Didn't he pay more than his competitors and get sued by his competitors for not acting in the the best interest of his shareholders (by wanting to pay his workers even more)?
No, Henry Ford's goal was to screw the Dodge brothers (whose other company, Dodge Brothers Company, needed a cash injection), not to help his workers.
The Dodge brothers were major investors in Ford Motor Company, and thus entitled to a large share of dividends. Henry Ford tried to bankrupt the Dodge Motor Company by avoiding to pay FoMoCo dividends and thus starve his competitor of cash. The fact that the mechanism Ford used to make his own company unprofitable (and thus avoid paying dividends) also benefited the workers is just coincidence.
In fact the reason we have the modern precedent "companies must operate for the benefit of shareholders" is precisely because Henry Ford's defense in Dodge v. Ford was "I can do this because I want to and I am king". If he had argued "paying workers more makes them happier and thus makes Ford more profitable in the long term", Ford probably would have won that lawsuit. He didn't make that argument because it just wasn't on his radar: His goal was screwing Dodge.
Fascinating read especially when viewed from the strategic angling to make Ford less profitable and cut off the minority shareholders the Dodge brothers from the dividend revenue stream they were using to build a rival company. So ironically, while the court held that the board had to prioritize shareholder profits, he would have realized greater shareholder profits by stifling the competition in its crib.
> while the court held that the board had to prioritize shareholder profits
It's a bit more nuanced than that. The court held that company directors have to be acting for the benefit of shareholders. They still have wide latitude about how to do that.
The reason Ford lost is because his legal position was essentially "I am king, therefore I can do whatever I want". But you can't do whatever you want. You can't lock the workers in the factory and burn it down with them inside, for example. You need to have some kind of colorable argument that what you are doing is somehow in the interest of shareholders (either long or short term).
The problem for Ford was that he couldn't articulate any reason for how his actions were beneficial to shareholders (probably because the real reason, killing the Dodge Brothers Company, would have been illegal under the antitrust laws of the time).
“Paying people more money makes them more efficient, motivated, and productive which benefits the company more than it costs. The expansion investment is to grow even faster to bring even more profits over the long term”.
Done. I doubt Henry Ford had trouble coming up with a fig leaf explanation if that’s all that was truly needed.
It might be apocryphal, but my understanding is that he did this less out of a sense of civic duty and more because the skilled tradespeople liked their existing lifestyle and did not want to work in factories much, so they needed a big raise to be convinced.
I think it's even simpler than that: To run an assembly line, you need all stations staffed at the same time. You can't run the line if you're missing staff for just one station, but you still have to pay all the people who did show up.
So the easy solution is just to pay a lot and threaten to fire (and possibly blacklist) anyone who no-shows. Since the pay is much higher than they can get elsewhere, the people are much more likely to show up.
The high pay probably also helped find people who would tolerate the extremely intrusive practices of Ford's "morality police" (my term), who would inspect worker's homes to ensure they were living "the right way".
