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their immediate financial
gain become the only consideration of the board of directors. The judge actually
dismissed most of the complaints filed by the Dodge Brothers, holding for example,
that Ford and his fellow directors had the right to plan the business as
they judged best, free from second guessing on such business decisions as expanding
production and smelting his own iron, and certainly under no obligation
to forego these in favor of distributing further dividends.
Moreover, there is no evidence that the decision in any way affected Henry
Ford's peculiar brand of paternalism in relations toward his employees. The court
did not prevent Ford from continuing lo pay higher-than-market wages or prevent
him from subjecting them to speed-ups, invasions of privacy, and
expectations of social conformity that went far beyond what was attempted by
other employers. Working lor Ford remained a tradeoff of high wages and tight
behavioral restriction (Meyer. 1981).
Reading the case, one might reasonably conclude that it strongly confirmed
the principie that shareholders cannot interfere with managerial decisions that
can be plausibly justified as enhancing business performance. The court acknowledged
that Ford couid build new plants, vertically integrate, or otherwise run the
business as he saw fit. What they forbade was the company's decision to sit on a
mountain of cash for allegedly philanthropic, not business, purposes, particularly
when the court had reasons to doubt Ford's candor regarding his actual
motive.
In fact, since Ford v. Dodge Bros., courts have proven very reluctant to force
corporations to pay out additional dividends or otherwise examme the economic
280 BUSINESS ETHICS QUARTERLY
wisdom of business decisions (Brudney. 1980).'' In Grobow v. GM (1988), the
board of directors was permitted to exercise its collective judgement that paymg
H. Ross Perot seven hundred million dollars in order to remove him from the
board of directors was in the best interest of the corporation. In finding a legitimate
business purpose in spending these funds to eliminate Perot's unflaggmg
dissension (as opposed to larger dividends or new investments), the highly influential
Delaware Supreme Court implied that there would be few decisions not
involving outright self-dealing that stockholders could enjoin boards from making.
Doing Well by Doing Good
An examination of a century of case law under circumstances less dramatic
than what faced the Michigan Court in 1919 demonstrates that corporate managers
have successfully defended generosity and consideration toward
non-shareholding constituents. In the process, courts have often accepted arguments
that anticipated instrumental stakeholder theory (see Jones. 1995).
Whatever skepticism the court expressed in Dodge Bros. v. Ford toward charitable
giving has largely disappeared in American jurisprudence since A.P. Smith
V. Barlow recognized in 1953 an enlightened self-interest rationale for spending
profits in this manner (Von Stange, 1994). Similarly, courts established long ago
that corporations can voluntarily agree to pay a tax bill that is higher than the
law might strictly require as part of a political compromise with local communities
{Kelly V. Bell, 1969). General Motors recently applied this principle when,
having won the right in court to disregard its own pro