Monday, May 08, 2006

What can Business Organizations law teach us about international policy?

It is a well established principle of business organizations law that the primary goal of a coporation is to make money for the shareholders.

This notion was articulated in the famous case of Ford v. Dodge, where shareholders filed suit after Henry Ford stopped declaring dividends, and attempted to cut the price of his cars in order to increase the number of people who could afford them.

Ford explained that his actions were motivated by altruistic purposes: "My ambition is to employ still more men, to spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes. To do this we are putting the greatest share of our profits back in the business."

The Court held that a corporation is organized primarily for the profit of the stockholders and decisions by the board of directors should be aimed at acheiving this end. To make business decisions primarily aimed at benefitting the public would be a breech of the director's fiduciary duty to the corporation. The court thus ordered Ford to pay dividends.

The interesting point, in my opinion, is how this framework would apply in the political context. If we were to view the federal government as the company, Congress & the President as its directors, & the citizens as the shareholders, what would be the business purpose of the federal government?

Continuing with this analogy, if the fundamental purpose of the government was to ensure the highest quality of life for its citizens (I'd be interested to hear what are some other possible purposes), how would this affect our role in world policy? Would the government breech its fiduciary duty by sending troops to Iraq if there were still murders in our cities, or sending relief to Africa if our streets are filled with the poor and homeless?



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