Ford Motors Closely Held Company Under Henry Ford. Sjares Held by Family
| Dodge v. Ford Motor Visitor | |
|---|---|
 A Ford Model T | |
| Court | Michigan Supreme Court |
| Full case proper noun | John F. Contrivance and Horace East. Dodge v. Ford Motor Company et al |
| Decided | February 7, 1919 (1919-02-07) |
| Citation(s) | 204 Mich. 459, 170 North.W. 668 (Mich. 1919) |
| Courtroom membership | |
| Judges sitting | Main Justice John E. Bird, Justices Flavius L. Brooke, Grant Fellows, Frank C. Kuhn, Joseph B. Moore, Russell C. Ostrander, Joseph H. Steere, John W. Rock |
| Example opinions | |
| Conclusion by | Ostrander |
| Concur/dissent | Moore |
| Keywords | |
| |
Dodge five. Ford Motor Company , 204 Mich. 459, 170 North.West. 668 (Mich. 1919)[1] is a case in which the Michigan Supreme Courtroom held that Henry Ford had to operate the Ford Motor Visitor in the interests of its shareholders, rather than in a charitable manner for the benefit of his employees or customers. It is often taught every bit affirming the principle of "shareholder primacy" in corporate America, although that teaching has received some criticism.[2] [three] At the same time, the instance affirmed the business judgment rule, leaving Ford an extremely wide latitude virtually how to run the visitor.
In the 1950s and 1960s, states rejected Dodge repeatedly, in cases including AP Smith Manufacturing Co v. Barlow [iv] or Shlensky v. Wrigley.[5] The general legal position today is that the business judgment that directors may practise is expansive. Management decisions will not be challenged where one tin can point to any rational link to benefiting the corporation as a whole.
Facts [edit]
Past 1916, the Ford Motor Company had accumulated a majuscule surplus of $60 million. The toll of the Model T, Ford's mainstay production, had been successively cut over the years while the wages of the workers had dramatically, and quite publicly, increased. The visitor's president and majority stockholder, Henry Ford, sought to terminate special dividends for shareholders in favor of massive investments in new plants that would enable Ford to dramatically increase production, and the number of people employed at his plants, while continuing to cutting the costs and prices of his cars. In public defense of this strategy, Ford declared:
My ambition is to employ however more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. To do this we are putting the greatest share of our profits back in the business.
While Ford may have believed that such a strategy might exist in the long-term do good of the company, he told his swain shareholders that the value of this strategy to them was not a main consideration in his plans. The minority shareholders objected to this strategy, demanding that Ford cease reducing his prices when they could barely fill orders for cars and to continue to pay out special dividends from the capital surplus in lieu of his proposed plant investments. 2 brothers, John Francis Contrivance and Horace Elgin Dodge, owned ten% of the company, among the largest shareholders next to Ford.
The Court was chosen upon to decide whether the minority shareholders could prevent Ford from operating the company for the charitable ends that he had declared.
Judgment [edit]
The Michigan Supreme Courtroom held that Henry Ford could not lower consumer prices and raise employee salaries.
Notably, obiter dicta in the stance written by Russell C. Ostrander argued that the profits to the stockholders should exist the primary concern for the visitor directors. Because this company was in business for turn a profit, Ford could not plow it into a charity. This was compared to a spoliation of the company's assets. The court therefore upheld the order of the trial court requiring that directors declare an extra dividend of $19.3 million. It said the post-obit:
A business corporation is organized and carried on primarily for the turn a profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to reach that end, and does not extend to a alter in the end itself, to the reduction of profits, or to the non-distribution of profits among stockholders in order to devote them to other purposes...
Significance [edit]
As a direct effect of this conclusion, Henry Ford threatened to ready a competing manufacturer as a way to finally compel his adversaries to sell back their shares to him. Subsequently, the money that the Dodge brothers received from the case would exist used to expand the Dodge Brothers Company.
Ford was too motivated by a desire to squeeze out his minority shareholders, especially the Dodge brothers, whom he suspected (correctly) of using their Ford dividends to build a rival car company. By cutting off their dividends, Ford hoped to starve the Dodges of capital letter to fuel their growth.[six] In that context, the Dodge decision is viewed equally a mixed result for both sides of the dispute. Ford was denied the ability to arbitrarily undermine the profitability of the firm, and thereby eliminate future dividends. Under the upheld business judgment dominion, however, Ford was given considerable leeway via control of his board almost what investments he could make. That left him with considerable influence over dividends, but non complete control as he wished.
This case is frequently cited equally support for the thought that corporate law requires boards of directors to maximize shareholder wealth. However, one view is that this estimation has not represented the police force in most states for some time.
Among not-experts, conventional wisdom holds that corporate law requires boards of directors to maximize shareholder wealth. This common but mistaken conventionalities is most invariably supported by reference to the Michigan Supreme Courtroom'southward 1919 opinion in Dodge v. Ford Motor Co.
—Lynn Stout[2]
Dodge is often misread or mistaught every bit setting a legal rule of shareholder wealth maximization. This was non and is not the law. Shareholder wealth maximization is a standard of conduct for officers and directors, non a legal mandate. The business organisation judgment rule [which was also upheld in this determination] protects many decisions that deviate from this standard. This is one reading of Dodge. If this is all the case is well-nigh, however, information technology isn't that interesting.
—M. Todd Henderson[iii]
Still, others, while agreeing that the case did not invent the idea of shareholder wealth maximization, found that it was an authentic argument of the law, in that "corporate officers and directors accept a duty to manage the corporation for the purpose of maximizing profits for the do good of shareholders" is a default legal dominion, and that the reason that "Dodge v. Ford is a rule that is hardly always enforced past courts" is not that information technology represents bad case law, simply because the business judgement dominion means:
the rule of wealth maximization for shareholders is about impossible to enforce as a practical matter. The rule is aspirational, except in odd cases. Every bit long every bit corporate directors and CEOs claim to be maximizing profits for shareholders, they will be taken at their word, because it is impossible to refute these corporate officials' self-serving assertions about their motives.
—Jonathan Macey[7]
See also [edit]
- U.s.a. corporate law
- Grimshaw five. Ford Motor Co.
- Corporate social responsibility
- Shareholder primacy
Notes [edit]
- ^ 170 North.West. 668 (Mich. 1919).
- ^ a b Stout, Lynn A. (2007-09-xviii). "Why We Should Cease Pedagogy Dodge v. Ford". Police-Econ Research Paper No. 07-eleven. UCLA School of Police force. SSRN 1013744.
- ^ a b Henderson, Thou. Todd (Dec 2007). "Everything Sometime is New Once more: Lessons from Dodge 5. Ford Motor Company". Olin Working Paper No. 373. University of Chicago Police Schoolhouse. SSRN 1070284.
- ^ 39 ALR 2nd 1179 (1953)
- ^ Shlensky v. Wrigley , 237 N.E. 2d. 776 (Sick. App. 1968)., a adjust over the decision not to build baseball ground lights to allow games to exist played at nighttime-time
- ^ Hodak, Marc (Autumn 2007). "The Ford Squeeze-Out". New York Academy. SSRN 1011924.
- ^ Macey, Jonathan R. (2008-01-01). "A Close Read of an Excellent Commentary on Dodge five. Ford". Virginia Constabulary & Business Review.
References [edit]
- Stout, Lynn A. (2007-09-xviii). "Why We Should Stop Educational activity Contrivance v. Ford". Law-Econ Inquiry Paper No. 07-11. UCLA School of Law. SSRN 1013744.
Source: https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.
0 Response to "Ford Motors Closely Held Company Under Henry Ford. Sjares Held by Family"
Post a Comment