Corporate Compliance

Corporate Compliance Plan
Ojadili Okolo
University Of Phoenix.
Riordan Manufacturing (RM) is a global company wholly owned by Riordan industries and provides its services worldwide in areas which include California, Georgia, Michigan and China. RM employs 550 people with revenues in excess of $1 billion and projected annual earnings of $46 million. The ethnic demographics for the senior management comprise: 70% Caucasian; 11 % black; 8% Hispanic; 9% Asian and 2% native Indian. The company projects annual earnings of about $46m and produce a variety of products with plastics. RM??™s pecuniary data, along with historical information, is evidence to their financial status and health of the company. They operate three branches in the US and moved one to China in order to save cost. Presently, the company has many issues ranging from logistics to finance and it??™s time to identify these issues and look for ways to solve them. Based on COSO outlines, there are key concepts regarding internal and external controls of RM that needs attention.There are great opportunities out there for RM to increase its profit margin and expand more in coming years if the proper foundation is laid for the company to grow. There are series of legal issues that may emanate in RM??™s practices if care is not taken. RM??™s employee handbook is bereft with information like corrective action plan before exercising their ???at will??? rights besides, the employee handbook contains a clause that says, ???However, this handbook cannot anticipate every situation or answer every question about employment???. The jury can misinterpret the clause in so many ways and even though RM reserves the right to decide on the conditions of employment, their employees are still protected under many laws which can be easily violated. It is imperative for RM to understand that the court of law can consider the handbook as an implied contract depending on the issue at hand and contracts should be unambiguous. Ethnic diversity, employee evaluation, sexual harassment, etc are also some of the issues that require proper attention. Nonetheless, RM is doing a good job in areas like employee motivation through incentives, career development, benefits, etc. The incentives offered are rather too low and this may affect the productivity of their employees. However, productivity measures, other than company-wide ones, almost always allow compensation for disruption beyond the control of the individual group, and there is a large discretionary element in these incentives which allow the employees, supervisors and management to adjust the figures in such a way as to produce the answer they think is correct (Accel Team Development, 2008).
RM??™s evaluation process is strictly behavioral. Rating employee??™s productivity of labor through their behaviors will produce a very mechanistic approach to performance evaluation and increase the chances of prejudice. A supervisor who doesn??™t like a dutiful employee because of the way he smacks his lips can rate that employee low simply because of that factor. RM should ensure measurement is conducted the way work is designed and allow employees to evaluate each other in order to compare with their supervisor??™s report.
The Sarbanes-Oxley Act, also known as Public Company Accounting Reform and Investor Protection Act of 2002, requires RM??™s principal executives to have ethical responsibilities on finance issues since RM is a corporation. These executives will be held liable for any financial impropriety found in the company. In order to accomplish an unalloyed ethical behavior among their employees, RM??™s management should:
1) Set the precedence through sound ethical behavior
2) Ensure the employees are trained and given manuals concerning ethical behaviors and the consequences of violating them.
3) Encourage whistle blowers and other employees who report any wrongdoing to RM??™s management.
4) Terminate any employee found wanting in any of these specified standards. In addition, they should proactively communicate any illegal or unethical actions to the appropriate internal and external parties irrespective of what it will cost the company.
RM??™s pecuniary data indicates continued success for the company as opportunities to improve the business are attained. However, increasing profits and reducing losses is not only an obligation to them but to the shareholders since Riordan is a corporation. ???A corporation possesses these qualities unlimited duration, free transferability of interest, limited liability for shareholders/owners, continuity, and centralized management but it is the responsibility of the officers and directors to make sure they are performed according to company policies??? (Jennings, 2006).Under the issues of liability, RM??™s directors and officers can be held liable for non compliance with corporate obligations. So, it is crucial for the directors pay attention to each issue that concerns the company and makes proper decisions. Strategic planning, decisions, creating and making policies should be made in line with company policies and not out of personal gains. Violation of any of these rules for decision making will attract a severe penalty from the director of liabilities. They are also obligated to seek for the interest of their holding company through sound business practices because if they fail, Riordan industries will be held liable for stock holder??™s interest. Corporations are not only indebted to themselves but the society in general.
RM has a branch in China. Conducting business internationally requires certain compliance agreement which must be adhered to in order to be protected by the United States Export Administration Regulations. Proper licensure in accordance to international requirements from the office of imports and exports, etc. Strict adherence as a rule of the thumb will save RM a great deal in money, image and time. RM is considering relocating from Hangzhou to Shanghai to save on transportation costs. A detailed analysis should be conducted to ensure that they continue to remain in compliance with all Chinese government regulations. There are local compliance issues that should be studied before anything especially the environmental regulations. Laws concerning environmental safety have ruined many companies that refused to abide by them and toying with such laws will be a gross error for RM.

If RM intends to remain profitable in the competitive market of plastic fan blades and fan housings then they will have to ensure that international laws are closely monitored and ensure that our international partners adhere to their national laws.
RM as a corporation has 55% of their assets in Property, Plant and Equipment. This percentage is about 30-40% for similar corporations. It shows RM has great many tangible and intellectual properties. There are many issues concerning security and oversight as regards to their tangible and intellectual properties. China has a history of violating copyrights, stealing trade secrets and trademarks. I will assume RM is wary of that and is prepared to guard their trade secrets and protect their trademarks from piracy. Such violation is criminal but the government in China seldom enforces anti piracy laws and it can stifle RM through draining their profits.
RM management should protect their intellectual properties. Patents, designs, trade secrets, copyrights and trademarks are to be protected at all cost. Trademarks like GenX heart valves, concept project, Cardicare, etc. Rees (2009), stated, ???The reasonable use of restrictive covenants provides employers with a way to protect their trade secrets and prevent unfair competition by ex-employees???. RM will restrict their competitors through the protection of their trade secrets. Other intrinsic information like their financial data should be kept secret. Nike was accused of running a sweat shop in China and the bad publicity didn??™t do them any good. They eventually lost in litigation and spent an enormous amount to clear up their public image. People in the US may look at the Chinese employee??™s remuneration and accuse RM of slave labor yet they wouldn??™t care to check the cost of living in China and Unites States. There is a conspicuous absence of any substantive reference to patents and trademarks in all RM??™s publication and it??™s scary because they may end up losing their patents to smarter investors who will end up reaping from a label RM spent time and energy creating. Although they made mention of a legal firm that manages all their patent issues but I think clarity should be the case here. Write them out (apart from the ones that really need to be secret).
RM also marked one of their documents (marketing plan) as ???proprietary??? when there is no mention of the proprietary information security program.
RM also claims they have no federal contracts in their human resource page yet they supply goods and services to the department of defense. I will like to call this negligence but be that as it may, incorrect information should be avoided through proof reading because it could lead to tort liabilities. If they have a contract with the Department of Defense; the Department of State, Department of Commerce and Department of Justice are going to be very interested in what technology is being sent to China. The Department of State is going to ask if the technology is ???dual use???, which typically means if it has both military and civilian application. If yes, then they demand an oversight in order to ensure the process does not violate import and export licensing agreements.
After reviewing RM??™s staff diversity, I noticed it??™s diverse in gender and age proportion but lacking in ethnic and age diversity. It??™s not as if the latter is completely absent but RM should endeavor to bridge these gaps in order to gain leverage when issues of discrimination arise. Following the civil rights acts of 1964(Title VII), many companies created corporate diversity programs, which are intended to increase cultural diversity in the workplace .These programs must be geared towards achieving the intended goals and not create a quota system that results in the hiring of unqualified minorities over qualified non-minorities. Curry (2004) stated, ???Not only does a variety of experience and background provide a vast array of knowledge and skills, but it also sparks creativity among those involved???. However, RM suggested in their employee??™s handbook that ???The Company does not have any affirmative action plans or goals.??? Perhaps, they are not breaking any law by adding such information in their handbook but I think they can get around it much more technically by lending support to nonprofit organizations that work towards eliminating workplace discrimination.
Other title VII violations like the pregnancy discrimination act, gender and age discrimination should be in RM??™s watch list because it??™s always better and easier to avoid the problem than seek for solution.
A tort is committed towards a private party. RM could be exposed to tort risks like negligence (intentional and unintentional), defamation, and invasion of privacy. There are series of tort liabilities besides negligence especially with non compliance issues. Enterprise liability, product liability and international laws guiding RM will involve strict organizational oversight. Legalistic measures of progress should be borrowed instead of enhancing ways to win litigation. Avoiding personal tort liabilities, intentional torts, negligence, accidental injuries and strict tort liabilities requires RM to actively monitor current employee satisfaction and complaint results and seek ways to proffer solutions. The 2004 employee satisfaction scores show a downward spiral from the scores obtained in 2001 and this demonstrates how unhappy their employees are with RM. These results coincide with recent employee complaint report revealing criticism of the discipline process and inadequate training.
An RM employee, Edwina Hernandez, complained about a calendar on the wall posted by Ed Ledford, because it shows naked women and her immediate supervisor took it serious and asked Ed Ledford to remove the calendar from his wall. Apparently, Ed Ledford albeit removing the calendar, used an offensive language to ward Edwina??™s supervisor off. Such occurrence is very unprofessional and RM should educate their management never to allow such a thing repeat itself. It is irresponsible for an employee to keep lewd pictures around the work place and Ed??™s behavior is a recipe for litigation. The US equal employment commission (2009) stated, ???Prevention is the best tool to eliminate sexual harassment in the workplace. Employers are encouraged to take steps necessary to prevent sexual harassment from occurring???.
The management should consider inputs from every member of management routinely, assess their ideas and encourage them to come forward with any issue concerning them. Perhaps, a closer look at the workforce diversity of the senior management should indicate there is need for more diversity so as to create an adequate balance at the top echelon.
Product liability risk and other tort liabilities can be avoided through:
1) Correct labeling of their products with manufacturer??™s instructions.
2) Abiding by Occupational Safety and Health Administration (OSHA) regulations and Consumer Product Safety Act of 1972. RM should remember the rules guiding OSHA and the rights their employees have as regards to OSHA laws. Jennings (2006) stated, ???An employee who is fired, demoted, or discriminated against for registering an OSHA complaint can file a complaint, and the Department of Labor can pursue the employee??™s rights in federal district court???.
Compliance with statutory and international laws like the standards organization guidelines for quality assurance and quality management, require products produced by Riordan Manufacturing to carry a stamp of compliance with standards and procedures as a means of limiting product defects. (Jennings, 2006)
It??™s not unusual for big corporations to attract lawsuits regularly. Issues like defective product, employee related issues, environmental compliance issues, patent etc, are what attracts these lawsuits. ADR was enacted by congress in 1996 as the Alternative Dispute Resolution act. It introduces innovative ways to settle disputes, reduce the work loads in our court system and has greater efficiency in settling disputes because it takes shorter time and has no unnecessary bureaucracy associated with the courts.
In order to save time and money, RM should design an appropriate pathway to avoid litigation if needs be, due to time, cost and bad public image associated with it. It??™s imminent for RM to form an ADR committee headed by their legal department.
i) The ADR committee should first of all identify each problem and evaluate them to ascertain the seriousness in it. Giant companies like Wal-Mart gets sued everyday but they don??™t waste their time giving audience to every lawsuit because they have a department that takes care of such issues and determine what should be taken serious or not.
ii) If the problem is a genuine one, the committee should determine which way to go in order to record minimal losses. If it??™s a recurring problem beyond their control, the committee should determine the proper ADR measure to be used in tackling the problem.
iii) Mediation is usually the cheapest and convenient ADR; RM should employ mediation and see how the case develops in due course. Some mediators are independent but I will advice RM to use a company employed attorney who has experience in mediation for their own business interest. There are chances that the plaintiff and his/her legal crew may reject the mediator and seek for the services of an independent party which is still acceptable as long as RM protects its interest through the use of experienced legal expertise. If no agreement is reached or the agreement which is not binding is not acceptable to either RM or the plaintiff, RM may consider using arbitration through American Arbitration Association (A.A.A). It??™s advisable for RM to examine the mediator??™s adjudication carefully and consider their current losses and how profitable it will be for them to consider other forms of ADR or even litigation. The whole thing is about weighing and balancing .Arbitration is somewhat binding as long as both parties agree to the judgment. It??™s usually cheap although not always but it??™s nothing compared to the huge legal bills and publicity associated with litigation. Chances are higher than mediation and it not only saves resources, but it also saves the public image because they are usually done secretly. There are rules guiding arbitration and RM should cultivate the culture of tracking arbitrators who usually rule against them and try their possible best to avoid their services. Choi(2009) stated, ???A study by Public Citizen found that credit card companies track arbitrators rulings and do not enlist the arbitrators who rule against them???. As long as it??™s not illegal, they reserve the right to accept or reject an arbitrator just like the plaintiff and the chances of the arbitrator being punishing them severely will be greatly minimized if there is a history of ruling in favor of RM.
RM needs to understand that a bad public image can bring a company down to its knees and the jury, being members of the community seldom have little sympathy for big corporations. If the case is an environmental compliance issue, discrimination or company related injury, they will stand little or no chance with a jury unless it??™s a clear cut case. The media also does not help matters because they seldom side with big corporations in liability cases. So, I will advise RM to accept any invitation for an ADR because of many uncertainties surrounding litigation.
iv) If there is no other way to avert litigation; RM should embark on a massive media campaign that will stress on issues which will give them a positive image. Every new invention, compliance, benevolence, achievement should be covered in depth. They should never underrate the power of the media. They can use the media to win 30% of their case before proper litigation ensues. No matter how you look at it, RM can use the media to cast doubts in the minds of many members of the jury. They should ensure that procedures are being followed appropriately and depending on the nature of the litigation, they may consider paying restitution or doing some kind of charity to the affected group. Nonetheless, win or lose, RM should undertake a massive measure to nip the cause of the problem in the first place and make sure they take adequate measures geared towards prevention. They should show remorse publicly if found guilty and have no intention of appealing.
v) Finally, RM should understand that it pays to follow procedures and many times cheaper than violating them. Although the legal department is a necessary aspect of a corporation, care should be taken not to stifle other areas of fund because a company may be budgeting too much just to keep their legal department strengthened.
A bulk of issues regarding RM centers on their employees. Motivating employees and looking out for their needs makes them to feel their effort is appreciated. Issues like trade secrets theft among employees, discrimination claims and other tort liabilities can be curtailed through adequate employee treatment. RM should also review their employment policies to include a clause that will make them subject to arbitration if needs be. Alternative resolution is always the best and can never be equated to litigation.References
Curry, M.(2004). Diversity: No Longer Just Black and White. Business Marketing. Retrieved from MBA Law and Business. (2007). The Corporation. Retrieved August 29, 2009, from
Accel team Development.(2008).Productivity. Retrieved August 27,2009, from
Jennings, Marianne Moody (2006). Business: Its Legal, Ethical and Global Environment. New York: Thomson, P. 855-868.
Rees T. (2009). A Brief Guide to Restrictive Employment Covenants. HighSwartz. Retrieved August 29 2009, from
The U.S. Equal Employment Opportunity Commission.(2009, March 11 ). Sexual Harassment. Retrieved August 28, 2009, from

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