Bill and Charles Koch Fight for Power

Koch Power Struggle As Luthans et al. (2015) show, “trust building matches the principles of empowerment” (p. 325), and in the Koch family, trust was very highly prized. For Bill, trust was lost when he constantly went against Charles in every decision that he made (Haneberg, 2012). Bill’s source of power within Koch Industries was coercive and when he stopped having any sort of influence, he was ousted.

Charles’ power was more legitimate—because he had an important role in the company and was a real decision maker—i.e., people depended on his words and actions for their livelihood (Bauer & Erdogan, 2012), and his power was also based on the concept of expert power: he demonstrated leadership, knowledge, ability, and strategic oversight—all of which are essential elements of legitimate and expert power (Bauer & Erdogan, 2012).

At the same time, he had coercive power—meaning that he could take away someone’s job or role in the business (like Bill’s) if he felt there was too little compliance on the latter’s part. For that reason, Charles expected conformity and he himself was also more willing to engage in conformity and he expected it of his younger brother too.

Conformity was really key to understanding the Koch issues, and as a basis of being accepted by the power brokers in the family (for instance, the father), one had to be willing to conform to the ideas and expectations that were dictated from the top (Bauer & Erdogan, 2012). Charles was willing to do that and Bill was not.

Bill complained about how money was spent, was always dissatisfied with his cut (dividends were never enough, and even after he was bought out from the company he came back and sued, arguing he was bought out for too little and deserved more money). His main source of power was simply the fact that he was part of the Koch family—but when his antics began to wear on the much more business-minded Charles, Bill was finally sent packing and his power dissipated in an instant.

It was, in short, more ephemeral than real. Few in the business were dependent upon Bill or relied upon him to do anything. His voice was of little consequence and the only real input he ever had was negative and self-serving, and so Charles realized that Bill was expendable and that the business would be better served if Bill were simply out of the way. Because Bill lacked dependency power (and because he was short-sighted and motivated by greed), he could be bought out—for a while.

One of Charles’ main influence tactics in his battle for control was to cultivate a strong support network, which is a good way to be influential in business (Bauer & Erdogan, 2012). Charles had the company’s core interests in mind and was respected by stakeholders—especially since he was willing to put money back into the company (instead of simply handing it out to Bill whenever Bill desired it).

For this reason, Charles was also much more adept at making allies than was Bill, whose whole attitude was more self-centered than it was other-centered (which is why he was ultimately a problem for the business in the first place).

Charles had the presence of mind to know that if you wanted to succeed you had to be on the right side of the power and he understood implicitly that power was ultimately rooted in the people within in and around the business and not solely just in his name or in his relation to his father. Therefore, Charles never ruffled feathers with his father or with those in the business who could serve as support network members.

Bill on the other hand, did not realize where real power comes from: he assumed that his position in the family, his standing as a Koch son, was enough to give him power—enough to make his voice be heard. He felt that if he wanted things a certain way, it should be done that way and there was no more to it than that. He did not take into consideration how his ideas would impact stakeholders or how the business might benefit or suffer as a result.

His viewpoint was narrow and his objectives were typically limited towards being pleasing to himself. Both brothers were willing to use hardball tactics, however—which means they were willing to dispense with negotiations and get the law involved if necessary (Bauer & Erdogan, 2012).

With so many billions of dollars at stake this is not surprising, and considering the bad blood within the family that stemmed from individuals taking sides and clashing to the point that they were cut out of their father’s will, the issue of trust being lost is what gave way to the use of hardball tactics in the end: for Bill there was simply no other method of recourse left. Other influence tactics that were used were pressure, consultation, exchange, and coalitions.

Charles was fond of building coalitions and putting pressure on those who disagreed with him, just like his father was. However, there was some degree of exchange and consultation that went into play to see if the hardball tactics could be avoided. When it became evident that neither Bill nor Charles were going to meet eye to eye on the matter, the influence tactics became harsher and more severe quite quickly and with great gusto.

What ultimately led to Charles Koch’s victory in this battle was his ability to show that he had legitimate power, that he had demonstrated fairness in the buyout of his brother from the business, and that he had a strong coalition and network of support within the family and business that would back him up.

Bill was more vulnerable to pressure and appeared more unsympathetic in the light of events as his track record of being self-centered and aloof in terms of the business’s activities did not reflect kindly on his character or on his power base. The most important lessons on organizational power that can be learned from reading about this power struggle are that before engaging in a power struggle, one should carefully weigh one’s chances of winning.

It is just like entering into any other fight or kind of contest. One looks at the advantages of the other side and one studies one’s own advantages.

This is how negotiators enter into a negotiation—however, had Bill actually been willing to negotiate, or even simply to give a little bit more of himself to the family and the business’s interests instead of always trying to be in a position where he could make demands though he did not really hold any legitimate power because he never really conformed to the ideals of the family, the whole power struggle might have been avoided in the first place.

Thus, if one is going to engage in a power struggle, one should definitely have a good reason for doing so—i.e., one should be confident that one’s power in the first place is legitimate and based on real need. If others are dependent upon you or if you have some kind of expert power that you can bring, then you may have a good deal of power to back your cause.

If, on the other hand, your power is largely imagined and is not really supported by a strong network or by a coalition, there really is no reason for you to enter into a power struggle at all because you will lose. A power struggle is not just a contest of personalities—it is a contest of realities. The reality in this case was that Charles was more attenuated to the needs of the Koch business.

He understood how to deal with stakeholders and he had a vested interest in conforming to the parameters that had been established by his father and the other business leaders within Koch Industries. Charles was not a spoiled brat or a type of charlatan business leader. He wielded influence and he was held.