That was far from what happened, though. In fact, the Michigan Supreme Court permitted Ford to go through with his plans as he pleased. The language about maximizing shareholders’ wealth, though powerful, was completely irrelevant to the court’s holdings. It acknowledged that its judges were “not business experts,” and for that reason deferred to Ford and the rest of the company’s board, permitting them to set forth on whatever strategy they deemed fit. After all, the court noted, Ford Motor’s previous strategies had already been extremely successful.
Though Dodge v. Ford Motor is usually cited as requiring companies to operate solely for their shareholders’ benefits, it actually pushes for a broader deference to boards’ judgment. Faced with evaluating Henry Ford’s clear and unambiguous statement that his purpose was not to make money for the company’s shareholders, the court granted him permission to do what he liked, essentially saying that anyone as successful as Ford must have been furthering a plan to boost profits in the long run, even if his plans seemed to limit profits in the short run and even if he explicitly said he had little interest in lining shareholders’ pockets.
Perhaps Ford sincerely believed that shareholders did not deserve to share any more in the company’s success. Or perhaps the court was correct that Ford’s comments and tactics were just masking a long-term strategy to maximize profits for shareholders. And certainly Ford, a notorious anti-Semite, was no saint. But whatever his intentions, he was permitted to go through with his plans as he pleased.
In a sense, Mark Fields finds himself in a similar situation to Henry Ford’s. Like the Dodge brothers, some present-day institutional investors and hedge funds demand that companies’ profits be distributed to shareholders as a reward for supplying capital. And, for its part, Fields’s company has led some noble corporate initiatives. A Ford Motor spokesperson insisted that “using only the definition included in the Fortune interview clip does not fully represent Ford’s vision and all that we are doing,” and indeed, the company has in the past few years greened its production processes, made its sourcing more environmentally friendly, and launched projects to promote driver safety and investigate ways to reduce congestion on the roads.
These are worthy projects, but Fields’ ambitions are still different from, and not as ambitious as, Henry Ford’s plan to give up corporate profits in order to increase American employment and to supply better cars at an affordable price.
Though all for-profit corporations are designed to make money, what they do with that money is up to the people running them, which is usually a board of directors. Boards are free to pay out dividends or buy back the company’s stock; they are also free to invest in research and development, increase employees’ wages, give back to their communities, put money into less environmentally harmful production methods, improve product quality, and lower prices. As long as there is some sort of connection to boosting long-term earnings, boards can essentially do as they please, as Ford’s court battle demonstrated. If they choose, directors can imbue a company with a purpose beyond distributing money to shareholders. Ford dealt with powerful shareholders too, but he faced them down and built a company that earned profits but also didn’t focus exclusively on them.