Vector Aeromotive Case Study

Vector Aeromotive Corporation (Vector) is in the business of designing and manufacturing exotic sports cars. It was the only U.S. based manufacture of these specialty cars and had fierce competition from the likes of Ferrari and Lamborghini. Vector tried to create a competitive advantage by blending aerospace technology and automobile technology using only the finest technology available in the United States. In the beginning the company was started as a privately funded limited partnership by Gerry Wiegert and in November of 1988 it completed its Initial Public Offering. Upon its incorporation, Vector had a board of directors made up of three individuals, with Mr. Wiegert as the board chairman and president. As time passed the board of directors would grow by two members, one was appointed by Mr. Wiegert and another by a big investor. Vector’s board of directors was tasked to create long term success for the corporation for the benefit of shareholders. This basic fiduciary duty is composed of four elements: 1.Duty of Care – obligation to make/delegate decision in an informed way, 2. Duty of Loyalty – obligation to advance corporate over personal interests, 3. Duty of Good Faith – obligation to be faithful and devoted to the interest of the company and its shareholders, and 4. Duty not to Waste – obligation to avoid deliberate destruction of shareholder value. But not everyone on the board was willing to play by these rules.

To understand what went wrong at Vector Aeromotive Corporation we have to understand what the purpose of the board of directors is. The board of directors at any organization has very defined roles and responsibilities within the business organization. Recruiting, supervising, retaining, evaluating a...

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... then have a cohesive organization that is competitive force in its market.

With Mr. Wiegert running the show, Vector is going to fail. The board needs to remove him or move him to more of “product advisory” role. Only then will Vector have a chance to compete in the well-established exotic car market. There is no cookie cutter template for having an effective board. But a successful organization will have corporate governance in place that will utilize a combination of hard components, like robust structures, clear roles and responsibilities, and rigorous processes and administration with soft components, like board members with the right competencies to address the organization’s short term and long term issues. In the end this will establish a culture of dynamic discussion and effective decision making by the entire board.