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Corporations must operate in the interests of their shareholders but business judgment that directors may exercise is expansive, at least in the state of Delawa

Corporations must operate in the interests of their shareholders but business judgment that directors may exercise is expansive, at least in the state of Delaware. Meaning they can sponsor a little league team but most certainly can't raise wages, lower prices, and cut dividends (Ford v. Dodge). In turn, they can't go so far as to knowingly compromise safety in pursuit of saving a few bucks per unit (Grimshaw v. Ford).

dml2135 3y ago
> but most certainly can't raise wages, lower prices, and cut dividends (Ford v. Dodge) Can you summarize this case? I don’t understand why corporations would be prevented from doing this. Couldn’t you always make the case that lowering prices or increasing wages are in the long term interest of shareholders, with the goal of increasing market share?
- maxwell 3y ago
  I'm not a law talkin' guy or member of any bar cartel.
  - maxwell 3y ago
    That said, it sounds like Henry Ford expressed that he wanted to hire more people, make up for lower prices with more volume, and invest in more plants, but seemed also motivated by cutting off dividend payments to the Dodge bros. Their payments had reached a megadollar a year, after initially putting in 10 kilobucks for 10%, and Ford correctly suspected they were using the payments to fund a rival car company. Courts ruled he couldn't cut off dividends so he bought everybody out.
sofixa 3y ago
> In turn, they can't go so far as to knowingly compromise safety in pursuit of saving a few bucks per unit (Grimshaw v. Ford). Boeing execs that got away with negligence that killed people are laughing all the way to their golden toilets.
brookst 3y ago
As GGC points out, Ford v. Dodge was about anticompetitive practices, not arbitrary increases to wages. Companies are 100% free to double wages at random. It is possible shareholders will sue (“everything is securities fraud”), but that’s a dispute about whether the action was in the best interests of shareholders in the long term. It remains 100% false that companies must maximize corporate profits, especially short term.

dml2135 3y ago

> but most certainly can't raise wages, lower prices, and cut dividends (Ford v. Dodge) Can you summarize this case? I don’t understand why corporations would be prevented from doing this. Couldn’t you always make the case that lowering prices or increasing wages are in the long term interest of shareholders, with the goal of increasing market share?

maxwell 3y ago
I'm not a law talkin' guy or member of any bar cartel.
- maxwell 3y ago
  That said, it sounds like Henry Ford expressed that he wanted to hire more people, make up for lower prices with more volume, and invest in more plants, but seemed also motivated by cutting off dividend payments to the Dodge bros. Their payments had reached a megadollar a year, after initially putting in 10 kilobucks for 10%, and Ford correctly suspected they were using the payments to fund a rival car company. Courts ruled he couldn't cut off dividends so he bought everybody out.

sofixa 3y ago

> In turn, they can't go so far as to knowingly compromise safety in pursuit of saving a few bucks per unit (Grimshaw v. Ford). Boeing execs that got away with negligence that killed people are laughing all the way to their golden toilets.

brookst 3y ago

As GGC points out, Ford v. Dodge was about anticompetitive practices, not arbitrary increases to wages. Companies are 100% free to double wages at random. It is possible shareholders will sue (“everything is securities fraud”), but that’s a dispute about whether the action was in the best interests of shareholders in the long term. It remains 100% false that companies must maximize corporate profits, especially short term.