Executive Summary

One Percent Is Not Enough

David A. Koch
Chairman & CEO of Graco Incorporated

July 1994

Why did our ancestors leave their home and family to travel to the New World? Why do people still come here today?

In 218 years, the people of our country have established the highest standard of living in the world, along with the most personal freedom. This is due to our form of government and a market system economy. We are all fortunate to have benefited from these two powerful systems.

Many have fought and died to protect our system of government and way of life. It would seem appropriate that we who have benefited from those efforts should understand and perpetuate our system for future generations. One key ingredient in that effort is determining the role of business in our society.

Why did our legislators in the early years decide to allow corporations to exist? I believe the purpose was to serve the most people possible by producing high quality, cost effective goods and services. The conclusion was that this would best be accomplished by private ownership and management.

I'm sure the early framers of our government and commerce had all stakeholders in mind when they passed this legislation--not just the stockholders. I'm convinced that they concerned themselves with the benefit to be derived for employees, customers, and the communities in which the corporations existed, as well as providing tax revenues to the government and profit to the shareholders.

This valuable franchise that businesses have cannot be taken for granted in a democracy where 50 percent plus one can change things. We in business exist at the will of the people and must be vitally concerned about how we are viewed.

Corporations should be encouraged to generate wealth and to invest and share it wisely. That investment takes many forms, and includes recognizing the importance of community and the people that live there. How can businesses impact people's lives most efficiently? One way is by sharing our earnings with worthwhile charitable organizations.

The federal government allows tax deductions for corporations of up to 10 percent of pre-tax income. Unfortunately, the national average for charitable contributions is closer to one percent pre-tax. So, we in business communicate by our actions that people need to look to government and tax revenues to satisfy human service needs rather than looking to corporations or individuals. We have learned from experience that government agencies inefficiently perform these tasks. Ultimately, we all pay through ever increasing taxes.

Minnesota corporations have been leaders in supporting non-profit organizations through the Keystone Program, encouraging contributions at or above the two- percent level. However, to perpetuate our system of government and support for a market system, privately owned, for-profit organizations will have to do more-- more in educating the public on the vital importance of generating wealth, and more in innovatively investing and using that wealth.

We in Minnesota have a fine tradition of leadership in this area. As the beneficiaries of our forefathers' efforts, it is up to us to build upon that tradition. We will all be measured by how well we do.

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