• megopie@beehaw.org
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    5 months ago

    He was sued for miss use of company profits, not for failing to maximize profits.

    He took profits and was reinvesting in new plants and cutting car prices, while also ending dividend payments to do so. That was the crux of the case, ending dividend payments despite having money to continue paying them. This case is routinely held up as an example of shareholder primacy but has been dismissed as an example of such by most modern thinkers In the field, in large part because the court also ruled that he had final say on how to proceed with company operation. Increasing worker pay was not the issue, ending dividends to make capital investment was.

    Edit: also, I should clarify, he was the majority share holder, and the minority shareholders could thus not replace him with someone willing to pay dividends. He was not being sued for failing to seek profits, he was being sued for holding those profits hostage from other shareholders.