Why Shareholders Come First

In one of the great twists of 20th century American capitalism, Henry Ford’s attempt to support employees of The Ford Motor Company and the city of Detroit back in 1916 had the unintended side effect of creating case law that put the shareholder returns of the company ahead of all other interests.

Most of us today are used to the notion of measuring dividend yield according to the prevailing price of the stock. If Philip Morris pays out a $4.08 dividend, and the price of the stock is $87.32 per share, we would say that the current dividend yield on the stock is 4.67%. Unless you really get into this stuff, you’re probably not inclined to think “Philip Morris has 1.5 billion shares paying out $6.12 billion.” The concept expressed relates to the same elements, but we often choose to relate the income generated compared to the current price because … Read the rest of this article!