This is the Cato Daily Podcast for Monday, June 25, 2012. I'm Caleb Brown. The Cato Institute has in principle ended a dispute with two of its

shareholders Charles and David Koch. I spoke with Cato's Chairman Bob Levy about the change.

From 1977 to about right now,

how has Cato been structured?

Well, Cato was co-founded by Ed Crane and Charles Koch

in the 1970s.

And Ed Crane put up management skills

and Charles Koch put up the seed capital.

Beginning in the late 70s, Cato was structured as a stockholder corporation.

This is very unusual for a non. We had four shareholders and the

shareholders had as their function the election of the Board of

Directors. Now in the nonprofit world if you're a stockholder

corporation it doesn't mean that the stockholders own the assets. It doesn't mean

that they have a personal share in the donations. What it does mean is they get to elect the board of directors and that's

the way Cato was structured. That's unusual but it's not impermissible. It's permitted

under federal law, it's permitted under the law of Kansas where Cato was incorporated.

For 30 years, our stockholders didn't meet.

And so essentially, the stockholders did not fulfill their obligation to elect directors.

Instead, our directors elected themselves.

We had a self-perpetuating board and indeed that's

the usual structure of nonprofits. Nonprofits are usually controlled by what's

called members and the members in most cases are the directors

...