered by energy captured from the rink refrigeration systems. Barcelona – Fashion designers thrive on creating something new. But at least one

famous designer, Andres Sarda, has relied on the same “secret ingredient” for 50 years. That special something is LYCRA® spandex, manufactured by INVISTA. Sarda was a forward-thinking textile engineer when he decided to use the elasticity of LYCRA® fiber to revolutionize the lingerie industry in Spain. He specified LYCRA® fiber when designing his first lingerie collection in 1962. It became immensely popular, and, ever since then, LYCRA® fiber has been a vital component in many of Sarda’s most famous swimwear and lingerie designs. “We are proud of having shared in a half-century of work by this very talented creator,” said Denise Sakuma, global marketing director for INVISTA Apparel. “We plan on saluting him throughout the year with a series of advertisements, promotions and exhibits.” INVISTA is also laying the groundwork for another celebration later this year: the 75th anniversary of nylon. Ireland – This island nation, nicknamed the Emerald Isle because of its lush green landscape, is even greener these days thanks to Koch Membrane Systems and one of its business partners. Last year, Dublin-based FDT Consulting Engineers & Project Managers suggested using KMS technology to see if water and carbon dioxide from various industrial waste streams could be cost-effectively recovered and reused. This experiment was partially funded by Ireland’s Environmental Protection

Agency. It involved testing industrial wastewater from various sources, including a brewery, dairy producer, snack food maker and pharmaceutical manufacturer. Using a KMS Laboratory Cell CF-1 membrane test unit, FDT was able to evaluate what type of process – microfiltration, ultrafiltration, nanofiltration or reverse osmosis – would produce the best results. In addition to constructing the test unit, KMS assisted FDT with the setup and provided recommendations for operating and cleaning the membranes and interpreting the test data. The experiment was so successful that FDT entered it in the annual Green Apple Award competition. These awards were established in 1994 as a way of recognizing and promoting environmental best practices worldwide. Out of more than 500 global entries, the FDT project was one of only four from Ireland to receive a Green Apple Award, presented in the House of Commons at the Palace of Westminster last November. Koch Membrane Systems and FDT have worked closely on similar projects before. One installation, at the second-largest brewery in Ireland, paid for itself in just 20 months. Almost 20,000 KMS systems have been installed worldwide, from Versailles to Sharm el-Sheikh. These installations are custom-designed to help customers reduce their water footprint, increase productivity, enhance safety and reduce costs. www.kochmembrane.com

3

What’s the best energy policy? Even though much of the world is still suffering from economic stagnation, most of us would agree that we still have a very high standard of living. Compared to previous generations, we are wealthier, healthier, have better technology, more mobility and many more opportunities for a better life. Several factors contribute to a higher standard of living, but one of the most important (and most often overlooked) is access to reliable and inexpensive energy. Affordable energy is essential for almost every aspect of our modern lives. Without it, we wouldn’t have many of the things we often take for granted. Affordable energy is needed to run the hospitals and laboratories that improve our health. It’s required to deliver electricity to our homes and put fuel in our vehicles. It also supports the millions of jobs associated with all of these things.

ing believe this change is directly attributable to the widespread use of fossil fuels. Because they believe further warming will have catastrophic effects, they have waged a war on carbon for many years. They have persuaded regulators to restrict carbon-based fuels in favor of subsidized alternative energy and encouraged policymakers to make fossil fuels more expensive in hopes of discouraging their use.

A matter of policy In 2009, some policymakers proposed new legislation called “cap-and-trade,” which would set a cap on carbon emissions and allow businesses to buy, sell or trade permits for emitting carbon. Due to its severe economic effects and the lack of proven benefits for the environment, the legislation was widely unpopular and failed to become law.

Vehicles with higher fuel efficiency are typically more expensive. They also tend to be smaller. For cash-strapped families with several children, this is a serious problem. Manufacturers have also tended to make cars lighter as a way of improving fuel efficiency, which can reduce a car’s safety in the event of an accident.

Truth and consequences Regulators have also changed the rules for stationary sources of emissions, including mills, manufacturing plants and refineries. The EPA now requires new and modified carbon-emitting sources to have permits from various agencies in addition to separate greenhouse gas requirements. These new requirements, coupled with lawsuits from non-governmental organizations, stop expansions that would create value for society and more good jobs.

Carbon concerns In general, the most affordable forms of energy come from fossil fuels, such as coal, oil and natural gas. Compared to these energy sources, alternative fuels such as solar and wind power are considerably more expensive (and less reliable). Burning fossil fuels to generate electricity or provide power necessarily releases carbon dioxide, or CO2 , into the atmosphere. Carbon dioxide, a gas, is what we exhale every time we breathe. Erupting volcanoes, decaying trees, wildfires and the animals on which we rely for food all emit CO2. This by-product, which is essential for plant life and an unavoidable aspect of human life, is at the center of today’s climate change controversies.

Degree of change There is a vigorous debate about what effects carbon emissions may or may not have on our future climate. Many scientists have estimated that the earth’s atmosphere has warmed by about 1.3 degrees Fahrenheit since 1880. Those who believe that increased CO2 emissions inevitably lead to global warm-

4

Corpus Christi – Although uncertainty surrounding potential cap-and-trade legislation requires Flint Hills Resources to evaluate its future capital needs constantly, FHR has already reduced per-barrel criteria air emissions at its refineries by 76 percent since 1997. That’s 64 percent better than peer refineries.

Instead of accepting this reality, the Administration decided to bypass Congress entirely and restrict emissions through regulations, which are rules that don’t require the approval of elected officials. The U.S. Environmental Protection Agency began restricting emissions from mobile sources such as cars, working with other agencies to require manufacturers to make more fuel-efficient autos. Although this might sound like a good idea, such a policy is loaded with unintended consequences.

The new rules also force manufacturers to use the most advanced (which usually means the most expensive) technologies.

Tale of two climates If the goal is really to reduce carbon emissions, it’s worth noting that the U.S. is doing a good job of achieving that goal without cap-and-trade programs. In Europe, where carbon cap-and-trade was imposed years ago, carbon emissions are actually up, not down. The same is true for European energy prices, which have become more expensive.

In April, the EU’s CO2 emissions-trading program was described as “on the brink of collapse,” as prices crashed by as much as 45 percent, dropping to record lows. In the U.S., which has no national cap-andtrade program, carbon emissions and energy prices are both down in recent years. Thanks to increased U.S. production, natural gas, which cost about $12 per million BTUs two years ago, now costs less than $4. U.S. crude oil prices are also down by more than $20 per barrel since 2011. Meanwhile, the U.S. economy is less sluggish than the recessionary economies of much of Europe. An article in the U.K. acknowledged how the recent boom in U.S. shale oil and natural gas production has already had “profound” effects. London’s Daily Telegraph noted that increased production of these fossil fuels in the U.S. is “creating hundreds of thousands of jobs, significantly adding to GDP and contributing tens of billions of dollars in federal, state and local taxes.” Instead of celebrating these developments, state and federal regulators in the U.S. keep trying to impose new and more restrictive carbon regulations. Considering the numerous and extensive environmental laws already in place, it’s easy to wonder why any additional carbon legislation – such as cap-andtrade – would be necessary.

Know your numbers

For those who prefer higher taxation to spending cuts, having an entirely new source of revenue is an appealing way to reduce the deficit. Unfortunately, taxing carbon, as with all taxes, only takes more resources from the private sector to support a swelling federal government.

Does this sound fair? A recent study by NERA Economic Consulting analyzed the probable effects of a U.S. carbon tax that starts at $20 per ton and then rises 4 percent per year (which is in line with recent proposals). If such a tax were imposed, the study estimated that more than 1.3 million U.S. jobs would be lost this year alone and that workers’ incomes would eventually drop as much as 8.5 percent. Such a tax would also decrease household consumption, due to the increased cost of goods. In Arkansas, for example, the average household would have to pay 40 percent more for natural gas, 13 percent more for electricity and more than 20 cents per gallon extra for gasoline. And that’s just in 2013. Costs would rise even more in subsequent years. For those living paycheck-to-paycheck, price hikes like these (coupled with higher payroll taxes) can only mean lower standards of living and less opportunity.

Immediately eliminating all CO2 emissions in the U.S. would only reduce global temperatures a negligible 0.08° C by 2050. But the damage to our economy and the well-being of American families would be enormous.

All too often state and federal proposals to tax carbon directly or launch new carbon cap-andtrade schemes have much more to do with raising revenue than helping our environment. Even with the so-called seSources: Intergovernmental Panel on Climate Change; Science and Public Policy Institute questration, total U.S. spending has not gone down, but taxes have certainly gone up. Families that spend a bigger portion of their household income on transportaAs of Jan. 1, a U.S. household making tion, utilities and household goods are $50,000 a year pays about $1,000 more in taxes. That isn’t nearly enough to erase the hurt, not helped, by carbon taxes and cap-and-trade rules that make traditional $1.3 trillion U.S. budget deficit, let alone forms of energy more expensive. the $16 trillion national debt.

April 2013 – Although the U.S. Senate recently voted down a carbon tax (again), several policymakers still want to impose one.

Almost everyone is hurt by these higher costs – the exception being those few who benefit from subsidies.

A better approach At a time when robust economic growth has been lacking, it makes no sense to burden essential industries and millions of households with even higher costs and bureaucratic hurdles. As several Koch companies have shown, there is a better way. By focusing on more efficient use of energy, it is possible to lower emissions without imposing even more environmental restrictions. INVISTA is an excellent example. That company is agressively pursuing a goal of reducing its energy intensity by 20 percent by the year 2020. Flint Hills Resources has already reduced its refinery emissions by 76 percent since 1997. Of the 50 largest refineries in the U.S., FHR refineries rank first, seventh and sixteenth for lowest criteria air emissions per barrel. For 2010 (the most recent year for which complete data are available), those emissions were 64 percent lower than the average among peer refiners. As Sheryl Corrigan notes in her Perspective editorial on page 8, Georgia-Pacific has cut sulfur dioxide emissions by almost half since 2000. Koch companies are now among the best in the world at using fewer resources while producing more and better goods. That approach is not just good business, it’s good stewardship and a much better strategy for improving the quality of life for all. scienceandpublicpolicy.org/originals/state_by_state.html

5

Original ideas An April 1 announcement about Koch investing in a greeting card company was no April Fool’s joke. It was just the latest example of Koch Industries’ investment capability in action.

company. “They’re looking for help solving a problem, like the need for extra liquidity to grow or the expertise to go global. “Because we’re entrepreneurial, privately held and well-capitalized,” Feilmeier said, “we can respond quickly to those requests.”

Building blocks

American Greetings’ brands include Gibson and Carlton Cards, Papyrus stores and licensed characters such as Strawberry Shortcake, Hollie Hobby and Care Bears.

According to Steve Feilmeier, CFO for Koch Industries, a KII subsidiary, AG Invesment, LLC, has made a preferred equity investment of about $240 million in American Greetings Corporation. If, as expected, the $878 million buyout deal closes this summer, American Greetings will once again be privately held by its founders, the Weiss family, who established the business in 1906 and took it public in 1952. “We committed this equity capital because we think the Weiss family are excellent managers and innovators,” Feilmeier said. “We also saw this transaction as a mutually beneficial opportunity. “That’s what true origination is all about – building relationships and finding new opportunities to help create value.”

All or nothing?

6

There was a time, not so long ago, when it seemed Koch companies would never consider a transaction that resulted in less than a majority stake – or, at the very least, half-ownership. “In the old days,” Feilmeier admitted, “our approach was usually to own and control, but now we’re much more willing to make substantial minority investments. He says many of the counterparties approaching Koch don’t want to sell their

Anyone who has read Charles Koch’s book, The Science of Success, knows about Koch’s foray into commercial real estate in the late 1970s and early ‘80s. What most people don’t know is that Koch is back in the commercial real estate market. Koch Asset Management Group, based in Scottsdale, Ariz., and Koch Equity Investments have made more than a billion dollars’ worth of real estate investments from coast to coast in the U.S. According to Chris Robertson, managing director of real estate for KAMG, these projects range from newly built office space in Santa Clara, Calif., to renovated apartments in Orlando, Fla. “In Denver, our invesment fund bought a high-rise office building and completely refurbished it,” Robertson said. “It’s now fully leased and will soon be sold.” Another project involves building a series of apartments in Alabama, near the Birmingham Country Club. Those will replace some very dated units built in the 1940s. Paying attention to the wants and needs of customers has been essential. “Apartment tenants in Orlando said they wanted to replace the tennis courts, which were largely unused, with a pool and workout facility. So that’s what’s happening.”

Enviable position Koch’s investment capability relies on several important advantages, including access to capital and the ability to make decisions quickly with minimal bureaucracy. But those advantages are not enough. “We try to align with like-minded management teams and be problem solvers,” said Matt Flamini, president of Koch Equity Development. “This requires listening to the needs of counterparties and being flexible with investment structures.”

Flamini said the ultimate goal is to structure an investment that meets the needs of the counterparty and provides an appropriate return for the risk Koch is assuming. “Our flexibility often sets us apart from other investors. “Once you’ve defined your acquisition or investment strategy,” Flamini added, “it’s really about getting the message to the marketplace, proactively meeting with potential investment candidates and listening willingly, so we can be problem-solvers.” Flamini contrasts Koch’s approach with those who try to line up several prospective buyers for a business or asset in hopes of bidding up the purchase price. “That’s unlikely to produce any real value, especially in today’s environment of artificially low interest rates,” Flamini said. “Far too many companies are willing to overborrow and then overspend.” “To conduct our business successfully,” Feilmeier concluded, “we’ve got to apply MBM® to everything we’re doing. “We need to continually work at listening to and understanding our customers in order to anticipate and profitably satisfy their needs.”

Koch Asset Management has invested in real estate transactions ranging from office space in Silicon Valley (above) to apartments in Orlando (below).

Looking Back

Too True

Coolidge by Amity Shlaes Among its notable accomplishments, this book is a reminder that many of the issues Americans wrestle with today have been around for decades. Banking issues, a volatile stock market, dangerous deficits, a push for new entitlements, double-digit unemployment, special treatment for special interests – Calvin Coolidge faced them all. Shlaes’ biography of the 30th U.S. President (1923-1929) is also a reminder that it is possible to address such issues successfully. Coolidge accomplished something that seems impossible for today’s politicians. He cut the actual size of the federal budget while simultaneously establishing policies that allowed the U.S. economy to grow. When Calvin Coolidge was unexpectedly sworn in as President, there was a federal deficit. By the time he voluntarily left office, there was a surplus. Shlaes has called Coolidge “our great refrainer” and “the President who could say no.” He resisted higher taxes, bigger budgets and costly entitlements – even when they were popular with voters. Many historians have dismissed the 1920s as a frivolous or extravagant era that set up the Great Depression. In reality, the 1920s were largely a time of innovation, growth and opportunity. It was also a time when one man, leading by example, could accomplish a great deal. www.amityshlaes.com

“I am for economy. After that I am for more economy.” – Calvin Coolidge

Photos courtesy GLI

Noteworthy

This photo of the White House was taken in 1862 by famed Civil War photographer Matthew Brady.

Handling history The Gilder Lehrman Institute of American History was founded in 1994 to develop the study and love of American history, and a respect for the founding principles of the United States. Anthony Napoli, the Institute’s director of education (and a former inner-city school teacher), has a unique way of helping GLI achieve that goal. “We’re all about using primary source documents, rather than textbooks, to teach history.”

for Kansas teachers and special classes for students featuring materials developed by GLI. (See letter on page 2.) According to Susan Addington, community relations manager for the Fred and Mary Koch Foundation, GLI does an exceptional job. “When you see more than 200 high school students repeatedly show up for three hours of extra class time on a Saturday,” Addington said, “that’s a pretty strong indicator the program is worthwhile.” These Saturday Academies are often Secret weapon devoted to subjects that teachers don’t have Nearly 70,000 documents, photographs time to cover in class. In many cases, GLI and other historic items are preserved in the Gilder Lehrman Collection. More than has been able to tailor resources in support 60,000 of these are available to view online. of a topic chosen by a school district. In 2011, First Lady Michelle Obama The items range from a hand-colored presented the Gilder Lehrman Saturday engraving of the Boston Massacre by Paul Academy Program with the National Arts Revere to a letter from a Titanic survivor, and Humanities Youth Program Award, scribbled while still at sea. the nation’s highest honor for out-of-school The oldest item in the collection is a letter, arts and humanities programs. written in Latin, from Christopher Colum“We’ve also seen a terrific response from bus to Queen Isabella of Spain. teachers for our Foundation-sponsored “Many of these items are on display at the GLI seminars,” Addington said. “Most New York Historical Society or on loan teachers, whether from public, private or to museums across the U.S.,” Napoli said, parochial schools, appreciate the opportu“but their real value comes when we put nity to ‘dive deep’ on important subjects, them in the hands of students and teachers. such as the history of freedom of speech.” “If you’re trying to understand what slavery “Thanks to the Fred and Mary Koch was really like or what people were really Foundation and others, we have more saying during the Great Depression, we than 2,800 schools affiliated with our procan provide the photos, letters and docugrams,” Napoli said, “including programs ments that bring those issues to life. ” in Atlanta, Houston and the Twin Cities. Koch connection “That creates a lot of opportunities to give our collection a real workout.” Since 2006, the Fred and Mary Koch  www.gilderlehrman.org Foundation has sponsored workshops

7

By Sheryl Corrigan Perspective Senior vice president – FHR renewables operations and EH&S In 1994, my husband and I took our newborn son and his great-grandma to the beach in Bayport, Minn., for a swim. At the end of our day, she told me how happy and thankful she was to see her great-grandson playing in the water she had avoided for most of her life. Eighty years earlier, she recalled, the water was “dirty and smelly,” polFrom 2003 through the luted from wastesummer of 2006, Corrigan was water and runoff, commissioner of the Minnesota with trash floating Pollution Control Agency. downstream. Today, that same beach is a popular gathering site and recreational resource for the entire region.

Tipping point That was a great day for our family, but especially for me, as it showed me that successful environmental stewardship can, and should, make people’s lives better. It was also a significant driver in my decision to accept a leadership position at the Minnesota Pollution Control Agency. Working at the state’s environmental regulatory agency gave me a chance to observe and learn about the most successful approaches to stewardship. Perhaps the most important lesson I learned had to do with vision. Regardless of what policy, regulation or initiative the agency was working on, if there was a clear vision about the desired outcome and all parties involved agreed there was value in the vision, the approach was generally successful. But if the vision wasn’t shared or there was disagreement regarding its value, the stewardship effort usually failed. These outcomes shouldn’t surprise anyone who works at a Koch company, as vision and incentives are two of the five dimensions of our MBM® framework. During my time at the MPCA, Flint Hills Resources was actively and effectively ad-

8

vancing environmental stewardship efforts in Minnesota. Here was a company that “walked the talk” and let its environmental performance speak for itself. It was through those interactions with FHR that I learned about MBM and Koch’s Guiding Principles and how the application of both led to good stewardship. I now know that Koch has a long history of environmental stewardship (dating all the way back to Fred Koch in the 1920s) that has changed people’s lives for the better. That’s why Koch was at the top of my list when it came time to seek a role in the private sector.

Instead of integrating vision, virtue and talents, knowledge processes, decision rights and incentives when addressing environmental issues, policymakers tend to focus on just one thing – their own agenda – without considering adverse secondary consequences. That agenda is usually whatever is popular or politically correct. Having good data and measurement systems to support any policy is critically important. Unfortunately, very few knowledge systems are perfect, which is why policymakers tend to default to their own agenda instead. Climate change policy is a sobering exWalking the talk ample of this. Because the incentives for Since 1997, Flint Hills Resources’ refiner- all those involved in developing climate ies have reduced average per-barrel criteria change policy are not aligned, getting the air emissions by 76 percent. best data to our decision-makers hasn’t been successful or sufficient. In 2004, FHR earned a Clean Air Award from the U.S. Environmental Protection The consequences of this (not just for Agency for reduced flaring and emissions. Koch, but society as a whole) are twofold. In 2000, FHR refineries averaged almost First, what used to be a robust discourse two hours of flaring per day. In 2012, on how to further stewardship efforts for flaring at Pine Bend Refinery totaled just air, land and water quality has now been reduced to a single topic: climate. six-and-a-half hours for the entire year. Second, As for other Koch resources companies, at “Koch has a long history of could Georgia-Pacific, environmental stewardship that has that be applied sulfur dioxide emissions have changed people’s lives for the better.” to more pressing been reduced by local needs – such as rebuilding outdated almost half since 2000. Total suspended wastewater treatment plants – have been solids in wastewater have been cut by 38 hijacked to support the climate drumbeat. percent since 2005. GP Harmon Recycling helps recover and Time for reflection reuse millions of tons of wastepaper used Today, when I look at my 19-year-old son, by GP and other companies. I still think about that day on the beach. I Last year, six INVISTA sites received am just as committed to driving environawards for perfect EH&S performance. mental excellence now as I was then. In addition, Koch’s Matador Ranch won a Great-grandma would probably be proud 2012 EH&S Excellence award for its water that I am working for a company that conservation efforts in Texas. has demonstrated its commitment to the environment in so many ways over so Shifting policies many years. If we use an MBM perspective to look at But I can’t help wondering what she our country’s environmental decisionmaking, it’s not hard to see why so many would think about our nation’s blinkered focus on climate change. policies and programs have failed to achieve the desired results.

http://www.kochind.com/Operations_Excellence/