Speaker 1: Welcome to brain Stuff, a production of I Heart Radio.
Speaker 1: Hey brain Stuff, Lauren Vogle bam here. When it comes
Speaker 1: to great American feuds, there's Hamilton and Burr, Hatfield and McCoy,
Speaker 1: and of course Cardi and Nikki, which my co workers
Speaker 1: assure me as a funny joke. Some of the most
Speaker 1: famous disputes in history have been settled in all kinds
Speaker 1: of ways, with pistols, murders, and yes, even rap battles.
Speaker 1: But the truly American way of handling big beefs is
Speaker 1: to hand them over to lawyers and drag them into
Speaker 1: the courts, which means that even the pettiest rivalries can
Speaker 1: have wide and longstanding impacts on our society. The legal
Speaker 1: tussle that took place between Henry Ford and the brothers
Speaker 1: John and Horace Dodge helped shape the auto industry as
Speaker 1: we know it. The feud also laid the groundwork for
Speaker 1: how judges even today look at the relationships of businesses
Speaker 1: with their shareholders, employees, and competitors. There is no Henry
Speaker 1: Ford without John and Horace Dodge, and there is no
Speaker 1: Dodge v. Ford Motor Company. If a once formidable partnership
Speaker 1: hadn't dissolved into in fighting for a leg up on
Speaker 1: the burgeoning American automobile market. Ford and Dodge are some
Speaker 1: of the most iconic names in US car making history.
Speaker 1: It turns out that the guys behind both brands started
Speaker 1: out on the same side. The Dodge Brothers, an unruly
Speaker 1: pair known in Detroit for their drinking prowess and affinity
Speaker 1: for knocking people out cold in barbrawls, got started in
Speaker 1: the car business in nineteen hundred building Oldsmobile transmissions. Just
Speaker 1: a few years later, they were the chief supplier and
Speaker 1: outside machinists for Ford Motors Model A, the company's first automobile.
Speaker 1: They also pontied up a large portion of the twenty
Speaker 1: eight thousand dollars that Henry Ford received from investors to
Speaker 1: get started. That investment soon paid off. Ford Motor turned
Speaker 1: a thirty seven thousand dollar profit less than three months
Speaker 1: after selling the first Model A. But the Dodges had
Speaker 1: bigger plans. They used the Dodge Brothers Motor Company banner
Speaker 1: in nineteen fourteen to launch their own car, the Model
Speaker 1: thirty five. The vehicle was intended compete directly with the
Speaker 1: Ford Model T. Henry Ford did not take kindly to
Speaker 1: this new competition. He made a pair of decisive moves
Speaker 1: to try to take the wind out of Dodges sales.
Speaker 1: Ford stopped paying dividends to the Dodge brothers and other investors.
Speaker 1: Then he slashed nearly two thirds off of the price
Speaker 1: tag on his cars. We spoke with Mark Hoddeck, an
Speaker 1: adjunct professor in New York University's Business School. He explained
Speaker 1: that while the Dodge brothers were Ford's primary target quote,
Speaker 1: Ford didn't want any shareholders. He considered shareholders to be parasites.
Speaker 1: The Dodges promptly sued Forward, claiming that he had priced
Speaker 1: his cars too low, thereby cheating shareholders of potential income.
Speaker 1: By the way, their suit was filed the day after
Speaker 1: Henry's son's wedding, and the Dodge brothers were guests at
Speaker 1: the reception. Anyway, the ensuing legal battle eventually found its
Speaker 1: way up to the U. S. Supreme Court. The case
Speaker 1: is often described as a win for the Dodges, but
Speaker 1: Hodak and some legal experts say that that's only half
Speaker 1: of the story. The court ordered Forward to pay a
Speaker 1: dividend to the Dodge brothers and other shareholders. In doing so,
Speaker 1: it rejected Ford's claim that he wanted to keep that
Speaker 1: money in order to reinvest it to bolster the company's
Speaker 1: production and boost workers wages. The decision is often cited
Speaker 1: for the legal theory of shareholder supremacy, or that businesses
Speaker 1: should maximize profits for the benefit of shareholders. Judge Russell
Speaker 1: Ostrander wrote for the court, a business corporation is organized
Speaker 1: and carried on primarily for the profit of the stockholders.
Speaker 1: The powers of the directors are to be employed for
Speaker 1: that end. But the court also acknowledged another important legal theory,
Speaker 1: commonly referred to as the business judgment rule. That principle
Speaker 1: assumes the corporate directors generally act in the best interests
Speaker 1: of the company and have widely way to do so
Speaker 1: as long as their moves are reasonable. The court cited
Speaker 1: this when it resolved another segment of the case. It
Speaker 1: rejected the Dodge's attempt to block Forward from expanding his factory.
Speaker 1: Ostrander wrote, the judges are not business expert. It is
Speaker 1: recognized the plans must often be made for a long future,
Speaker 1: for expected competition for continuing as well as an immediately
Speaker 1: profitable venture. The experience of the Ford Motor Company is
Speaker 1: evidence of capable management of its affairs. Ford may have
Speaker 1: had that part of the decision in mind when he
Speaker 1: made his next move against the Dodges. After the court ruling,
Speaker 1: Ford announced he was selling the company to his son.
Speaker 1: He also planted a rumor that he might start a
Speaker 1: new car business. All of this drove down the value
Speaker 1: of the shares in Ford Motor Company. That was enough
Speaker 1: to spook the Dodges and other investors, who sold their
Speaker 1: shares back to the Ford family, exactly what Ford had
Speaker 1: wanted in the first place. Today's episode was written by
Speaker 1: Chris Opford and produced by Tyler Clang. Brain Stuff is
Speaker 1: a production of iHeart Radio's How Stuff Works. For more
Speaker 1: on this and lots of other topics involving the sick
Speaker 1: burns of history, visit our home planet as stuff Works
Speaker 1: dot com and for more. Podcasts for iHeart Radio is
Speaker 1: at the iHeart Radio app, Apple Podcasts, or wherever you
Speaker 1: listen to your favorite show.