Robert J. Rhee, University of Florida Levin College of Law, has published The Neoliberal Corporate Purpose of Dodge v. Ford and Shareholder Primacy: A Historical Context 1919-2019 in the Stanford Journal of Law, Business & Finance:
The article provides a historical context of the most iconic case in corporate law, Dodge v. Ford Motor Co. The case famously asserted that “there should be no confusion” that corporate purpose is “primarily for the profit of the stockholders.” This statement succinctly encapsulates the idea of shareholder primacy, the corporate rule requiring managers to prioritize profit maximization over other interests. A unique period in history gave rise to this political statement. Overt politicism explains why the case split the panel of judges then, and why Dodge was never influential among courts and was ignored by academics until the neoliberal turn of the 1980s. For much of the twentieth century, American capitalism had no use for the idea in Dodge because shareholder primacy conflicted with the prevailing political order and economic system. Dodge found late influence in legal academia only when America embraced neoliberalism. Its pithy shibboleth fit the moment when intellectualization was needed for a new economic system based on the policy preference for capital.--Dan Ernst
This history-based analysis makes three basic points: (1) shareholder primacy did not exist and could not have existed in law or academic consensus for most of the twentieth century prior to the advent of neoliberalism because it conflicted with the prevailing political order and economic system; (2) shareholder primacy is not a discovery of some natural law of economics after a 250-year search in modern economics, but it is a rule of law of the existing political order and economic system, a rule that, like other laws, came to be because it served the unique policy needs and preferences and the societal conditions of the time; (3) therefore, since there is no end of history of political order and economic system and rules of law, being fluid, are functions of policy preferences of the time, the decline of neoliberalism calls into question the future of Dodge and shareholder primacy.
