Dodge v. Ford Motor Company, 204 Mich. 459, 170 N.W. 668. (Mich. 1919), was a famous case in which the Michigan Supreme Court held that Henry Ford owed a duty to the shareholders of the Ford Motor Company to operate his business for profitable purposes as opposed to charitable purposes. // Case citation is the system used in common law countries such as the United States, England and Wales, Canada, New Zealand, Australia and India to uniquely identify the location of past court cases in special series of books called reporters or law reports. ... The Michigan Supreme Court is the highest court in the State of Michigan, that is the court of last resort. ... 1919 (MCMXIX) was a common year starting on Wednesday (see link for calendar). ... The Michigan Supreme Court is the highest court in the State of Michigan, that is the court of last resort. ... Henry Ford (1919) Henry Ford (July 30, 1863 – April 7, 1947) was the founder of the Ford Motor Company and father of the modern assembly line used in mass production. ... A shareholder or stockholder is an individual or company (including a corporation) that legally owns one or more shares of stock in a joint stock company. ... Ford Motor Company is one of the largest automobile manufacturers in the world. ... A charitable organization (also known as a charity) is a trust, company or unincorporated association established for charitable purposes only. ...

Facts

In 1916, the Ford Motor Company earned surpluses in excess of $100,000,000.00. The company's president and majority stockholder, Henry Ford, sought to stop declaring dividends for investors, and instead cut prices below the price for which they could actually sell cars, while at the same time increasing the number of persons employed by his company. Ford said that he wanted to increase the number of people who could afford to buy his cars. He stated: 1916 (MCMXVI) was a leap year starting on Saturday (link will take you to calendar). ... Ford Motor Company is one of the largest automobile manufacturers in the world. ... This article or section does not cite its references or sources. ...

"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. To do this we are putting the greatest share of our profits back in the business."

Minority shareholders objected, demanding that Ford continue to charge higher prices in order to pay them larger dividends. Dividends are payments made by a company to its shareholders. ...

Issue

The Court was called upon to decide whether the minority shareholders could prevent Ford from operating the company for the charitable ends that he had declared.

Opinion of the Court

The Court held that a business corporation is organized primarily for the profit of the stockholders. The discretion of the directors is to be exercised in the choice of means to attain that end, and does not extend to the reduction of profits or the nondistribution of profits among stockholders in order to benefit the public, making the profits of the stockholders incidental thereto.

Because this company was in business for profit, Ford could not turn it into a charity. This was compared to a spoilation of the company’s assets. The court therefore upheld the order of the trial court requiring that directors declare an extra dividend of $19 million. Ford Motor Company is one of the largest automobile manufacturers in the world. ...