ABSTRACT
Behind Henry Ford’s business decisions that led to the widely taught, famous-in-law-school Dodge v Ford shareholder primacy decision were three relevant industrial organization structures that put Ford in a difficult business position. First, Ford Motor had a highly profitable monopoly. Second, to stymie union organizers and to motivate his new assembly line workers, Henry Ford raised worker pay greatly; Ford could not maintain his monopoly without sufficient worker acquiescence. And, third, if Ford pursued monopoly profit in an obvious and explicit way, the Ford brand would have been damaged with both his workforce and the company’s consumers. The transactions underlying Dodge v Ford should be reconceptualized as Ford Motor Company and its auto workers splitting the ‘monopoly rectangle’ that Ford Motor’s assembly-line produced, with Ford’s business plans requiring tremendous cash expenditures to keep and expand that monopoly. Hence, a common interpretation of the litigation setting – namely that Ford let slip his charitable purpose when he could have won with a business judgment defense – should be reversed. Ford had a true business purpose – spending on labor and a vertically-integrated factory to solidify his monopoly profit and splitting that profit with labor – but he would have jeopardized the strategy’s effectiveness by articulating it …
Roe, Mark J, Dodge v Ford: What Happened and Why? (October 15, 2021).
First posted 2021-10-20 10:00:27
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