Vector Aeromotive Corporation Case Study

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Generally, the board of directors are responsible for the following duties: 1) duty of care – duty to make/delegate decisions in an informed way; 2) duty of loyalty – duty to advance corporate over personal interests; 3) duty of good faith – duty to be faithful and devoted to the interests of the corporation and its shareholders; 4) duty not to “waste” – duty to avoid deliberate destruction of shareholder value. There is no reason to believe that the duties of Vector’s board should be any different. The major conflict between Vector’s board and its president centers on President Wiegert’s management style, belief of excessive spending and his deceitfulness towards the board members and potential investors. Although President Wiegert’s management style was not initially noticed as a concern, it was brought to the board’s attention by the finance VP, Don Johnson, but he failed to receive any support. Johnson had observed the president not giving employees the “freedom to be effective” and focusing more efforts on profit and promotion instead of engineering and production. The board would finally acknowledge this was a rather large issue two years later. There were several instances where the board questioned the president’s misuse of company expenses but had a difficult time producing evidence of any wrong doing. The amount of excessive spending that the president was responsible for was noticed as a problem but no action was taken. The board members also voiced concern about the over exaggerated “fraudulent” business plan that President Wiegart was using to raise money for Vector. Wiegart was not only losing the trust of his board members and employees but also his potential investors. Another problem, not mentioned in the case, was the board members themselves. They were all selected by the founder and president of the corporation, with the exception of Baduraman Dorpi (he was appointed by the Indonesian investor per the purchase agreement). The...
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