Law School Resources
Dodge v. Ford Motor Co., (1919)
1. Dodge v. Ford Motor Co., (1919);
pg. 262, briefed 2/19/97
Ford Motor Co. had a surplus of almost $112
million. It declared a dividend of $1.2 million.
The Dodge Bros. were major shareholders, and wished
to get some money to open a competing business.
Ford's Board of Directors refused to issue a larger
dividend, claiming that the surplus was needed for
expansion and operating cushion.
3. Procedural Posture:
Dodge sued to compel Ford's board to declare a
special dividend equal to one-half of its surplus.
The lower court awarded the dividend.
Whether the refusal of the Ford board of directors
to issue such a dividend in this case amounted to a
willful abuse of discretion.
It is well recognized that the power to declare a
dividend, and the amount of the dividend, is
exclusively within the discretion of the board of
directors. However, a board may be compelled to pay
a dividend if the failure to do so would be a
willful abuse of their discretionary powers, or
fraud, or breach of the fiduciary duty. Here, the
surplus is so large, that even if Ford were to
immediately spend all of the money it planned for
expansion, there would still be an obscene surplus.