The following memorandum will discuss the facts related to Vulcan, Inc. and their recent acquisition of a plot of land in Montana. Vulcan, Inc. is a multinational Fortune 200 company engaging principally in the exploration for and extraction of minerals. It is listed on the New York Stock Exchange and has 615 million shares outstanding. On March 7, Vulcan Inc. Chief Executive Officer Stewart Myer held a private meeting with Martha Bordeaux, the VP for finance; Lamont Johnson, the chief geologist; and Nastasha Bylinski; the VP for acquisitions at an Atlanta airport. Upon meeting, chief geologist Lamont Johnson relayed his report to the executives that they had discovered remarkable tests results regarding the conductivity of rocks in Montana. To obtain samples without giving any information to the landowners, Johnson “pretended to be a motion picture company looking for locations to remake the movie High Noon.” Myer reminded his coworkers that it was critical maintaining absolute secrecy and that he would decide and tell who needs to know. At 10:00 A.M. on April 11, Vulcan Inc. CEO Stewart Myer announced the company’s “strike” in Montana containing at least 30 million tons of high-grade copper and zinc ore. Based on the facts provided, I will conclude by detailing the appropriate claims by Vulcan shareholders in regards to the illegal activities of its executives. II. Memorandum
According to Section 6.24 of the Revised Act, “The board of directors determines the terms upon which stock rights, options, or warrants are issued; their form and content; and the consideration for which the shares are to be issued.” Based on the facts, Vulcan issued stock options on March 15 at $23.50 a share to thirty executives including the previously mentioned Stewart Myer, Lamont Johnson, Nastasha Bylinski, and Martha Bordeaux. At this point in time, neither the stock option committee nor the board of directors had any knowledge of the strike in Montana or the pending land acquisition program. Taking the facts provided into consideration, it is evident that the Board of Directors for Vulcan, Inc. did not commit any illegal actions. According to Section 8.30 of the revised Act, “A director may also rely on good faith upon information provided him by officers and employees of the corporation…as to matters the director believes are within the person’s professional or expert competence.” As Myer and other executives withheld information from the board, the Board of Directors cannot be held legally accountable for issuing stock options to some of its executives at a fair market price. While directors owe a duty of loyalty (a fiduciary duty) to the corporation and its shareholders, the directors of Vulcan, Inc. acted as they sought best for the corporation based on the facts presented to them. Likewise, the directors acted in an ethical manner, as they did not advance their own personal interests at the company’s expense through issuing these stock options. Stewart Myer and other executives were the sole beneficiaries of this issuance. Press Release
On the morning of March 20, VP of Finance Martha Bordeaux read an article in a national newspaper exposing Vulcan, Inc.’s strike in Montana. After relaying this information to CEO Stewart Myer, Myer prepared a press release for March 21 which claimed the article “greatly exaggerated” Vulcan, Inc.’s findings. To continue, the article stated, “Most of the areas drilled have been barren or marginal.” According to the 1934 Act, Section 18 imposes express civil liability upon any persons who makes or causes to be made any false or misleading statement with respect to any material fact in any application, report, document, or registration filed with the SEC. To continue, Rule 10b-5 states “A misstatement or omission is material if there is a substantial likelihood that a reasonable investor would consider it important in whether to purchase of sell...
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