Vulcan, the U.S.' largest supplier of sand and gravel used in paving and building, has seen its stock price rise more than 12% since April 2018, when Chao said she would cash out her shares, according to a 2017 government ethics agreement.
Chao's shares have risen in value by more than $40,000 since the month she said she would divest them, the Journal reported, citing corporate and government filings.
Chao did receive a payout on the shares, now valued at nearly $400,000, in April 2018, as deferred compensation for the time she spent on the company's board of directors before being confirmed to President Donald Trump's Cabinet, Vulcan told the newspaper.
"I will receive a cash payout for all of my vested deferred stock units in April of the year following the year of my separation from service," Chao said in her January 2017 ethics agreement.
A spokesman for the Transportation Department told the Journal that the agreement she signed was flawed, because it did not account for Vulcan's policy requiring directors' deferred shares to be paid out in shares of company stock. The language of the ethics agreement Chao signed "is being clarified to avoid confusion," the spokesman told the Journal.
Chao promised in that agreement that, "Until I receive the cash payment of my vested deferred stock units, I will not participate personally and substantially in any particular matter that to my knowledge has a direct and predictable effect on the financial interests of Vulcan Materials" without a waiver.
The department's top ethics official found that Chao's continued ownership of Vulcan stock "presents no conflict of interest," a Transportation Department official told CNBC.
But former Office of Government Ethics chief Walter Shaub told the Journal that Chao, whose department oversees U.S. transportation and infrastructure responsibilities, should strive to avoid even the appearance of a potential conflict.
"For the head of the DOT to have a financial interest in an asphalt company, that is not sending a message to employees of DOT that she is making ethics a priority," Shaub told the Journal.
Neither the Transportation Department's ethics office nor Vulcan immediately responded to CNBC's requests for comment on the Journal's report.