Corporate Compliance Plan
Started by Dr. Riordan in 1991, Riordan Manufacturing, Inchas been the leading manufacturer of plastic injection molding. ???Initially, the companys focus was on research and development and the licensing of its existing patents, but in 1992 Dr. Riordan obtained venture capital which he used to purchase a fan manufacturing plant in Pontiac, MI??? (Apollo Group, Inc., 2004). In 1993, Riordan expanded business in Albany, Georga, with a manufacturing plant used to produce plastic beverage bottles. In 2000, Riordan Manufacturing underwent a huge expansion, relocating the fan manufacturing plant from Pontiac, to Hangzhou, China, at which time the Michigan plant was redesigned to develop miscellaneous plastic parts.
Riordan Manufacturing??™s management team has been focusing on developing a Corporate Compliance Plan to meet the growing requirements of the company??™s specialization and globalization in the field of plastics manufacturing. The corporate compliance plan details the mission and vision of Riordan, ensuring compliance with all applicable laws, policies, and regulations. By developing the new compliance plan, management at Riordan will be solidifying their desire to promote ethical commitments throughout all their operations.
This plan has been designed to placing significant importance of internal controls, and submits a proposal to lessen risks by applying recommendations and principles from the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Ultimately, the development of the new corporate compliance plan will ensure that staff at Riordan will be more aware of the policies and regulations established to help reduce compliance liabilities.
This paper will examine the legal environment including opportunities and challenges of Riordan Manufacturing in the areas of alternative dispute resolution (ADR), enterprise liability, product liability, international law, tangible and intellectual property, legal forms of business, and governance to form a successful corporate compliance plan for the company.
Alternative Dispute Resolution (ADR)
The Corporate Compliance plan includes an ADR for resolving any conflicts, disagreements, and discrepancies that may occur causing a lack of productivity within the company. Riordan Manufacturing encourages team members to follow the chain of command, suggesting that a problem occurs; the immediate supervisor is contacted first to resolve the issue. If the immediate supervisor is unable, or unresponsive, the employee should move up the chain of command. A compliance manager and a compliance committee will now be available to assist in dispute resolution is no action has taken place.
At Riordan Manufacturing, employees are urged to participate in informal mediation processes. An unbiased mediator will be selected to conduct the mediation process. The mediator selected will be someone from a different area of the manufacturing departments, who is uninvolved with the dispute. If the issue is able to be resolved through mediation, the decision will be recorded in the compliance manager??™s office and will be the official resolution.
Should no resolution be determined by the previous processes, the dispute will be handled by peer review. This process will be conducted by a panel consisting of three neutral employees selected at random from the different departments, one corporate compliance team member, a member of human resources, and the two parties in dispute. Once the parties involved have presented the issue, the panel selected will determine the final decision. The final outcome will be documented and maintained by corporate compliance. An official report will be sent to the managers and directors of the department for review.Enterprise and Product Liability
By relocating to China, enterprise liability can result. Litteral and Finkel, Riordan??™s legal team will need to reevaluate and rewrite certain vendor and supplier contracts to reduce the risk of enterprise liabilities. Riordan does not want to take the risk of losing their vendors and suppliers and suffering significant financial losses, so the company must continue to manage these contracts effectively. To avoid contract misinterpretations, the terms of all contracts between both suppliers and vendors must be clearly specified and leave little room for further interpretation. This will help Riordan, the suppliers, and vendors to minimize risks and liabilities.
???Risk is a pervasive part of everyday business and organizational strategy??? (COSO, 2009)
By using the Enterprise Risk Management (ERM) approach outlined by the COSO, Riordan Manufacturing can manage risks associated with the relocation to Hangzhou, China. Every part of Riordan Manufacturing, owners, board of directors, management team, and employees affect the process of ERM. Incorporating the ERM approach into the internal controls, Riordan will be able to keep the relocation on track by responding to risks in a timely manner (COSO, 2009).
If Riordan Manufacturing decides to switch suppliers, or hire new employees due to the expansion and change of location, product liability can result. Product compliance is essential, therefore, the legal team should review the regulations regarding product liability in the new area where manufacturing and sales are taking place. Industry standards in China may be completely different from the standards in the United States, and Riordan must comply with all regulations to avoid potential tort liability.
A new risk management department will be developed at Riordan to ensure the integrity and testing of products is taking place and that all products are in compliance. Product reviews will take place by risk management, and any deficiencies will be reported to the government, along with the necessary corrective actions being taken to fix the problems. In addition, Riordan can further avoid product liability risks by making sure that any new vendors and suppliers being contracted and in complete compliance with U.Sand international manufacturing standards.Tangible and Intellectual Property
Companies must protect tangible and intellectual property. In order to do this, there are a few actions that need to be taken. Tangible property is easier to safeguard since these are the items that can be liquidated. [These items include the buildings, factories, inventories, office equipment, machinery and any other item associated with the business that can be sold for cash. Riordan Manufacturing maintains an asset list which includes all tangible property listed, and maintains an insurance policy for these items. Semi-annually, management inventories all items for asset tag accuracy, and to make sure that all items are accounted for.
Intellectual property is a completely different story. Since intellectual property cannot physically be touchedcompanies have a more difficult time protecting it. Riordan Manufacturing protects their intangible property using patents, trademarks, and copyrights.
???The Uniform Trade Secrets Act to give statutory protection to trade secrets??? (Cheeseman, 2010), so these are protected as well.
Understanding international laws have become extremely important to Riordan Manufacturing the relocation of the fan plant from Michigan to China. Since China is a different country with a different set of governing laws, the Riordan legal team must make sure that the company is in compliance with all applicable laws and regulations. Litteral and Finkel, a large international law firm has been used by Riordan since the beginning of their existence, some there should be no problem handling the interpretation of the Chinese law.Legal Forms of Business
Numerous legal forms of business exist for an entity to choose from, Sole Proprietorship, General Partnership, Limited Partnership, Limited Liability Company (LLC), S-Corporation, and C-Corporation (Holland, October 1998). Riordan needs to choose a legal form of business that will best suit the needs of the company, taking into consideration ???the tax, managerial, legal and liability impacts that the business formation has??? (Holland).
If Riordan has not already chosen a form of business, the logical selection would be a C-Corporation, as it would allow more flexibility. As a C-Corporation, they would be ???organized with ownership of shares of stock which are assignable and transferable??? (Holland). Riordan would also be a separate legal entity from owners, which would protect the owners from being sued for the corporations debts. The owners would only lose their initial investment in the company if the company has suit filed against them. As a C-Corporation, Riordan would have to file IRS tax returns and pay taxes on profits held by the company.
???The Committee of Sponsoring Organizations (COSO) is a voluntary private-sector organization. COSO is dedicated to guiding executive management and governance entities toward the establishment of more effective, efficient, and ethical business operations on a global basis??? (Committe of Sponsoring Organizations of the Treadway Commission [COSO], 1985-2010).
???The Riordan Manufacturing Board of Directors carries the responsibility of overall management of business affairs of the Company in accordance with state corporation requirements, the Articles of Incorporation, and its By-Laws???(Apollo Group, Inc., 2004).
Senior management at Riordan Manufacturing is held accountable by the Board of Directors, and the board may remove a member of management as they see fit. Management at Riordan has the responsibility to ensure that the company internal control policy is being adhered to and that it is in compliance with all rules, laws, regulations and guidelines. ???The daily activity of operations shall be governed by departments through the development of a Departmental Governance Plan??? (Apollo Group, Inc.).?
Stakeholders need to know that methods are firmly in place that will protect their financial investments from fraud, misuse, and risks. Assurance is needed that investments into a company will be used for what they are intended. Business practices are driven by a solid code of ethics which are crucial when reassuring stakeholders and focusing on maintaining good business relationships.References
Apollo Group, Inc. (2004). Riordan Manufacturing. Retrieved September1, 2010, from https://ecampus.phoenix.edu/secure/aapd//cist/VOP/Business/Riordan/Internet/IndexPort.htm
COSO (2009). Effective Enterprise Risk Oversight. Retrieved September 1, 2010, from http://www.coso.org/documents/COSOBoardsERM4pager-FINALRELEASEVERSION82409_001.pdf
Cheeseman, H. R. (2010). Business Law: Legal Environment, Online Commerce, Business Ethics, and International Issues (Seventh Edition ed.). Upper Saddle River, New Jersey: Pearson Prentice Hall.
Committe of Sponsoring Organizations of the Treadway Commission (1985-2010). Internal Control – Integrated Framework. Retrieved September 1, 2010, from http://www.coso.org/IC-IntegratedFramework-summary.htm
Holland, R. (October 1998). Legal Forms of Business. Retrieved September 1, 2010, from http://cpa.utk.edu/pdffiles/adc19.pdf
Corporate Compliance Plan