3 ms·

It's not that they are interested in providing as much value possible - they are legally mandated. [1] [1] - https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_

by snarfy 8y ago

It's not that they are interested in providing as much value possible - they are legally mandated. [1] [1] - https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co.

aerotwelve 8y ago
Dodge v. Ford is only precedent in Michigan. Even within Michigan, it's my understanding that the decision is outweighed by the business judgement rule[1], which contradicts any mandate of shareholder primacy. [1] https://en.m.wikipedia.org/wiki/Business_judgment_rule https://en.m.wikipedia.org/wiki/Business_judgment_rule
falcolas 8y ago
Other court cases have shown that shareholder value is not solely profits. Shareholder value is also obtained by creating a company that will survive and thrive over time - it's why Target and Costco can both survive while paying reasonable wages to their employees.
jcranmer 8y ago
That case doesn't mean what most people who bring it up want it to mean, particularly as has been interpreted by 100 years of intervening case law. In that case, Henry Ford had more or less admitted that he was attempting to screw over specific shareholders. As it is applied in modern practice, a corporate officer merely has to articulate a rationale of why his/her actions benefit the shareholders. For example, deciding to double every worker's salary, on the basis that it would improve morale and productivity, could be seen as ultimately benefiting shareholders, even if it tanks profits and dividends in the short-term. Pretty much the only way you could actually get the Dodge v Ford case invoked in precedent is to have someone on the stand admit that he/she was trying to screw over shareholders (which is basically what Henry Ford did, and why he lost the case), which should be impossible if that person has competent representation.

3 ms·

It's not that they are interested in providing as much value possible - they are legally mandated. [1] [1] - https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_

by snarfy 8y ago

aerotwelve 8y ago
Dodge v. Ford is only precedent in Michigan. Even within Michigan, it's my understanding that the decision is outweighed by the business judgement rule[1], which contradicts any mandate of shareholder primacy. [1] https://en.m.wikipedia.org/wiki/Business_judgment_rule https://en.m.wikipedia.org/wiki/Business_judgment_rule
falcolas 8y ago
Other court cases have shown that shareholder value is not solely profits. Shareholder value is also obtained by creating a company that will survive and thrive over time - it's why Target and Costco can both survive while paying reasonable wages to their employees.
jcranmer 8y ago
That case doesn't mean what most people who bring it up want it to mean, particularly as has been interpreted by 100 years of intervening case law. In that case, Henry Ford had more or less admitted that he was attempting to screw over specific shareholders. As it is applied in modern practice, a corporate officer merely has to articulate a rationale of why his/her actions benefit the shareholders. For example, deciding to double every worker's salary, on the basis that it would improve morale and productivity, could be seen as ultimately benefiting shareholders, even if it tanks profits and dividends in the short-term. Pretty much the only way you could actually get the Dodge v Ford case invoked in precedent is to have someone on the stand admit that he/she was trying to screw over shareholders (which is basically what Henry Ford did, and why he lost the case), which should be impossible if that person has competent representation.