WEBVTT - How Does Henry Ford's Feud with the Dodge Brothers Affect Businesses Today? 

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<v Speaker 1>Welcome to brain Stuff, a production of I Heart Radio.

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<v Speaker 1>Hey brain Stuff, Lauren Vogle bam here. When it comes

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<v Speaker 1>to great American feuds, there's Hamilton and Burr, Hatfield and McCoy,

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<v Speaker 1>and of course Cardi and Nikki, which my co workers

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<v Speaker 1>assure me as a funny joke. Some of the most

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<v Speaker 1>famous disputes in history have been settled in all kinds

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<v Speaker 1>of ways, with pistols, murders, and yes, even rap battles.

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<v Speaker 1>But the truly American way of handling big beefs is

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<v Speaker 1>to hand them over to lawyers and drag them into

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<v Speaker 1>the courts, which means that even the pettiest rivalries can

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<v Speaker 1>have wide and longstanding impacts on our society. The legal

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<v Speaker 1>tussle that took place between Henry Ford and the brothers

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<v Speaker 1>John and Horace Dodge helped shape the auto industry as

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<v Speaker 1>we know it. The feud also laid the groundwork for

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<v Speaker 1>how judges even today look at the relationships of businesses

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<v Speaker 1>with their shareholders, employees, and competitors. There is no Henry

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<v Speaker 1>Ford without John and Horace Dodge, and there is no

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<v Speaker 1>Dodge v. Ford Motor Company. If a once formidable partnership

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<v Speaker 1>hadn't dissolved into in fighting for a leg up on

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<v Speaker 1>the burgeoning American automobile market. Ford and Dodge are some

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<v Speaker 1>of the most iconic names in US car making history.

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<v Speaker 1>It turns out that the guys behind both brands started

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<v Speaker 1>out on the same side. The Dodge Brothers, an unruly

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<v Speaker 1>pair known in Detroit for their drinking prowess and affinity

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<v Speaker 1>for knocking people out cold in barbrawls, got started in

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<v Speaker 1>the car business in nineteen hundred building Oldsmobile transmissions. Just

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<v Speaker 1>a few years later, they were the chief supplier and

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<v Speaker 1>outside machinists for Ford Motors Model A, the company's first automobile.

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<v Speaker 1>They also pontied up a large portion of the twenty

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<v Speaker 1>eight thousand dollars that Henry Ford received from investors to

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<v Speaker 1>get started. That investment soon paid off. Ford Motor turned

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<v Speaker 1>a thirty seven thousand dollar profit less than three months

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<v Speaker 1>after selling the first Model A. But the Dodges had

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<v Speaker 1>bigger plans. They used the Dodge Brothers Motor Company banner

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<v Speaker 1>in nineteen fourteen to launch their own car, the Model

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<v Speaker 1>thirty five. The vehicle was intended compete directly with the

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<v Speaker 1>Ford Model T. Henry Ford did not take kindly to

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<v Speaker 1>this new competition. He made a pair of decisive moves

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<v Speaker 1>to try to take the wind out of Dodges sales.

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<v Speaker 1>Ford stopped paying dividends to the Dodge brothers and other investors.

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<v Speaker 1>Then he slashed nearly two thirds off of the price

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<v Speaker 1>tag on his cars. We spoke with Mark Hoddeck, an

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<v Speaker 1>adjunct professor in New York University's Business School. He explained

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<v Speaker 1>that while the Dodge brothers were Ford's primary target quote,

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<v Speaker 1>Ford didn't want any shareholders. He considered shareholders to be parasites.

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<v Speaker 1>The Dodges promptly sued Forward, claiming that he had priced

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<v Speaker 1>his cars too low, thereby cheating shareholders of potential income.

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<v Speaker 1>By the way, their suit was filed the day after

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<v Speaker 1>Henry's son's wedding, and the Dodge brothers were guests at

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<v Speaker 1>the reception. Anyway, the ensuing legal battle eventually found its

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<v Speaker 1>way up to the U. S. Supreme Court. The case

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<v Speaker 1>is often described as a win for the Dodges, but

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<v Speaker 1>Hodak and some legal experts say that that's only half

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<v Speaker 1>of the story. The court ordered Forward to pay a

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<v Speaker 1>dividend to the Dodge brothers and other shareholders. In doing so,

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<v Speaker 1>it rejected Ford's claim that he wanted to keep that

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<v Speaker 1>money in order to reinvest it to bolster the company's

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<v Speaker 1>production and boost workers wages. The decision is often cited

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<v Speaker 1>for the legal theory of shareholder supremacy, or that businesses

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<v Speaker 1>should maximize profits for the benefit of shareholders. Judge Russell

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<v Speaker 1>Ostrander wrote for the court, a business corporation is organized

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<v Speaker 1>and carried on primarily for the profit of the stockholders.

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<v Speaker 1>The powers of the directors are to be employed for

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<v Speaker 1>that end. But the court also acknowledged another important legal theory,

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<v Speaker 1>commonly referred to as the business judgment rule. That principle

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<v Speaker 1>assumes the corporate directors generally act in the best interests

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<v Speaker 1>of the company and have widely way to do so

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<v Speaker 1>as long as their moves are reasonable. The court cited

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<v Speaker 1>this when it resolved another segment of the case. It

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<v Speaker 1>rejected the Dodge's attempt to block Forward from expanding his factory.

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<v Speaker 1>Ostrander wrote, the judges are not business expert. It is

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<v Speaker 1>recognized the plans must often be made for a long future,

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<v Speaker 1>for expected competition for continuing as well as an immediately

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<v Speaker 1>profitable venture. The experience of the Ford Motor Company is

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<v Speaker 1>evidence of capable management of its affairs. Ford may have

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<v Speaker 1>had that part of the decision in mind when he

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<v Speaker 1>made his next move against the Dodges. After the court ruling,

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<v Speaker 1>Ford announced he was selling the company to his son.

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<v Speaker 1>He also planted a rumor that he might start a

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<v Speaker 1>new car business. All of this drove down the value

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<v Speaker 1>of the shares in Ford Motor Company. That was enough

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<v Speaker 1>to spook the Dodges and other investors, who sold their

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<v Speaker 1>shares back to the Ford family, exactly what Ford had

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<v Speaker 1>wanted in the first place. Today's episode was written by

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<v Speaker 1>Chris Opford and produced by Tyler Clang. Brain Stuff is

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<v Speaker 1>a production of iHeart Radio's How Stuff Works. For more

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<v Speaker 1>on this and lots of other topics involving the sick

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<v Speaker 1>burns of history, visit our home planet as stuff Works

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