Dodge v. Ford Motor Co.

Dodge v. Ford Motor Co.
Decided 1919
Full case nameJohn F. Dodge and Horace E. Dodge v. Ford Motor Company et al
Citation(s)204 Mich 459; 170 NW 668 (1919)
Court membership
Judges sittingChief Justice John E. Bird, Justices Flavius L. Brooke, Grant Fellows, Frank C. Kuhn, Joseph B. Moore, Russell C. Ostrander, Joseph H. Steere, John W. Stone
Case opinions
Decision byOstrander
Keywords

Dodge v. Ford Motor Co., 204 Mich 459; 170 NW 668 (1919),[1] is a case in which the Michigan Supreme Court held that Henry Ford had to operate the Ford Motor Company in the interests of its shareholders, rather than in a manner for the benefit of his employees or customers. It is often taught as affirming the principle of "shareholder primacy" in corporate America, although that teaching has received some criticism.[2][3] At the same time, the case affirmed the business judgment rule, leaving Ford an extremely wide latitude about how to run the company.[citation needed]

The general legal position today (except in Delaware, the jurisdiction where over half of all U.S. public companies are domiciled and where shareholder primacy is still upheld[4][5]) is that the business judgment that directors may exercise is expansive.[citation needed] Management decisions will not be challenged where one can point to any rational link to benefiting the corporation as a whole.

  1. ^ 204 Mich 459 (Mich 1919).
  2. ^ Stout, Lynn A. (September 18, 2007). "Why We Should Stop Teaching Dodge v. Ford". Law-Econ Research Paper No. 07-11. UCLA School of Law. SSRN 1013744.
  3. ^ Henderson, M. Todd (December 2007). "Everything Old Is New Again: Lessons from Dodge v. Ford Motor Company". Olin Working Paper No. 373. University of Chicago Law School. SSRN 1070284.
  4. ^ Micheletti, Edward; Gerber, Marc; Atkins, Peter (February 21, 2019). "Social Responsibility and Enlightened Shareholder Primacy: Views from the Courtroom and Boardroom". The Harvard Law School Forum on Corporate Governance. Retrieved May 27, 2022.
  5. ^ Berger, David J. (February 14, 2017). "In Search of Lost Time: What If Delaware Had Not Adopted Shareholder Primacy?". Rochester, NY. doi:10.2139/ssrn.2916960. SSRN 2916960. {{cite journal}}: Cite journal requires |journal= (help)