In the movie “How to Succeed in Business without Really Trying” Robert Morse sings about how we are all part of the great big brotherhood of man, and ignoring the inherent sexism of that lyric, he’s right. This is why God got thoroughly upset with me this week when I happened to mention the notion that the primary responsibility of corporations is to increase shareholder value. God quickly disabused me of that notion.
The real primary responsibility of corporations (and politicians) is to act ethically, no matter what the law may say. But what does the law say? Well, to get to that you need to keep in mind that the law in the United States is not just our collection of constitutions and statutes but also of case law, court decisions handed down over the centuries. It is from case law that the notion of the primacy of shareholder value comes, specifically from the case of Dodge v. Ford.
In Dodge v. Ford, the court ruled essentially that since the Ford Motor Company was organized as a company and not a charity that they could not stop paying out dividends and use their profits instead to benefit the public. Now part of what went into this decision was recognition that Henry Ford suspected that the plaintiffs in the case, the Dodge brothers, who owned about ten percent of the Ford Motor Company, were planning to use their dividends to create a competing car company (which they later did). So what Henry Ford was actually doing, at least in part, was trying to prevent competition. So even back in 1919 corporations talked about benefiting the public while actually just trying to line their own pockets.
Now does God care about all these details of the case and the law? Of course not, she just kept on talking about there being a higher law than the laws of man and how that was the only law she needed to know. She ranted about ethics and railed against people trying to game the system. Then she made some comment about how if corporations were meant to be treated as people they would have been created by her and not us.
It wasn’t a conversation that I wanted to get into right then, having had enough of her ranting for the day, so I didn’t take the bait.