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> The Dodge brothers owned 10% of Ford and opposed this and took Ford to court because they wanted the payments to be able to start their own company. They won

> The Dodge brothers owned 10% of Ford and opposed this and took Ford to court because they wanted the payments to be able to start their own company. They won and Ford was not allowed to lower prices or raise salaries at the company thus enshrining maximising shareholder value into law. Is maximizing shareholder value really law now ? Just trying to understand if CEOs are legally responsible to return maximum share of profits to shareholders.

jurassic 4y ago
Whether it's law or not, the board will fire them if they don't make shareholders the top priority.
- tschellenbach 4y ago
  happened to a friend of mine. he didn't want to fire people fast enough and was sacked.
  - jacquesm 4y ago
    I'd say good for him.
- astrange 4y ago
  https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans https://www.businessroundtable.org/business-roundtable-redef... https://www.businessinsider.com/tim-cook-versus-a-conservative-think-tank-2014-2 https://www.businessinsider.com/tim-cook-versus-a-conservati... How many of these people have been fired?
zaphar 4y ago
Law in the sense that there is legal precedence from court cases, yes. Law in the sense that there are literal statutes saying so, no. Sadly, both matter.
- astrange 4y ago
  There is not such precedence. There sort of is precedence that you have to say you're doing it, but you can implement that by basically doing anything you want. It is true that you can sue a company for securities fraud if they do essentially anything that you can claim made the share value go down, but that doesn't mean you'll win.
mindcrime 4y ago
Is maximizing shareholder value really law now ? Just trying to understand if CEOs are legally responsible to return maximum share of profits to shareholders. Well... that's a slightly complicated question. It's definitely not quite as simple as "companies must maximize profit to the exclusion of all other concerns". But while directors and executives are given wide latitude to run the company according to their judgment, they don't have carte blanche to do "whatever they want" either. More to the point, while a company as a whole can do more than simply "maximize profit to the exclusion of all else", the caveat seems to be that they can do so if the owners (eg the shareholders) agree. From the SCOTUS decision in the Hobby Lobby case: While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. For-profit corporations, with ownership approval, support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives. Many examples come readily to mind. So long as its owners agree, a for-profit corporation may take costly pollution-control and energy-conservation measures that go beyond what the law requires. A for-profit corporation that operates facilities in other countries may exceed the requirements of local law regarding working conditions and benefits. If for-profit corporations may pursue such worthy objectives, there is no apparent reason why they may not further religious objectives as well. The question I see then, is how much influence a single shareholder can truly yield based on this principle. That is, of course, assuming they don't single-handedly hold a controlling share of the company to the point that they can simply replace the board with whoever they want and enforce any arbitrary edict. Given a publicly traded company, it seems clear that some shareholders are going to want the "maximize my stock value at any expense" while others are going to go for more of a "do the humanitarian thing and treat (employees|the environment|whatever) well" or such-like. See: https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3943559 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3943559 https://corpgov.law.harvard.edu/2021/12/01/dodge-v-ford-what-happened-and-why/ https://corpgov.law.harvard.edu/2021/12/01/dodge-v-ford-what... https://caselaw.findlaw.com/us-supreme-court/13-354.html https://caselaw.findlaw.com/us-supreme-court/13-354.html https://web.archive.org/web/20130603013056/https://www.brookings.edu/~/media/research/files/papers/2012/6/18%20corporate%20stout/stout_corporate%20issues.pdf https://web.archive.org/web/20130603013056/https://www.brook... https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. https://en.wikipedia.org/wiki/Shareholder_primacy https://en.wikipedia.org/wiki/Shareholder_primacy
fsckboy 4y ago
civil law, you've heard that you can sue anybody for anything? You can... ...but the thing that makes such a "tort" lawsuit matter is damages, what damage did I do to you that you are now suing me. Like, if you're a pedestrian and I hit you with my car, your lawsuit against me depends on showing a monetary value for how I damaged you, for example, days of lost work. If you weren't injured, and went on about your day, week, month and life, you weren't damaged and there's no grounds for the lawsuit, even though my gross negligence could have damaged you 9 times out of 10. (This is an example to make a different point, we are going to ignore "emotional distress", etc.) if you're a shareholder and I am the CEO and I have the company pursue goals that don't maximize the value of your shares, that cost resources and don't have a chance of maximizing shareholder value, when I could have, I have monetarily damaged you.
anonymouskimmer 4y ago
The linked wikipedia article directly contradicts the medium article on this. With respect to the Dodge decision, could other Ford shareholders have sued the Dodge brothers for forcing Ford to yield dividends once the Dodge brothers then used those dividends to undercut the value of Ford stock by creating a competitor? Or do minority shareholders not have a duty to other minority shareholders the way majority shareholders do?

jurassic 4y ago

Whether it's law or not, the board will fire them if they don't make shareholders the top priority.

tschellenbach 4y ago
happened to a friend of mine. he didn't want to fire people fast enough and was sacked.
- jacquesm 4y ago
  I'd say good for him.
astrange 4y ago
https://www.businessroundtable.org/business-roundtable-redefines-the-purpose-of-a-corporation-to-promote-an-economy-that-serves-all-americans https://www.businessroundtable.org/business-roundtable-redef... https://www.businessinsider.com/tim-cook-versus-a-conservative-think-tank-2014-2 https://www.businessinsider.com/tim-cook-versus-a-conservati... How many of these people have been fired?

zaphar 4y ago

Law in the sense that there is legal precedence from court cases, yes. Law in the sense that there are literal statutes saying so, no. Sadly, both matter.

astrange 4y ago
There is not such precedence. There sort of is precedence that you have to say you're doing it, but you can implement that by basically doing anything you want. It is true that you can sue a company for securities fraud if they do essentially anything that you can claim made the share value go down, but that doesn't mean you'll win.

mindcrime 4y ago

Is maximizing shareholder value really law now ? Just trying to understand if CEOs are legally responsible to return maximum share of profits to shareholders. Well... that's a slightly complicated question. It's definitely not quite as simple as "companies must maximize profit to the exclusion of all other concerns". But while directors and executives are given wide latitude to run the company according to their judgment, they don't have carte blanche to do "whatever they want" either. More to the point, while a company as a whole can do more than simply "maximize profit to the exclusion of all else", the caveat seems to be that they can do so if the owners (eg the shareholders) agree. From the SCOTUS decision in the Hobby Lobby case: While it is certainly true that a central objective of for-profit corporations is to make money, modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so. For-profit corporations, with ownership approval, support a wide variety of charitable causes, and it is not at all uncommon for such corporations to further humanitarian and other altruistic objectives. Many examples come readily to mind. So long as its owners agree, a for-profit corporation may take costly pollution-control and energy-conservation measures that go beyond what the law requires. A for-profit corporation that operates facilities in other countries may exceed the requirements of local law regarding working conditions and benefits. If for-profit corporations may pursue such worthy objectives, there is no apparent reason why they may not further religious objectives as well. The question I see then, is how much influence a single shareholder can truly yield based on this principle. That is, of course, assuming they don't single-handedly hold a controlling share of the company to the point that they can simply replace the board with whoever they want and enforce any arbitrary edict. Given a publicly traded company, it seems clear that some shareholders are going to want the "maximize my stock value at any expense" while others are going to go for more of a "do the humanitarian thing and treat (employees|the environment|whatever) well" or such-like. See: https://www.nytimes.com/roomfordebate/2015/04/16/what-are-corporations-obligations-to-shareholders/corporations-dont-have-to-maximize-profits https://www.nytimes.com/roomfordebate/2015/04/16/what-are-co... https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3943559 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3943559 https://corpgov.law.harvard.edu/2021/12/01/dodge-v-ford-what-happened-and-why/ https://corpgov.law.harvard.edu/2021/12/01/dodge-v-ford-what... https://caselaw.findlaw.com/us-supreme-court/13-354.html https://caselaw.findlaw.com/us-supreme-court/13-354.html https://web.archive.org/web/20130603013056/https://www.brookings.edu/~/media/research/files/papers/2012/6/18%20corporate%20stout/stout_corporate%20issues.pdf https://web.archive.org/web/20130603013056/https://www.brook... https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co https://en.wikipedia.org/wiki/Dodge_v._Ford_Motor_Co. https://en.wikipedia.org/wiki/Shareholder_primacy https://en.wikipedia.org/wiki/Shareholder_primacy

fsckboy 4y ago

civil law, you've heard that you can sue anybody for anything? You can... ...but the thing that makes such a "tort" lawsuit matter is damages, what damage did I do to you that you are now suing me. Like, if you're a pedestrian and I hit you with my car, your lawsuit against me depends on showing a monetary value for how I damaged you, for example, days of lost work. If you weren't injured, and went on about your day, week, month and life, you weren't damaged and there's no grounds for the lawsuit, even though my gross negligence could have damaged you 9 times out of 10. (This is an example to make a different point, we are going to ignore "emotional distress", etc.) if you're a shareholder and I am the CEO and I have the company pursue goals that don't maximize the value of your shares, that cost resources and don't have a chance of maximizing shareholder value, when I could have, I have monetarily damaged you.

anonymouskimmer 4y ago

The linked wikipedia article directly contradicts the medium article on this. With respect to the Dodge decision, could other Ford shareholders have sued the Dodge brothers for forcing Ford to yield dividends once the Dodge brothers then used those dividends to undercut the value of Ford stock by creating a competitor? Or do minority shareholders not have a duty to other minority shareholders the way majority shareholders do?