1. Dodge v. Ford Motor Company
In 1919, the Ford Motor Company was sued by its shareholders because of Henry Ford’s strategy of wanting to employ more men, pay them more, increase production, and decrease car prices, essentially “spreading the benefits” of the industrial system.
This was problematic for the shareholders, particularly for brothers John and Horace Dodge who owned 10% of the company and were among the largest shareholders. The Dodge brothers argued that special dividends for the shareholders should be paid out, whereas Ford wanted to use the money to invest in new plants to rapidly increase production.
2. Ford Threatened to Start Another Company
When the Michigan Supreme Court sided with the shareholders, stating that Ford could not turn a for-profit corporation into more of a charitable company by withholding dividends from shareholders, Ford threatened to start a rival company to compete in the market. His intention was to try to get the shareholders, including the Dodge brothers, to sell their shares back to him so that he could gain more control over how the money was spent.
Ford suspected that the Dodge brothers were trying to start their own car motor company through the use of their dividends earned from Ford, which ended up being true. The Dodge Brothers were earning around $1 million in Ford stock annually. Ford ended up paying the Dodge brothers $25 million after the suit was settled.