Rae Wong Beyond Integrity 3rd Ed Zondervan 2012 ISBN 978031

Rae & Wong, Beyond Integrity, 3rd Ed. (Zondervan) 2012, ISBN: 9780310291107 Business and management ethics

The Chapter 4 Commentary on page 171 of the text alludes to the Michigan State Supreme Court case of Dodge v. Ford Motor Co. The Dodge brothers owned 10% of the stock of Ford Motor Co., Henry Ford held 58%. The company had been highly successful, and had made it a policy to issue huge \"special dividends\". But then Henry Ford announced that he would stop issuing special dividends, and would instead pump the money back into a new facility, which became the Ford River Rouge Plant. The Dodge brothers sued to enjoin construction of the plant and to require FoMoCo to issue special dividends. The court held that FoMoCo must issue some dividends, but could continue with its construction plans. FoMoCo was a tremendously profitable enterprise, selling good cars for low prices during the second decade of the 20th Century. The conflict between Henry Ford and the Dodge brothers: Dodges wanted to prevent building of a plant that would have enabled Ford to cut costs and continue to sell cheap - Dodges wanted to divert buyers from the Model T to Dodge cars. And they wanted to receive dividends – their share of the profits of Ford Motor Co. Conversely, Ford probably kept the Dodges bottled up with stock (he wouldn\'t buy them out) and refused to issue dividends to keep Dodges cash-starved (and to reduce their ability to expand the Dodge automaking company). At trial, Ford argued that diverting corporate profits to corporate expansion would be beneficial to Ford and the community.

What observations do you have regarding the competing interests here? and How, if at all, can it be argued that Henry Ford was acting ethically?

Solution

Dividends are provided to the share holders when a company makes profit and it is solely in the hands of the owner of the company whether they will release the dividends or will invest for the ezpansion.

Sometimes if a company makes profit and still doesnot provides the divident is considered positive in the market. Because shareholders gets the message that the comoany is doing expansion which inturn will help them in the profit made by share market.

Ford did it ethically correct to bottleneck the share so that the dodge brothers couldnt buy more share and pressurize the ford for giving the dividends.