Corporate Compliance Plan for Riordan - Essay Example

? Riordan: Corporate Compliance Plan Riordan: Corporate Compliance Plan Introduction Riordan Manufacturing is an international plastics manufacturer.It manufactures plastic beverage containers, custom plastic parts and plastic fan parts. It is a Delaware Corporation, however has plants situated throughout the U.S. and in China. It employs 550 people and has projected earning of over $46 million. As a huge MNC, Riordan is exposed to numerous risks and legal liabilities in various forms. As part of its corporate compliance, it has to ensure that all the legal risks and liabilities are taken into cognizance and addressed in a preventive manner. As such a framework of codes of conduct and regulations which are in conformity with the various Federal, State and International laws is to be built. Such a Frame work shall act as a means and tool to mitigate any possible legal risks and liabilities The compliance plan should move ahead with Enterprise Risk management as a starting point with COSO risk guidelines as a basis (Steinberg, 2011). From a risk and liability mitigation perspective, the most impending aspect of the issues arising out of the numerous business and related transactions would be the underlying conflict. Thus, a separate mechanism for addressing the conflicts or disputes emanating from business transactions should be put in place. In order to avoid high litigation costs, a more preventive approach for conflict resolution that is Alternative Dispute Resolution should be implemented such that it is in consonance with ADR clause of the applicable Local/Regional and International Laws. Riordan already has a corporate governance plan in existence. As per the plan, the Riordan Board of Directors should carry out the overall responsibility of the company as per the state corporate requirements. The plan specifies the board leadership roles, compensation and performance criteria, meetings etiquette and proceedings, committee matters and membership as well as operational and financial responsibilities of the board. Riordan has appointed Lowell Bradford the Legal Counsel who directly oversees the legal matters for the company. All the legal matters from various departments are forwarded to him, which he addresses based on his experience and knowledge and when required in consultation with Litteral and Finkel, the International Law Firm retained by the company. As per the above discussion in light of the most recent strategic decision of the company to move its China operations from Hangzhou to Shanghai, the possible legal risks and the liabilities shall be addressed as follows: ADR: Riordan should stipulate guidelines for its legal department to follow in order to avoid possible costly litigations as also the long term effectiveness of the conflict resolution. Towards the same goal, it should adopt an Alternative Dispute Resolution (ADR) strategy which is in consonance with the ADR clause of the state corporation laws. As an effective strategy, the most important aspect of ADR from business conflict resolution viewpoint is to adopt a win-win attitude (Barbara & Corvette, p. 266). Based on the COSO risk management strategy (Steinberg, 2011), Riordan should decide upon whether Mediation or Arbitration would be an effective approach in the given situation. As such the authority to decide upon the same should rest with Lowell Bradford, the legal counsel. The authority to choose the Arbitrator and/or mediator for the same shall also rest with Mr. Bradford, however, he shall have a consultative role, whereas the legal board of Directors shall have a collective and final say in the matter. However, a Binding-mediation strategy (Jentz, Miller, & Cross, 2008, p. 40) shall be the most appropriate strategy for Riordan. The possible disputes that might arise from the relocation in the form of possible disagreement with the existing workforce over the termination of work contracts as well as vendor contracts resulting from the relocation. In order to address and mitigate the possible risks of disputes arising from this decision, Lowell Bradford, the must also consult its international law firm in the matter, since it pertains to an International location. Enterprise liability: The size and nature of the operations of Riordan makes it liable for numerous acts of commission or omission on part of the various constituents of the corporation. The huge number of transactions, particularly those with respect to its clients and vendors, make it susceptible to legal risks and liabilities in various forms. In order to address this liability, an effective strategy under the given circumstances is to devise contractual guidelines based on the possible risks of Enterprise liability. The Company should allow sufficient leverage within the contracts towards, mitigation of any possible risks that might accrue to the company due to any act on part of its employees or vendors or any stakeholder, amongst themselves or towards the public in general. The contracts should incorporate the review clause and provide sufficient scope for positive interpretation in favor of the enterprise. Given the current decision to relocate, Riordan is likely to face disputes regarding payment settlements and compensation issues. Riordan, should, on its part strive to encourage the practice of renewal of the contracts, such that misunderstanding that develops over a period of time with consumers and employees can be prevented and mitigated. Product liability: Product liability is “the liability that manufacturers or other sellers in the chain of sale, have, not only to immediate purchasers, but also to the general public for physical injury or property damage caused by defective products they place on the market or for failure of the products to perform adequately, once they are purchased” (Goldman & Sigismond, 2010, p. 290). Riordan being a huge manufacturing firm, with a large product line must have a set of guidelines in place to anticipate and mitigate any possible product related risks such that it can prevent any tort liability. With particular reference to the relocation of manufacturing facility from Hangzhou to Shanghai, it is inevitable that new vendors and suppliers will be hired. It is quite likely that new suppliers might be unable to perform up to the expected standards especially at the beginning and this might mean missing the deadlines or not being up to the mark in terms of product quality and delivery in some form or the other. The chief legal counsel must ensure that all the products manufactured at Riordan are in compliance with the established standards for the particular industry and product category and manufactured and sold in such a manner as to avoid any lawsuit or tort liability. Riordan should hire a product specialist or team of product specialists to assist the product manager to ensure the highest standards of product quality keeping the latest product design standards in mind. Product should be designed such that there is no safer alternative design available in market. Riordan should try to manufacture products with no manufacturing defects. However, appropriate warnings and instructions should be incorporated on the products such that any possible losses or defects do not invite any tort liability. International law: Riordan manufacturing being an international entity with manufacturing facilities in the US and China, besides distribution and sales in many other countries of the world must take into account the implications of International law as applicable to its business transactions. Since, International Law does not emanate from any particular legal system of a nation but of different states (Aust, 2010, p. 2), Riordan must take care to put in place rules and codes of conduct for its employees and management, as also its channel partners to observe particularly those in International locations or dealing directly or indirectly with international markets. Given the decision to relocate its operations to Shanghai, China, the legal firm Litteral and Finkel must ensure that the decision is endorsed not only by the Chinese Government, but also facilitated by it, if it has to succeed as a business venture. Any move in the direction that is in conflict with the Chinese law has to be addressed and rectified keeping the principles of applicable international business laws, as accepted by the Chinese Government. This is especially important in the light of the fact that enforceability in International Law does not come from the courts or the police but from the consent of the state both explicit and implicit (Aust, 2010, p. 3). Tangible and Intellectual property: Riordan Manufacturing, with its huge manufacturing and distributor network, is likely to have numerous product and process patents. Research and Development documentation as well as equipment which are a source of its competitive advantage in the market for Riordan need to be safeguarded particularly in view of the relocation exercise that is supposed to take place. Mr. Lowell, chief legal counsel in consultation with the legal firm Litteral and Finkel must draft confidentiality agreements with the vendors, distributors and other channel partners in order to safeguard its trade secrets. The confidentiality agreements also make Riordan liable for protecting the Intellectual rights of its partners, vendors and suppliers with whom it signs confidentiality agreements. As far as tangible property protection is concerned, the agreements with the vendors and business partners must cover any liability arising out of any unauthorized use of its equipment upon theft or malpractice by any constituent of its partner firms. Further, any equipment given for distribution should be on a returnable basis and be returned and inventoried upon completion of the stipulated process and/or time as defined in the relevant agreements. Employment law: In order to mitigate any risks arising out of the issues related to employee performance and or workplace satisfaction or discrimination, Riordan manufacturing should entrust its HR heads to work in close coordination with the chief legal counsel, who must work together firstly to draft codes of conduct for both management as well as the employees and must take into account the legal principles guiding the prevention of lawsuits in such matters. Riordan should take into account the principle of “Employment at will.” “Employment at-will” is a legal doctrine that simply states that employer-employee relationship is such that either party may sever the relationship “for any reason, no reason, or even bad reason” (Washington, 2011). It should also take into account the local and international laws governing the employment issues in the overseas locations. Personnel manual: Riordan should prepare and maintain detailed personnel manual to lay at rest any doubts or confusions that might arise out of difference of viewpoint or opinion or conflict of vested interests particularly in China, where the labor or workforce interests are considered primary. The law for of Litteral and Finkel must work closely with the chief legal counsel to mitigate any possible risks by drafting and advising the board of directors on the issues like gender bias, termination, workplace discipline and other related personnel issues. Riordan must take into account the principle of equal opportunity for all employees. The U.S. Equal Employment Opportunity Commission (EEOC) is responsible for enforcement of the federal laws (Title VII of the Civil Rights Act of 1964) according to which it is illegal to discriminate against the protected classes: race, color, religion, sex, national origin, age, disability or genetic information. Contract management: Riordan, within the legal compliance framework, is and will get into numerous contracts with various parties including vendors and customers. Sometimes, operational inconsistencies lead to serious complaints and if not handled properly, might result into lawsuits. Thus, Riordan must entrust its legal counsel with the responsibility of putting into place a contract risk identification and rectification mechanism in place, wherein the contracts and the related or possible issues might be mitigated. Riordan must acknowledge that the three standards of performance are complete, substantial and inferior. Complete performance is ‘situation in which a party to a contract renders performance exactly as required” (Cheeseman, 2010). The risk mitigation as mentioned above could be achieved by timely and insightful pre contract negotiations. Legal forms of business and governance: Based on its unique business needs and financial situation, a company may choose to carry out business in various legal forms. The various forms of business are Sole proprietorship, partnership, Limited Liability Company (LLC), C-Corporation and S-Corporation. However, expanding business into new international areas like the recent decision to move production to Shanghai, will bring with it new complexities of doing business in terms of political, legal, marketing and technological challenges. Thus Riordan will have to reconsider its legal business structure with which it will start doing business in newer areas. Riordan with its overseas business operations should opt for the model of a C-Corporation. As a C-Corporation, Riordan will be well placed for handling the legal complexities of large and International business. It will a legal and tax entity independent of its owners. An important aspect of a Corporation from a legal aspect is that the company can though be held liable for offences, can not be put in prison. The punitive action can at best be monetary fine or business sanctions or penalties. Corporate Governance: Riordan must follow the Corporate Governance model wherein the Company is run by a board of Directors elected by shareholders. All the policy matters must be decided upon by the board members. The Board of Directors have a special role to play in ensuring corporate and legal compliance in a company. Riordan’s board of directors must strive to create a culture of compliance within the whole organization not only through policy and procedural pronouncements, but also through personally exemplary acts that can be followed by the staff members and other stakeholders. One of the most important aspects of a compliance plan is the corporate governance. Corporate Governance is “the conduct of the corporation based on laws, securities and exchange rules and societal expectations that determine how the corporation based securities, exchange rules and societal expectations that determine how the corporation including the officers and directors, interacts with the providers of the capital, while continuing to manage its business effectively” (Endres & Ramos, 2002, pp. 20-43). Quite notably, corporations were increasingly being subject to accounting and financial scams by certain shareholders and others, which ultimately was affecting the genuine stakeholders of the companies as well as other businesses. In order to address these issues, the U.S. Congress passed the Sarbanes Oxley Act of 2002, which sought to create more transparency on part of the corporate managements towards the shareholders of the business. Riordan should in compliance with the above act tailor its corporate reporting structure such that it is transparent enough to mitigate any risks of future lawsuits arising out of any unfavorable situations such as mentioned above (PriceWaterHouseCoopers, 2003). The improvements as mentioned above consist of establishing internal control systems aimed at improving the reporting structure. The control structures are supposed to function on the control activities of the COSO framework and these are: control environment and risk assessment, control activities. References Aust, A. (2010). Handbook of International Law. Cambridge University Press. Barbara, B., & Corvette. Conflict Management: A Practical Guide To Developing Negotiation Strategies. Pearson Education. Cheeseman, H. (2010). Business law: Legal environment, online commerce, business ethics, and international issues (7th ed.). Upper Saddle River, NJ: Pearson Prentice Hall. Endres, K. A., & Ramos, T. (2002). Corporate Governance & Securities Law. In T. L. Banks, & F. Z. Banks, Corporate Legal Compliance Handbook (pp. 20-43). Aspen Publishers. Goldman, A. J., & Sigismond, W. D. (2010). Business Law: Principles and Practices. 2010. Jentz, G. A., Miller, R. L., & Cross, F. B. (2008). Business Law: Text and Summarized Cases: Legal, Ethical, Global, and E-Commerce Environment. Cengage Learning. Price WaterHouse Coopers. (2003). The Sarbanes Oxley Act of 2002 And Current Proposals by NYSE, Amex and Nasdaq . PriceWaterHouseCoopers. Steinberg, R. M. (2011, March). Using the New COSO Risk-Management Guidance. Compliance Week , pp. 36-37. Washington, D. (2011). Wrongful discharge revisited. Franklin Business & Law Journal , 34-37. Read More