Almost a century ago, Henry Ford’s car company had become lushly profitable, but the great automaker decided that his shareholders didn’t need large dividends. Instead he believed that the gains could be better used to reduce the price of his cars. He could thereby “spread the benefits of this industrial system to the greatest number possible, to help them build up their lives and their homes.” Toward that end he had already announced that he would pay his workers the then-remarkable wage of $5 a day.
The consumer society was thus born and the model set for a nation offering the most generalized prosperity the modern world would know. Ford’s plans, however, did not sit well with his shareholders, particularly the Dodge brothers, who had gotten 10 percent of the company in exchange for some technology they had contributed to his firm in its early years. The Dodges were eager to start their own company and sued Ford, charging that he wasn’t running a corporate business but a “semi-eleemosynary institution.” The Michigan Supreme Court agreed. In ordering Ford to pay larger dividends, the court made this statement, which became black-letter corporate law: “A business corporation is organized and carried on primarily for the profit of the stockholders.”
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