company. The Georgia-Pacific team was allowed to remain the Georgia-Pacific team and allowed to retain the bulk of what they considered to be their corporate culture. They did not dress in the Koch uniform of button-down shirts with no tie and possibly a blazer. Koch Industries had never taken such a soft touch with another corporate culture. There was a looseness to the process that was new.
But drastic change came quickly, and it was driven by the force of debt. The executive suites on the fifty-first floor of the Georgia-Pacific tower, which Hannan thought were “too lavish,” were dismantled almost right away. The executives were kicked out of their offices and sent down to the fiftieth floor. The corner office of the previous Georgia-Pacific CEO, A. D. “Pete” Correll, was cleared out and turned into a meeting room. The desk, the furniture, and the art on the walls were replaced with a meeting table surrounded by unremarkable black office chairs. It looked no nicer than any meeting room in any suburban office park in Kansas, although with a nicer view. The executive dining room was emptied out and turned into a meeting space where managers could book events with clients.
Hannan moved to Atlanta and bought a house. Within a year, he was promoted to replace Moeller as the CEO of Georgia-Pacific, directly overseeing the biggest investment that Charles Koch had ever made. He was forty-one years old.
Hannan’s office on the fiftieth floor of the Georgia-Pacific tower was modest but well appointed, with a big desk and a small conference table surrounded by tasteful wooden chairs. He would spend more than a decade as CEO of the company, finding ways to manage Georgia-Pacific in a fashion that spun off enough cash to pay off its debt while also giving his two most important shareholders a satisfactory return on their investment.
In 2016, there was one item in Hannan’s office that told an important story. On the polished wood credenza directly across from Hannan’s desk, he had prominently displayed a paper Dunkin’ Donuts coffee cup. It’s an odd piece of décor. It was cheap, and it was a constant reminder of one of Hannan’s biggest business failures. Early in his tenure, Hannan led a $200 million acquisition of a paper company in California called Insulair, which made the Dunkin’ Donuts cup. The cups had special insulation, and Georgia-Pacific planned to sell them to big chains like 7-Eleven. The deal was a flop. It turned out the cups were too expensive for convenience stores, and Insulair was sold off.
Hannan liked to keep that failure at the front of his mind. He could look over and see the cup at any moment when he was on the phone or writing a memo. He cherished the uneasy feeling it created. It kept him on edge, and this was the key to thriving in the private equity economy. The heavy debt required ever-better performance and leaner operations. The pressure to achieve this never stopped. It was transmitted from Charles Koch, to Jim Hannan, to the cadre of executives who worked around him.
Then, perhaps most importantly, it was transmitted down the chains of command to the ground level of Georgia-Pacific. This is where middle-class Americans were making a living during the 2000s. The pressure affected everyone there, on the ground level, even if they didn’t fully understand where it was coming from.
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I. About $73 million of this price was Georgia-Pacific’s debt that Koch assumed with the purchase.
II. It is unclear how much of this sales price was financed by debt and how much in cash, because Koch Industries was not obligated to report that figure. However, in 2009, almost five years after the acquisition, Koch reported that Invista was carrying roughly $2.6 billion in debt. That year, Koch paid down $1.6 billion of that debt.
III. Koch perpetually competed with the food-and-grain-processing giant Cargill for this distinction. Cargill would later overtake Koch in the rankings and remained number one. Koch executives privately said that outside analysts almost always failed to capture Koch Industries’ full size, and erroneously counted Cargill as being larger—which suited Charles Koch just fine.
CHAPTER 16
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The Dawn of the Labor Management System
(2006–2009)
When Koch Industries bought Georgia-Pacific, it inherited a network of giant paper mills and timber operations scattered throughout the mountains and valleys of the Pacific Northwest. The mills in Oregon and Washington were connected by an economic circulatory system of rivers that carried barges full of timber, wood chips, and finished paper