View Poll Results: Should the duty by re-examined?

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Thread: The Duty of Corporations

  1. #1
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    The Duty of Corporations

    Right now it is understood that corporations have a duty to their shareholders, but not to their employees, consumers, or the remainder of the public (although they of course have a duty to comply with the law, which includes many regulations designed to protect employees/consumers/third parties).

    The clearest example of the warped effects of this is probably the famous case of Dodge v. Ford Motor Company.

    By 1916, the Ford Motor Company had accumulated a capital surplus of $60 million. The price of the Model T, Ford's mainstay product, had been successively cut over the years while the cost of the workers had dramatically, and quite publicly, increased. The company's president and majority stockholder, Henry Ford, sought to end special dividends for shareholders in favor of massive investments in new plants that would enable Ford to dramatically grow the output of production, and numbers of people employed at his plants, while continuing to cut the costs and prices of his cars. In public defense of this strategy, Ford declared:

    "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."

    While Ford may have believed that such a strategy might be in the long-term benefit of the company, he told his fellow shareholders that the value of this strategy to them was not a primary consideration in his plans. The minority shareholders objected to this strategy, demanding that Ford stop reducing his prices when they could barely fill orders for cars and to continue to pay out special dividends from the capital surplus in lieu of his proposed plant investments.
    When the shareholders sued, the court ruled in their favor, stating Ford's duty was to profit his shareholders, not the community or his employees.

    In light of the growing gap between the wealthy and the rest of America, do you think that this idea needs to be re-examined?
    Last edited by Cameron; 10-10-11 at 01:43 PM.
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    Re: The Duty of Corporations

    I never thought of it like that, good point. I definitely think they should have their consumers best interest in mind.

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    Re: The Duty of Corporations

    They have the duty to behave ethically.

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    Re: The Duty of Corporations

    good poll; i was just thinking about this.

    my post in a related thread :

    i would argue that capitalism has a responsibility beyond making a profit / delivering a dividend to shareholders. many of us who support capitalism do so because it provides society and individuals a greater opportunity for advancement. absent that, it's more or less re-heated feudalism.

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    Re: The Duty of Corporations

    It's funny, isn't it? A company tried to do good by the consumer and the worker and the government told them "no, no. you need to focus on benefitting your shareholders short-term."
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    Re: The Duty of Corporations

    Corporations aren't people. They don't have duties. They're not capable of performing duties. They are, at best, tools for creating money for their owners and employees; they're incapable of doing anything else and it is foolish to expect them to.

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    Re: The Duty of Corporations

    Shareholders get nothing until the duties owed to employees and suppliers are met. That is, paychecks are issued timely and accurately, and bills are paid. There's nothing wrong with that model.

    In the Dodge vs Ford case, it is interesting to note that the plaintiffs had a competing business and could have used Ford dividends to expand their own operation at Ford's cost.

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    Re: The Duty of Corporations

    Quote Originally Posted by Krhazy View Post
    Right now it is understood that corporations have a duty to their shareholders, but not to their employees, consumers, or the remainder of the public (although they of course have a duty to comply with the law, which includes many regulations designed to protect employees/consumers/third parties).

    The clearest example of the warped effects of this is probably the famous case of Dodge v. Ford Motor Company.



    When the shareholders sued, the court ruled in their favor, stating Ford's duty was to profit his shareholders, not the community or his employees.

    In light of the growing gap between the wealthy and the rest of America, do you think that this idea needs to be re-examined?
    No, I don't think it should be re-examined. A large company's main responsibility is to its investors. They are people, too, and represent a whole lot more people than the employees, as a matter of fact. And rather than show up for a paycheck, investors put their money on the line...expecting a fair return.

    Now! In order to best serve their investors, any company needs good employees. So attracting and retaining them is integral to their success. One hand washes the other. The fact that you don't think corporations are using enough soap makes me wonder what you wish they'd do. Hire people they don't need? Build plants to stand idle? Give their shovelers teaspoons to dig with? What?
    Last edited by MaggieD; 10-10-11 at 02:31 PM.
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    Re: The Duty of Corporations

    Courts ruled correctly.

    Anyone can start a private buisiness, organization, or just a group of people, or their own individual efforts with the goals of:
    -> helping whoever they want.

    You are free for the most part in the U.S. How can you not already know this!

    However, if you start a public business that has specific shareholder obligations, you're being essentially invested in, to maximize profits. How you go about that, as CEO, is up to you, but you still answer to investors. That's how it should be. If they can do it while being green and being #1 with consumers, OK. If they can't, OK. If you as a CEO would rather run in private, you can. Run it any way you want.

    But don't let the criminal desire to force other people to run it YOUR way, creep into your thoughts. That's wrong-headed.

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    Re: The Duty of Corporations

    I've never understood people who think that a corporation's duty is to produce a profit for its shareholders, period. Sure, that's the duty of SOME corporations. But really, a corporation's duty is whatever it's management decides its duty is. If you don't like it, don't invest in it.

    I think of it like this: If I started my own business, and wanted to give half of my profits to charity, no one would tell me I'm wrong for doing so. If I started a partnership with four other people and we agreed to majority rule, and a majority agreed to give half of our profits to charity, we're still fine because we all agreed to abide by the majority's decision. If I started a corporation where the shareholders elected a Board of Directors that agreed to give half of our profits to charity, I think the same logic applies. Obviously a lot of the shareholders would want the corporations to take on that responsibility (or else they would've elected a different board), and the ones who don't agree are under no obligation to continue to invest in the company.
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