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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?
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?
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