The Dodge vs Ford case: should academics keep teaching it or not?

One of the first voices that emerged against keeping the doctrine emanating from this resolution by the Michigan Supreme Court was Ms Lynn Stout, in her article “Why we should stop teaching Dodge vs Ford”, (1). Prof Bainbridge opposses to this view, (2). We will review both in what follows.

The case can be briefly described as follows: a founder and majority shareholder, (Mr Henry Ford) was sued by the Dodge brothers on the accusation that he was restricting paying dividends to shareholders even if profitability was very high; the court did not buy Mr Ford´s reasoning on preferring investing to build better and cheaper cars and pay better wages, (for their employees to be able to buy a car, for instance). And the judge stated that the purpose of a business corporation was the pursuit of profit, so that directors did not have discretion to work for alternative goals but only to select the means to pursue this one.

She asserts that this statement was not necessary and a mistake also, being strange to Corporate law.