Case
Dodge v. Ford Motor Co.
Answer: Dodge v. Ford Motor Co. (Mich. 1919). The court concluded that, in a traditional for‑profit corporation, directors may not withhold dividends merely to serve general public benefits; it ordered a special dividend but deferred to management’s expansion plans. Later treatments frame deference through the business judgment rule, and modern public‑benefit‑corporation statutes expressly authorize stakeholder balancing. ([law.cornell.edu](https://www.law.cornell.edu/wex/business_judgment_rule))
Rule to remember
Dodge v. Ford Motor Co. (Michigan Supreme Court, 1919) held that directors of a traditional for‑profit corporation may not forgo shareholder returns solely to pursue general benevolence; the court compelled a special dividend while declining to enjoin Ford’s long‑term expansion, illustrating both shareholder primacy and judicial deference to business policy.
Key elements and checks
- Parties/posture: Minority shareholders challenge refusal to issue special dividends despite large surplus; seek court‑ordered payout.
- Rule: In traditional for‑profit corporations, shareholder pecuniary interests are the corporate end; directors’ discretion is reviewed under the business judgment rule.
- Application: Court found stated non‑pecuniary aims could not justify withholding dividends; nevertheless deferred to management’s plant‑expansion decisions.
- Remedies: Courts rarely micromanage operations but may compel dividends when directors act inconsistently with shareholder pecuniary rights.
- Distinction: Public benefit corporations may balance stakeholder and public interests by statute, unlike traditional C corporations.
- Aftermath: Later doctrine emphasizes BJR deference and recognizes state‑law variation; Delaware, for example, applies BJR outside special contexts like Revlon/Unocal.
In the source’s words
“The business judgment rule provides a director of a corporation immunity from liability when a plaintiff sues on grounds that the director violated the duty”
business judgment rule | Wex | US Law | LII / Legal Information Institute
“Unlike traditional C corporations, which are primarily obligated to maximize shareholder value, PBCs are permitted, and required, to balance three considerations:”
public benefit corporation | Wex | US Law | LII / Legal Information Institute
State variation matters. Dodge is a Michigan case and is often read as articulating shareholder primacy for traditional for‑profit firms. Many jurisdictions apply strong business‑judgment deference, and modern statutes authorize alternatives like public‑benefit corporations that permit balancing of stakeholders and public purposes.