Riordan_Manufacturing_Corporate_Compliance_Plan

Following the letter of and the spirit of the legal industry is essential in today's global business environment. Additionally, even with legal expertise on your side, management must proceed with caution. Daily, situations are encountered that must be reviewed, diagnosed and handled based upon the merit of each individual situation. Riordan is an international plastics manufacturer with 550 employees and $46 million in projected annual revenues. Riordan was founded in 1991 and has seen impressive growth within its industry. The company’s focus in on manufacturing and sale of plastic beverage bottles, custom plastic parts, and plastic fan parts. In an effort to realize cost savings, the company has made a financial and strategic decision to move its China operations from Hangzhou to Shanghai in the upcoming year. This move will require change in the framework within the culture of Riordan. This detailed plan will with review the current environment as it relates to the legal environment, specifically speaking to opportunities the company will face in the areas of alternative dispute resolution (ADR), enterprise liability, product liability, international law, tangible and intellectual property, legal forms of business, and governance. The ultimate goal is to provide insight in order to create a successful tool that can be used as a guide for the company to ensure a successful transition into the future. Alternative Dispute Resolution (ADR) As with most change, there will be confusion that will come from the change in location. Job losses in Hangzhou will result in stress for displaced employees. The company must make every effort to ensure that the resulting layoffs, because of the move from Hangzhou to Shanghai, are in compliance with local laws. The company must have a tested ADR framework in place to deal with the residual conflicts. ADR which includes arbitration and mediation is the most efficient and cost-effective method of dealing with the workplace conflict as oppose to having to file and deal with formal complaints in the court of law and public opinion. ADR also tends to restore or enhance the public perception and overall relationship between the employees and management because emphasis placed upon the community's or the perceived injured parties' interests, while litigation emphasizes defending positions. Through ADR, both parties have the ability to develop a resolution and are beneficial to both than the outcome if litigation is chosen and a judge and jury are involved. The company will need to put in place a process that is in compliance with local laws. Litteral & Finkel, the international law firm that Riordan has on retainer should work together the company's legal counsel, to put a framework in place. Another suggested method would be interest-based negotiation or interest-based bargaining and mutual gains bargaining. This particular style of negotiation is based upon each party understanding one another particular point of view by using a variety of tools such as active listening, rephrasing for clarification, and brainstorming to reach agreement. One of the first advocates for this type of negotiation was Mary Parker Follet who says this is a way to increase "creative problem solving" during times when groups were in a deadlock over an agreement (Leventhal, 2006). Enterprise Liability Enterprise liability may result from company’s relocation. The company’s legal department will be responsible for reviewing, assessing and rewriting contracts for vendors and suppliers to try and mitigate the risks associated with the relocation. Contract laws deals with the creation of and resulting activities between two or more participants. This kind of activity creates incentive for each participant to act responsibly and not violate the ability of each participant not to prevent each other from being able to optimize and complete the intent of the activity. Ambiguous contracts create avenues for misinterpretation of ideas, needs, and wants. When creating a contract, all participants involved needs to ensure that their responsibilities and requirements are stated clearly. The company should continue to manage their supplier and vendor contracts effectively because if not, they risk losing suppliers and will suffer irreparable losses. Manage contractual agreements should be a team effort between the company and all related parties to leave no room for misinterpretation on either side. To avoid this, the interests of both parties must be clearly defined in the contract. This kind of collaboration can ensure that the company, its suppliers and vendors can avoid risks, minimize the liabilities, and benefit from the process. Product Liability Product liability can arise from the company changing suppliers. Additionally, the process of having to hire and train new, inexperienced employees, due to the relocation. The legal team should make certain that company’s new suppliers are in full compliance with all of the regulations regarding product liability in all of the markets where the company’s products are sold and manufactured. Regulations do not specifically provide for a standard. Supplier and vendors expect that companies will meet the industry standard. The company should review industry standards and not meeting those standards give rise to tort liability. The company should hire an independent facility to test the company's manufacturing processes at all its manufacturing plants at regular intervals. The testing schedule should comply with industry standards as well as with federal and international regulations. Federal regulations should serve as the minimum standard with which the company should comply to avoid tort liability involving noncompliance. The company’s board of directors should designate a risk manager to lead in reviewing company practices and procedures, thus ensuring the integrity of the procedures so that the results of the tests performed are reliable and credible. The manager should conduct reviews at multiple levels. This process will aide in detecting any shortcomings in compliance and will allow the creation of a process enabling the company to move on to recommend a plan of action, allocate resources, and take measures to correct any issues found. In case an issue has occurred, the manager must take steps immediately to notify the company’s senior management and government officials of the violations and follow up with a plan of corrective actions. Having a plan in place and implementing that plan timely will improve the company’s relationship with regulatory agencies and build credibility, which will help minimize damage when outside agencies report the matter. The company will be able to relay its ongoing record of self-monitoring. The manager must conduct all activities in consultation with the legal department. International Law International laws are especially important in the company’s strategic plan and should involve moving the manufacturing facility from one location to another. It is necessary that the company’s legal department is aware of and complies with every applicable instance of local and country laws to include tax policy, employment laws, environmental and manufacturing regulations, trade restrictions and tariffs and political stability (Pearce & Robinson, 2005). This should not be an issue as since the company's has retained the services of Litteral & Finkel. Riordan must on their expertise to handle any infractions of Chinese law that occur as a result of the company’s business activities. Tangible and Intellectual Property Riordan's legal team must ensure that all loans and purchasing of tangible equipment are completely documented and governed by contractual agreements. Intellectual property rights deals with works that arise from the intellect of people and result in commercial value. It includes intangible ideas, inventions, trade secrets, process, programs, data, formulas, patents, copyright, trademark, software or application, business methods, or industrial process. A company’s intellectual capital, especially as it relates to patentable inventions, usually are of substantial value to company. One risk of intellectual property for the company is that the courts are scrutinizing patents more closely than before. Current patent holders are now required to demonstrate significant steps in the process to render an item patentable. They company’s legal department should reevaluate the current portfolio to protect the company against this risk and the risk of violating others' intellectual property. Additionally, the team should review existing licenses and change the company's current licensing practices. Legal Forms of Business The company must address what legal form of business is best for the organization in the international environment for this region. This is important because of the financial, legal and managerial issues that may result in huge a liability impact in the business formulation which will result in an even larger success within the organization. There are a number of designations that a business can take on. The most common are: sole proprietorship, general partnership, limited partnership, limited liability company, C corporation and S corporation. If the company has not already done so, the company should organize as a C corporation. As a C corporation, the company would be organized with ownership of shares of stock that are assignable and transferable. As a C-corporation, the company would also be a separate legal entity from the owners and can function just as a person would while providing limited liability for the owners. This protection would protect the owners from being sued for the debts of the C-corporation unless they personally guaranteed the debts. The potential loss for the owners of the company would be limited to the capital invested. As a C corporation, the company would be required to file annually a tax return and pay taxes on profits. The control and operation of the company would be in the hands of the shareholders who usually defer to the board of directors for leadership. Governance Because of past incidents there are mechanisms in today’s market that will protect investments from the risk of misuse, fraud and embezzlement. Investors need assurances that companies will use their investments as intended to improve corporate performance, and practices that assure this are at the heart effective corporate governance (Gregory, 2000). Good corporate governance is a set of ethically driven practices that are necessary in order to assure stockholders that a good business relationship in being maintained between the company and its stockholders. Risk mitigation is the thrust of corporate governance and includes enterprise risk management (ERM), a governance framework, a Committee of Sponsoring Organizations' (COSO) and aligning governance with ERM. With these components in place, the company can develop preventative solutions for governing the organization and ensure successful governance along with a risk mitigation plan. Using the enterprise risk management approach will help the company’s management understand and manage internal and external risks they may encounter during the relocation. This approach will allow the company to keep the transition on track. COSO is essential in understanding the factors that can lead to fraudulent financial reporting that resulted in the passage of the Sarbanes-Oxley Act. COSO frames guidelines for ethical financial reporting practices for public companies and their independent auditors, for the SEC and other regulators, and for educational institutions. COSO guidelines are essential for the company to able to comply with the terms of the Sarbanes-Oxley Act. Instituting strong internal controls is the cornerstone of the COSO guidelines (COSO, 2008). To assure compliance with the Sarbanes Oxley Act, the company should put in place strong internal controls that ensure ethical financial reporting. ERM and corporate governance is comprised of four components including stakeholders, the governance safeguard provided by the board of directors, risk management, and assurance. The boards of directors, senior management, internal and external auditors are the basis of corporate governance at Riordan. Additionally, the company’s board of directors is responsible for corporate governance. The board is responsible for acting on behalf of the stakeholders, but cannot assume responsibility for risk management. The company should clearly define and state corporate governance roles and the legal department should be involved with the establishment and oversight and practice of these activities. Conclusion If the company carefully plans a legal framework that will help minimize its risks and maximize it opportunities in the areas of ADR, enterprise liability, product liability, international law, tangible and intellectual property, legal forms of business, and governance, they will have a successful relocation.  REFERENCES COSO (2008). Internal control : Integrated framework. Retrieved February 9, 2009 from http://www.coso.org/IC-IntegratedFramework- summary.htm Gregory, H.J. (2000, September/October).The globalization of corporate governance. Global Counsel. Retrieved February 9, 2009 from http://rru.worldbank.org/Documents/PapersLinks/globalisation_of_corporate_governance.pdf Leventhal, L. (2006, August/October). Implementing interest based negotiation: Conditions for success with evidence from Kaiser Permanente. Dispute Resolution Journal. Retrieved February 8, 2009 from EBSCOhost database Pearce, J. & Robinson, R. (2005). Strategic management: Formulation, implementation and Control. 9th ed. New York: The McGraw-Hill Companies.