Dodge v. Ford Motor Co.

The price of the Model T, Ford's mainstay product, had been successively cut over the years while the wages of the workers had dramatically, and quite publicly, increased.

In public defense of this strategy, Ford declared: My ambition is to employ still 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.

The minority shareholders objected to this strategy, demanding that Ford stop 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.

Notably, obiter dicta (a non-binding remark) in the opinion written by Russell C. Ostrander argued that the profits to the stockholders should be the primary concern for the company directors.

The discretion of directors is to be exercised in the choice of means to attain that end and does not extend to a change in the end itself, to the reduction of profits or to the nondistribution of profits among stockholders in order to devote them to other purposes.As a direct result of this decision, Henry Ford threatened to set up a competing manufacturer as a way to finally compel his adversaries to sell back their shares to him.

This case is frequently cited as support for the idea that corporate law requires boards of directors to maximize shareholder wealth.

This common but mistaken belief is almost invariably supported by reference to the Michigan Supreme Court's 1919 opinion in Dodge v. Ford Motor Co.Dodge is often misread or mistaught as setting a legal rule of shareholder wealth maximization.