You are the chief operating officer of Brantford Manufacturing Co. (“BMC”) BMC is a public corporation now located in Brantford, Ontario. BMC manufactures brass fittings, primarily for suppliers of plumbing products. BMC located in Brantford because the Ontario government gave the corporation a $12 Million grant in hopes of bringing jobs to Brantford. BMC did hire 100 employees for the Brantford operation.

BMC has been a very profitable operation over the last 5 years. It has regularly paid its shareholders a 5% dividend on their shares, and the share value of BMC has doubled in that period. BMC leases its plant from a local landowner. All of its factory assets are also leased from Industry Supply Corporation (“ISC”). ISC owns 55% of the shares of BMC. ISC also owns all of the patented processes used by BMC in its business. ISC licenses BMC to use those processes. Thus BMC has no assets other than cash and accounts receivable from its business operations.

Over the 5 years of its operations, BMC has produced a large pool of waste water. The water is polluted with heavy metals, which is why the water is contained in this pool. The pool is contained by a dam. The dam was built originally for a flour mill; BMC added some concrete to seal the dam and the waste water pond. There is enough waste water in the pool to create a serious flood in the centre of Brantford and to pollute all of the buildings it might flood.

Recently, BMC had an independent engineering firm inspect the dam. The report from this engineering firm disclosed that the dam has been seriously weakened and is in immediate danger of flooding. The engineering firm considers that it would cost about $25 Million to replace the dam with a modern waste water containment facility.

ISC is sole shareholder of a corporation in North Carolina, Carolina Brass Inc. (“CB”). CB carries on much the same business as BMC. It uses the same patents and processes licensed from ISC. It would cost ISC very little to move all of the production of brass fittings to CB in North Carolina. BMC would remain as the Canadian sales office for CB’s products, and CB would assume all of BMC’s contracts for brass fittings. All of the production workers in Brantford would be laid off and the plant closed.

You have to make a recommendation to the board of directors of BMC and ISC. What should BMC do? What should ISC do? Why do you think this is the best recommendation? There are certainly some choices here; propose what they are and assess each alternative. You should justify your overall recommendation according to one of the theories of the corporation set out in the reading.