Workers, Shareholders, and the Purpose of Corporations

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In a case that sought to rein in Henry Ford's allegedly charitable impulses (such as refusing to pay dividends in order to reinvest in his factories and pay his workers above-market wages), the Michigan Supreme Court famously articulated that the duties of managers and directors are to serve the shareholders by maximizing the profit of the corporation. Ford's case is routinely cited as recognizing the norm of shareholder supremacy within corporate law. This chapter critiques the low place of workers within corporate law doctrine, in which only shareholders have the right to elect members of the board of directors and in which the management is held to owe fiduciary duties only to shareholders. It argues that the justifications for shareholder dominance urged by most corporate law scholars—the nature of ownership; the inability of shareholders to control their “agents” in management; the residual nature of shareholders' claims; the shareholders' inability to protect themselves through contract—are not as strong as proposed because these justifications often apply to workers as well.