I love the Cato Institute. I admire the Kochs and greatly appreciate their contributions to libertarian causes. I have ties to both sides too numerous to bore readers with. So I’m distressed that they are at odds. Here’s my small contribution to the debate:
(1) In one sense, the Kochs had no choice but to file their lawsuit, given that the two sides couldn’t come to terms on a modification of the shareholder agreement. The point of that agreement, poorly drafted as it was, was obviously to ensure that Cato remained true to its libertarian mission by vesting personal control in particular stakeholders. But let’s say that Bill Niskansen’s widow was a closet socialist, and the Cato board had declined to buy back Niskansen’s shares thinking she was a Cato-style libertarian. Think about John Kerry coming into Republican Senator Heinz’s fortune via Theresa, and you can see the potential problem. Apparently, before the lawsuit, negotiations had broken down over whether and how to modify the shareholder agreement. Without knowing each side’s position in those negotiations, I’m not in a position to judge who was acting unreasonably.
(2) The Kochs made a huge error in nominating some directors without strong libertarian credentials (Hinderaker, Olson), and others with direct ties to the Kochs (including Olson, who does legal work for them). This falls short of proof that the Kochs either want to “take over” Cato, or change its direction in any significant way, but it’s a p.r. disaster that clearly strengthens Crane’s hand in the court of public opinion.
(3) Cato claims that David Koch and a couple of directors expressed their dissatisfaction that Cato doesn’t act in a more partisan matter. That’s not terribly surprising from David, given his funding of Americans for Prosperity. But it’s brother Charles who strikes me as the more doctrinaire libertarian (he’s certainly the one who has been more involved in “movement” libertarianism over the years), and, as the one who co-founded Cato, likely the one much more involved in pursuing this dispute. I very much doubt Charles wants Cato to be substantially different than it is now, though it’s well-known that he and Crane are at odds on a somewhat personal level, as well as to some extent on management. (‘m sure that Charles would like Cato to institute objective measures of its success and influence, consistent with his market-based management philosophy. That may or may not be a sound idea, but it’s not indicative of a change in ideology or non-partisanship.) The problem, though, is that the way the shareholder agreement is currently structured, it’s entirely possible that David could wind up being in sole control of Cato upon Charles’s death. This makes Cato’s concerns about the effect of a successful lawsuit on its ultimate direction quite reasonable.
(4) Given all this, and the fact that both sides have not-crazy reasons for what they are doing, I hope a compromise can be found that gives the Kochs a say in Cato commensurate with their contribution to the organization over the years (which, to my mind, clearly suggests a minority stake), while still preserving Cato as Cato. Better yet, if the well hasn’t been poisoned, I would love to see the outcome of reconciliation between the two sides. Some informal mediation undertaken by high-profile libertarians with ties to both sides may help, given what clearly is an atmosphere of mutual recrimination and suspicion. Also, I like Ilya’s idea, below.