Dodge v Ford - Case Brief PDF

Preview

Summary

Case Brief...

Description

Dodge v. Ford Motor Co. Michigan Supreme Court 1919 Procedural History: Lower court ordered payment of a special dividend and enjoined Ford from engaging in activities that would lessen the value of shareholders shares purposefully. Ford appealed.

Facts: Ford ceased special dividends in 1916 even though it was increasingly profitable. All future profit would be invested into lowering the price of the product and growing the company, the board ratified this. Aimed to run the company in a way that benefits the whole community, but consequently lessens the profitability of the company thus harming the shareholders. Dodge bros (minority holders) sued to reinstate the dividend and stop the goal of betting the community through Ford’s operations. Issue: Can a company choose to stop paying dividends and instead invest its profits in the communities in which it is active? Holding: No. Reasoning: A business corporation is organized and carried on primarily for the benefit of the stockholders. The company’s efforts and practices should be targeted to meet that specific end, and the company cannot change the end itself. Thus, the use of profits to meet another end (community aid) instead of benefitting the stockholders cannot be permitted. Primary purpose cannot be to benefit others besides the shareholders. Thus the lower court is affirmed. Issues with this case today: What time frame does “profitable” mean, long term or short term? Judges are not business experts, and the expansion of Ford motor company and this could merely be a business strategy for long term prosperity or in anticipation of future markets or competition....