Dodge V. Ford Motor Company - Significance

Significance

See also: Shareholder value and Squeeze out

This case is frequently cited as support for the idea that "corporate law requires boards of directors to maximize shareholder wealth." The following articles attempt to refute that interpretation.

"Among non-experts, conventional wisdom holds 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. This was not and is not the law. Shareholder wealth maximization is a standard of conduct for officers and directors, not a legal mandate. The business judgment rule protects many decisions that deviate from this standard. This is one reading of Dodge. If this is all the case is about, however, it isn’t that interesting."

The contested actions of Henry Ford that led to this decision can also be viewed as a conscious attempt 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 to fuel their growth. In that context, the Dodge decision is viewed as 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 rule, however, Ford was given considerable leeway via control of his board about what investments he could make. That left him with considerable influence over dividends, but not as complete control as he wished.

As a result of this decision, Ford ended up resorting to threatening to set up 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 be used to expand the Dodge Brothers Company.

Read more about this topic:  Dodge V. Ford Motor Company

Other articles related to "significance":

North Uxbridge School - National Register Listing
... Uxbridge Historic Significance Architecture/Engineering Architect, builder, or engineer Cutting,Carlton Cutting Architectural Style Italianate, Colonial ...
Grantsmanship - Significance
... The significance of projects seeking funding can be divided into four categories theoretical, methodological, applied, or social ... A project with an applied significance provides answers to real-world problems ... something useful and valuable have social significance ...
Kaupina - Religious Significance
... “ ” Sri Shankaracharya It has religious significance attached to asceticism for the Hindus ... a verse called Kaupina Panchakam to assert the significance of asceticism ...
Significance

Significance can refer to: with purpose and importance

  • Meaning
    • In semiotics, the meaning assigned to a sign
  • Significance (magazine), a magazine published by the Royal Statistical Society and the American Statistical Association
  • Significance (policy debate), a stock issue in policy debate
  • Significant figures or significant digits, the precision of a numerical value
  • Statistical significance, the extent to which a result is unlikely to be due to chance alone
Fizeau Interferometer - Fizeau's Ether-drag Experiment - Significance
... According to the theories prevailing at the time, light traveling through a moving medium would be dragged along by the medium, so the measured speed of the light would be a simple sum of its speed through the medium plus the speed of the medium ... Fizeau indeed detected a dragging effect, but the magnitude of the effect that he observed was far lower than expected ...

Famous quotes containing the word significance:

    Of what significance the light of day, if it is not the reflection of an inward dawn?—to what purpose is the veil of night withdrawn, if the morning reveals nothing to the soul? It is merely garish and glaring.
    Henry David Thoreau (1817–1862)

    Politics is not an end, but a means. It is not a product, but a process. It is the art of government. Like other values it has its counterfeits. So much emphasis has been placed upon the false that the significance of the true has been obscured and politics has come to convey the meaning of crafty and cunning selfishness, instead of candid and sincere service.
    Calvin Coolidge (1872–1933)

    The hypothesis I wish to advance is that ... the language of morality is in ... grave disorder.... What we possess, if this is true, are the fragments of a conceptual scheme, parts of which now lack those contexts from which their significance derived. We possess indeed simulacra of morality, we continue to use many of the key expressions. But we have—very largely if not entirely—lost our comprehension, both theoretical and practical, of morality.
    Alasdair Chalmers MacIntyre (b. 1929)