Corporate Compliance Plan – Company Model used: Riordan Manufacturing

Riordan Manufacturing has decided to open a new division of its business in Puerto Rico. A plan that applies to the legal principles Riordan Puerto Rico is created. This plan will focus on the legal liability of officers and directors of Riordan, including corporate responsibility, international law, legal forms of business, government, and Sarbanes Oxley.

Riordan Manufacturing is a global plastics manufacturer employing 550 people, and has annual revenues of more than $ 1 billion. They pay special attention to detail and accuracy by implementing a rigorous quality control. Riordan has facilities in San Jose, California, Albany, Georgia, Pontiac, Michigan and Hangzhou, China. The company's sole owner to Riordan Manufacturing, Inc., and is listed as a Fortune 1000 company. Some of their products are plastic beverage containers, plastic parts for fans and other plastic parts made ​​with unique specifications for other clients. The company has decided to open a production plant in Puerto Rico. Riordan will need to meet the legal requirements of Puerto Rico as well as with those of U.S. corporations in other countries. Besides, the officers and directors will need to know the legal responsibilities of the corporation in both jurisdictions.

Alternative Dispute Resolutions

There are three main techniques of alternative resolution of legal disputes that are commonly used in the United States. They include mediation, arbitration and collaborative law (Cheeseman, 2010). Below, we will discuss the first two, applying them to Riordan Manufacturing, Inc.

If arbitration is negotiated before (using a mediator)(LawInfo.com):

1. Uppermanagement proceed in good faith between the situations. Either party may provide to the other by written of any situation not resolved in the current course of the activities. In a period of 48 hours after the receipt of the notification. The response shall include the following:

a.       A written notification of the position of the Company, and a draft of explanations for that situation, and

b.      The name of the corporate legal representative of and any other person who will accompany the representative, (if applicable).

2. Unless the negotiating parties agree otherwise in writing, the previous trading shall finish at the end of the first encounter (“First Meeting "). Such termination shall not prevent the continuation of the negotiations or subsequent arrangements, if wanted.
3. All offerings and arrangements, whether verbal or letters, submitted by either party are confidential, privileged and not admitted for any situation, in the arbitration or other proceeding involving the parts, stipulating that those documents are otherwise admissible or may be presented as evidence should not be taken as inadmissible or may not be submitted as evidence as a result of their use in the process.
4. Never before the initial encounter, will parts begin any legal process relating to this Agreement except to seek an interim action that is permitted by law or by arrangement of the parts involved. However, this exception does not apply to either part if the other does not want to comply with the arrangements included before.
5. All time limits and corresponding defense based on the passage of time shall be recorded in writing during the process, and for 5 days after calendar. The parts shall determine the extent, if any, required to establish such written documentation.

 If there is no prior negotiation (arbitration):

If the parts do not want to negotiate before arbitration, but wish to mediation before arbitration, they can achieve it by using the following (LawInfo.com, 2014):

1.      The parts agree that any and all differences or situations resulting of or related to this Agreement shall be submitted to mediation and if it’s not resolved, then the same shall be submitted to final and binding arbitration.

2.      Any part may initiate mediation by giving to all parts a mediation request in writing, setting out the object of the dispute or the extent of relief sought.

3.      The parties shall cooperate with each other to select a neutral mediator panel and planning procedures of mediation. The parts agree that they will participate in the process in good faith and to share equally the costs, if any.

4.       All offerings, commitments, and statements, whether oral or written , which were carried out in the course of the mediation by any of the parts, are confidential, privileged and inadmissible for any purpose , including impeachment , in arbitration or other proceeding involving the parties, stipulating that evidence that is otherwise admissible or may be presented as evidence should not be taken as inadmissible or may not be submitted as evidence as a result of its use in the mediation.

5.      Either part will start arbitration with respect to the issues submitted to mediation by providing a written request for arbitration at the later time of the initial mediation session or at any time after 5 days from the date of filing the written request for mediation , whichever occurs first ("Most previous date"). The mediation may continue after the commencement of arbitration if the parties so desire.

6.      Never before to the earlier start date, can neither part start arbitration or litigation relating to this Agreement except to seek an interim action that is authorized by law or by agreement of the parties. However, this limitation does not apply to either party if the other party refuses to comply with the requirements of paragraph 3.

7.      All time limits and corresponding defense based on the passage of time shall be recorded up to 15 days after the date of most previous date. The parties shall determine the extent, if any, required to implement the register.

Corporate Governance and Liabilities

Riordan Manufacturing, Inc. is a sole proprietor. It has the advantage that it can make all management decisions, hire and fire employees. In addition, any gain corresponds to them. The owner is not legally separate business and therefore is legally responsible for, (Cheeseman, 2010):

·         Personal responsibility for being sole owner

·         Business Contracts

·         Damage to civilian employment

·         Losing demands personal assets earned by creditors

·         Submit the profits or losses of the company in their personal income contributions report

International Laws

Law 144 of August 10, 1995 in Puerto Rico, known as the General Corporation Law of Puerto Rico, establishes the procedure to be followed when an organization thinks of establishing business in Puerto Rico. Here are some guidelines that Riordan must meet before setting the franchise to do business on the island:

·         A certificate of attendance (or equivalent document) to be issued by the Secretary of State or an officer having the protection of the corporate registration in jurisdictions under whose laws the corporation is established.

·         Application to do business in Puerto Rico conferred by an authorized officer of the corporation in which the following information is determined:

o   Name of the foreign corporation

o   Name of the jurisdiction under whose laws it is incorporated

o   Date of incorporation and term of legal personality

o   the physical address of its corporate domicile

o   Address your designated the Commonwealth and the name of the resident agent at that office

o   Names and usual business addresses of its current directors and officers

o   Value of assets and liabilities of the corporation , dated not more than one (1) year from the filing of the application, and

o   Description of the business that the corporation intends to carry out in the Commonwealth, and a statement that you are authorized to conduct such business in their jurisdiction of incorporation.

Once the requirements are completed, the State Department issues a certificate of approval that authorizes the foreign corporation to conduct business in the Commonwealth of Puerto Rico under its resident agent seal.

 Legal Forms for Business and Government

In Puerto Rico, Riordan is being a foreign corporation, and it has to follow a few steps before it can be established. Riordan must comply with all federal, state and local laws, rules and regulations. The following are some of the laws, rules and regulations that apply to Riordan:

·         Clean Air and Water Act - Since many manufacturing companies around the world use plastic, there are many different laws and regulations affecting its production. Riordan's plant is located in the United States and Puerto Rico, so there must be knowledge of each state or municipality of the laws concerning air and water. Riordan must be in full compliance with the Clean Air and Water Act for immediate action in case of any violation. Riordan assigned a manager who will be responsible for complying with federal, state and local laws. The Director will review all laws and all information obtained to all employees to ensure full compliance (Jennings, 2006).

·         Occupational Safety and Health Administration (OSHA) - The Director will conduct a monthly safety inspection to verify compliance with all OSHA regulations. Compliance with OSHA regulations should reduce accidents, injuries, illnesses and death. OSHA Information will be posted on all bulletin boards of the company.

·         Federal Trade Commission Act – (For product and enterprise liability) states that all products manufactured by Riordan must comply with the Uniform Commercial Code to eliminate the possibility of intentional damage, negligence, and strict tort liability. Riordan ensure updated, accurate and clearly printed on all products. Legal actions will be reported to the Corporate Compliance Officer and Chief Legal Counsel Riordan (Jennings, 2006).

·         Committee of Sponsoring Organizations of the Tread way Commission, (COSO) - is a private organization in the United States, which provides guidance on organizational management, business ethics, internal control, enterprise risk management, fraud and financial reporting (Landsittel, 2009).

·         Enterprise Risk Management, (ERM) - consists of eight interrelated components. These are derived from the way a business works and are integrated with the management process, these components are: internal environment, setting goals, event identification, risk assessment, risk response, control activities, information, communication and monitoring (COSO, 2004).

COSO Recommends using Enterprise Risk Management (ERM) as an approach to identify and manage uncertain risks of the corporation. These risks are managed through strong and reliable internal controls. Riordan Executives and Directors will implement the ERM for: risk assessments, identifying risk responses, educate and train all employees on the results of risk (Applegate, 1999).

Other product and enterprise liability

The management and directors of Riordan Manufacturing are responsible for the legal, ethical and moral climate of the company. With controls that will, the company and commitment to customers, employees and the board will be able to comply with all laws, rules and regulations governing the operation of the business. They will be able to face any liability and any claims and any matter relating to any employee, including work injuries. This plan will reduce exposure to any risk and allows focus resources and maintain the position as an industry leader.

 

Tangible and Intellectual Property

Riordan Manufacturing Inc. tangible and intellectual property is protected at the time the corporation is registered on the Department of State. A trademark is any word, name, symbol or device or any combination thereof that: identifies and distinguishes the good of a person, including a unique product, from those manufactured or sold by others and to indicate the source of goods even if that source is unknown.  In Puerto Rico the protection of trademark law is enshrined in the Trade Marks Act of the Commonwealth of Puerto Rico, Act No. 63 of August 14, 1991 10 LPRA sec. 171 et seq. Under this law, a trademark is “any sign or device used to distinguish market products or services of a person, product or services of another person ", 10 LPRA sec. 171.  This allows Riordan Manufacturing Inc. to determine that they has a better right to their trademark.

Outlines the preventative and management strategies of the mentioned legal aspects     

      The Sarbanes-Oxley Act of 2002 (the Act), which was signed into law by U.S. President George W. Bush on July 30, 2002, has far-reaching implications for non-U.S. companies that issue securities in the United States or whose securities are traded on U.S. securities exchanges (Mallor, Barnes, Bowers &  Langvardt 2010).

      Due to today’s regulations and laws applicable to companies, it is imperative that management and the board of directors take ethical decisions oriented towards meeting of the Sarbanes Oxley Act. Part of the implementation of this law revolves around the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and a series of guides implemented by them. Internal controls are an essential part of a company's risk management (Cheeseman, 2010).

      These controls are based on the rules, laws and regulations governing companies. This way companies can achieve goals, meet the mission and reduce incidental matters. Develop such techniques and be in compliance with the code of ethics together with internal controls will take Riordan to keep up in the competitive field of business and constantly changing.

      The management group and directors of Riordan should focus on the design of a corporate compliance plan that allows them to adapt the design of their products under the highest quality standards. Once clear and precise ethical standards are established, the company may achieve their expectations through knowledgeable employees on processes and objectives. It is very important to strengthen the enforcement of these policies to ensure compliance with federal, local laws, and all regulations that monitor abuse and waste, privacy and security requirements and corporate governance.

      Some of the strategies and important points that management must put emphasis for the prevention and detection of the mentioned legal aspects are:

·         Prevention: Proper quality and control; meet standards in the research and development (R&D) department; ensure proper disposal of chemical substances and wastes; proper training on factory equipment.

·         Detection: Proper management practices will aid in the detection of potential violations. These include: constant worker feedback, monitoring of products, checking of manufacturing equipment, customer services surveys, and maintaining good customer and employee relations. 

Enterprise risk management and control activities

Enterprise risk management consists of eight interrelated components. These are derived from the way management runs an enterprise and are integrated with the management process.  These components are: internal environment, objective setting, event identification, risk assessment, risk response, control activities, information and communication and monitoring.  The internal environment at Riordan is one of high integrity. The Riordan mission statement is just one of the philosophies that are in place to reflect the internal environment at Riordan.

Enterprise risk management ensures that management has in place a process to set objectives and that the chosen objectives support and align with the entity’s mission and are consistent with its risk appetite.  Internal and external events affecting achievement of an entity’s objectives must be identified, distinguishing between risks and opportunities. Opportunities are channeled back to management’s strategy or objective-setting processes. In the event that an issue arises measures are in place through the employee handbook to guide management to make the correct decision.

Control Activities are policies, procedures that are established and implemented to help ensure the risk responses are effectively carried out.  Relevant information is identified, captured, and communicated in a form and timeframe that enable people to carry out their responsibilities. Effective communication also occurs in a broader sense, flowing down, across, and up the entity.  An enterprise is liable for product and worker safety. Enterprise risk management abides by eight reticulate mechanisms.  Committee of sponsoring organizations defines internal control as a channel affected by an entity’s, management, board of directors, and other personnel. This channel is formed to procure commonsensible affirmation regarding the accomplishment of objectives in effectiveness and adequacy of operation, accuracy of financial information, and compliance with relevant laws and regulations. 

A company’s management creates controls and in satisfactory manner abides to applicable laws and regulations. Riordan officers and directors must create that implicate a code of conduct, firm training, and staffing practice. Furthermore, procedures to asymptotic ability of recruitment, performance, training and control shall establish.  Establishing an audit committee that works with the board of directors, to practice the regulated environment, and resolve error in the internal controls. Further, a way to communicate and corporate anatomy build by the board and enforce by the organization. Riordan must accomplish personals with principle control risk management, and corporate governance. 

Riordan must place highlight on legit ethics and law acknowledging and attachment within their training curriculum, and not curb it to just technical training. As per committee of sponsoring organization enterprise risk management executive summary, objective must exist before management can determine, future events impacting their accomplishment. This ensures the management has in place a plan to set objectives, and the selected objectives must coordinate with the entity’s mission are steady with its risk inclination.

Riordan require to draft, their necessary reporting, operating, and compliance objective. Riordan’s primary objective is to be excellent and perfect with manufacturing.  The executive summary pinpoint that event identification is external and internal events impacting achievement of an entity’s objectives must be identified, comparison between opportunities and risk. Opportunities are sent back to management’s strategy or objective establishing processes.  Riordan global presence and performance track record, have positioned the organization to carry forward with its commitment to perfection in plastic product manufacturing. 

Regular audit would help regulate the effectiveness of Riordan risk strategy and if strategy meets organization objectives. Riordan main objective should be to analyze external and internal fear onward with the processing of system that recognize with insider trading, fraudulent behavior, inconsistencies. The audit validates the precision of the financial statements and dealings, and identifies weaknesses within the internal controls.   Committee of sponsoring organization mention that risk response is management selects risk responses-accepting, reducing, avoiding or sharing risk-developing with the entity’s risk clemency and risk inclination.

Riordan must analyze potential risk and for most risk, there shall be response developed. Riordan would profit from overbearing their risk appetence contrary to the benefit/cost breakdown of the risk response, and appraise the strong point of the response and the connected mitigating factors.  When Riordan originates an enterprise risk strategy, and has glance at the risk, the internal audit should help calculate the cost effectiveness of the internal controls. Riordan must guarantee that they analyze risk and actions taken to control risk. Riordan has already set a superior security and it system in place.

A systematic background check is essential for all employees to avoid any resource. Riordan currently has established an audit system.  Riordan must have additional control activities in place adjacent to the audit system. Authentication must come along for activity such as with drawls, transfer of funds, and changes in customer personal information. Private information must be protected entire times. Thus, access to sensitive information only by designated employees where access is recognize on the company computer system. Riordan is heretofore implementing this risk management attitude. 

Specific laws or aspects of the law that must be adhered to and must outline steps for employees to adhere to these laws, and how to handle situations when laws have been violated.

The main concern of this plan is to be aware of the legal liabilities that the company would face and provide guidance and legal advice.  In all business you can’t anticipate the risk, but is important to have a plan.  The compliance plan will address the legal liabilities that could affect the plastic industry and guidelines for employees and management to obey and understand the laws.   These plan will include the Alternative Dispute Resolution (ADR) these tool will give Riordan a plan for handling disputes regarding product claims, international and Puerto Rico laws, tangible and intellectual property laws.

The first step of the ADR should be a mediator, if the dispute could not be settle by the mediator it goes to arbitration, also a legal consultant would be provided.  The legal consultant could also be an arbitrator that can evaluate cases and use the best approach for the resolution.  The ADR is commonly used by many companies because is less expensive than a lawsuit and more effective between the parties.  The ADR would be used in employee grievances, contracts and all areas where legal situations happen.  The company will need a corrective action plan if any legal issue develops.

The Enterprise Risk Management (ERM) will be used to manage risks and provide tools for identifying risks in management and company operations.  The Enterprise Risk Management is the process of planning, organizing, leading and controlling the activities of the organization, to minimize the risks in the organization capital and earnings.  ERM also can include risks from accidental losses, financial, operational and strategic.  The Enterprise Risk Management has eight components or steps;

·         Internal environment-the ERM ensures that management has a process to set objectives and that the objectives align with the mission of the organization.

·         Objective setting-have a plan in accordance with objectives

·         Event identification-Internal and external events affect the organization objectives.

·         Risk Assessment-risks are analyzed, considering the impact and how they should be manage

·         Risk Response- the management would select the response, avoiding, accepting, reducing or sharing risk.

·         Control Activities-policies and procedures are establish and implemented to help the risk responses to be effective.

·         Information & Communication-important information is identified and communicated in a form that people carried their responsibilities.

·         Monitoring-the risk management is monitored and modifications are made as necessary.

As any company like Riordan they have to ensure that all the aspects of their business and laws are in perfect order so the employees can be in the right time and place. These employees have to know that Riordan is going to give them the manual of regulations and laws so they can be informed every time, so in a future their laws cannot be violated.

Riordan has to follow some of the laws that the government should demand them. The government system will help the executives of the company to insure that all their employees should obey any practice and laws of the industry. The company must handle the information, laws and rules in a intelligent way and use critical thinking, strategy and management risk so they cannot violated laws. The company must be prepared for any responsibility and liability that could happen or any threat can happened in a future.

There employees can analyze different scenarios that can affect them legally, with the permission of Riordan. Is a responsibility that in the plan or evaluation that the company have they will do or have some requirements that in the future can help to improve the plan so any law cannot be violated. If the company fined that they have risk or potential risk violating some of the laws of the employees they need to do a comprehensive report. “Enterprise risk management enables management to effectively deal with uncertainty and associated risk and opportunity, enhancing the capacity to build value.” (COSO Executive Summary, 2004, p.1)

The report have to be clear, precise and have a simply communication that can explain what are the next step that the company will do that will avoid problems.

Any dispute, discord or conflict that can happen between employees with the company about a right or laws that was not completed, the ADR will give the opportunity to resolve problem with the company. The employees need to know that if something wrong or a problem happened they need to contact the supervisor to resolve the issue, where a mediator will try to resolve the problem. If the problem cannot be resolve the employee can go to the norms, regularities and laws that the company provided.

 

References

Available if requested.