The brothers brought a lawsuit against Ford seeking $39 million to be distributed to stockholders. Ford was blindsided by the move, though he probably shouldn’t have been. Ford claimed that he had stopped paying dividends to investors because he wanted the money to reinvest in workers, new models and to build his gigantic River Rouge plant. He wanted to do all that and at the same time keep the price of the Model T incredibly low.
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To give you an idea of how intense this time period was, in 1913, the Dodge Brothers sold around 250 cars during its first year in existence. It sold 45,000 the next year, as Chrysler.com recounts. The year the brothers brought the lawsuit, Dodge was the second-largest automaker in the U.S. behind only Ford. And they were respected machines. The Dodge brand had a reputation for durability, which led to Dodge becoming the official truck of the U.S. during World War I.
Ford fought back, but the Dodges eventually won their suit and made Henry Ford look like a fool in the process. No matter what Ford the man said about investing back into his cars, the judge ruled that Ford the company existed to serve its shareholders like Dodge first and foremost.
“There should be no confusion,” the judge stated in his opinion, “a business corporation is organized and carried on primarily for the profit of the stockholders.”
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The
lawsuit brought by the brothers against Ford became the legal basis for the idea that companies exist primarily to generate profits for shareholders, setting the stage for the aggressive rise of the American corporation.
