~3 min read At least to Milton Friedman he was, "that business has a 'social conscience' and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are--or would be if they or anyone else took them seriously--preaching pure and unadulterated socialism." Milton Friedman goes on to preach shareholder primacy in his influential essay in 1970, but he did not originate it. Where is Ford in this you ask? I'll get to it. I promise. Specifically he articulates, "In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom." [Emphasis mine] This idea again was not new back then. But it is not ancient. In fact it's scarcely a century old. And here's where we get to Henry Ford. The oldest ruling I can find in the US is from the Michigan Supreme court in a case called Dodge v. Ford Motor Co. Basically, Ford wanted to (1) cut the price of its cars, (2) raise the wages of its workers, and (3) build a plant to expand production. And he was going to do this by stopping a special dividend he had been giving. Ford was also surprisingly open about why he was doing this, “My ambition is to employ still more men; to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. To do this, we are putting the greatest share of our profits back into the business.” [Emphasis mine] Compare this back to what Friedman complained about in essay, "that business has a 'social conscience' and takes seriously its responsibilities for providing employment." [Again emphasis mine] Getting back to what the court said now. Basically, he wasn't allowed to do that, since "a business corporation is organized and carried on primarily for the profit of the stockholders." And while executives have some leeway, it's not so that the executives can reduce the profit flow "among stockholders in order to devote them to other purposes." The company that Ford started and was the major stockholder of, could not reduce the delivery of money to other men who put in capital much later. He was duty bound to deliver this money to the Dodge Brothers and to be clear himself and all other stockholders, specifically because he testified he wanted "to help them build up their lives and their homes." Because that was his stated goal, he was prohibited from it. This should be shocking. I hope it is. Most people view the purposes of businesses is to make money, yes, of course. But it should be also to build the loves and homes of others. It should be value creating, not merely extracting. — Robert This message is 100% organic human effort, so it will have typos. No, I didn't send it through an LLM to typo check it. It was made with just my fingers and my eyes. |