Welcome to brain Stuff, a production of I Heart Radio. Hey brain Stuff, Lauren Vogle bam here. When it comes to great American feuds, there's Hamilton and Burr, Hatfield and McCoy, and of course Cardi and Nikki, which my co workers assure me as a funny joke. Some of the most famous disputes in history have been settled in all kinds of ways, with pistols, murders, and yes, even rap battles.
But the truly American way of handling big beefs is to hand them over to lawyers and drag them into the courts, which means that even the pettiest rivalries can have wide and longstanding impacts on our society. The legal tussle that took place between Henry Ford and the brothers John and Horace Dodge helped shape the auto industry as we know it. The feud also laid the groundwork for how judges even today look at the relationships of businesses
with their shareholders, employees, and competitors. There is no Henry Ford without John and Horace Dodge, and there is no Dodge v. Ford Motor Company. If a once formidable partnership hadn't dissolved into in fighting for a leg up on the burgeoning American automobile market. Ford and Dodge are some of the most iconic names in US car making history. It turns out that the guys behind both brands started
out on the same side. The Dodge Brothers, an unruly pair known in Detroit for their drinking prowess and affinity for knocking people out cold in barbrawls, got started in the car business in nineteen hundred building Oldsmobile transmissions. Just a few years later, they were the chief supplier and outside machinists for Ford Motors Model A, the company's first automobile. They also pontied up a large portion of the twenty eight thousand dollars that Henry Ford received from investors to
get started. That investment soon paid off. Ford Motor turned a thirty seven thousand dollar profit less than three months after selling the first Model A. But the Dodges had bigger plans. They used the Dodge Brothers Motor Company banner in nineteen fourteen to launch their own car, the Model thirty five. The vehicle was intended compete directly with the Ford Model T. Henry Ford did not take kindly to
this new competition. He made a pair of decisive moves to try to take the wind out of Dodges sales. Ford stopped paying dividends to the Dodge brothers and other investors. Then he slashed nearly two thirds off of the price tag on his cars. We spoke with Mark Hoddeck, an adjunct professor in New York University's Business School. He explained that while the Dodge brothers were Ford's primary target quote, Ford didn't want any shareholders. He considered shareholders to be parasites.
The Dodges promptly sued Forward, claiming that he had priced his cars too low, thereby cheating shareholders of potential income. By the way, their suit was filed the day after Henry's son's wedding, and the Dodge brothers were guests at the reception. Anyway, the ensuing legal battle eventually found its way up to the U. S. Supreme Court. The case is often described as a win for the Dodges, but Hodak and some legal experts say that that's only half
of the story. The court ordered Forward to pay a dividend to the Dodge brothers and other shareholders. In doing so, it rejected Ford's claim that he wanted to keep that money in order to reinvest it to bolster the company's production and boost workers wages. The decision is often cited for the legal theory of shareholder supremacy, or that businesses
should maximize profits for the benefit of shareholders. Judge Russell Ostrander wrote for the court, a business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. But the court also acknowledged another important legal theory,
commonly referred to as the business judgment rule. That principle assumes the corporate directors generally act in the best interests of the company and have widely way to do so as long as their moves are reasonable. The court cited this when it resolved another segment of the case. It rejected the Dodge's attempt to block Forward from expanding his factory.
Ostrander wrote, the judges are not business expert. It is recognized the plans must often be made for a long future, for expected competition for continuing as well as an immediately profitable venture. The experience of the Ford Motor Company is evidence of capable management of its affairs. Ford may have had that part of the decision in mind when he made his next move against the Dodges. After the court ruling, Ford announced he was selling the company to his son.
He also planted a rumor that he might start a new car business. All of this drove down the value of the shares in Ford Motor Company. That was enough to spook the Dodges and other investors, who sold their shares back to the Ford family, exactly what Ford had wanted in the first place. Today's episode was written by Chris Opford and produced by Tyler Clang. Brain Stuff is
a production of iHeart Radio's How Stuff Works. For more on this and lots of other topics involving the sick burns of history, visit our home planet as stuff Works dot com and for more. Podcasts for iHeart Radio is at the iHeart Radio app, Apple Podcasts, or wherever you listen to your favorite show.