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Riordan Manufacturing is simply a global plastics manufacturing organization, with annual earnings that approximates $46 million. Riordan Manufacturing organization is the property of Riordan Industries, a Fortune 1000 company that collects more than $1 billion in terms of revenues, (Tavangaran, 2009). The organization has workforce of more 500 persons and is involved in the production of goods for manifold industries that include, automobile accessories industry, military, appliances manufacturers and industry dealing with bottling of beverages. The outside appearance of the company may make one conclude that the organization is very stable.
Nonetheless if one makes analysis of the organization from the legal point of view, one finds that the organization has a great deal of compliance issues that it needs to address. It is in this area that the Riordan Manufacturing organization is necessitated to revisit its corporate compliance policies in order to come up with a new compliance plan that will bring about legal compliance in all areas of its business operation, (Gup, 2003).
The focus of the Riordan Manufacturing can be simplified in manifold categories. Riordan Manufacturing has a belief that the organization is the main player in the plastics industry. It is therefore the duty of the organization to address myriad challenges directed to it by its reliable and loyal customers.
Riordan Manufacturing organization is known to apply the modern innovative manufacturing discipline (Six Sigma). In addition the organization has implemented the highest quality standards (ISO 9000) with the objective of maintaining their leadership in the plastics market and to keep a flexible position with respect to identifying the industry's market trends. Regarding to the customer relationships of the organization, the Riordan Manufacturing organization is seeking to help its customers in all possible ways in order to add to their intentions of becoming a solution provider for the industry. With regard to the same, the organization's section bestowed with the responsibility of maintaining high quality control as well as the innovative and responsive business solutions is seeking to come up with a long-term relationship with the customers.
With respect to the organization's internal environment, the organization intends to focus its attention mainly on its personnel through the establishment of a team-oriented environment. The reason behind all these is for maintenance of a clear path that heads for holistic innovativeness of the organization. In addition to providing training for its employees, the organization gives the necessary information needed as well as the support required for maintenance of culture that complements the intentions of the organization and the demands for the market. To sum up all, the organization does place highly the financial and human capital that guarantees the continuous growth of the Riordan Manufacturing.
1.3 Purpose of the Compliance Program
This corporate compliance program has been designed with the intention of giving Riordan Manufacturing a reasonable assurance that the organization will adhere to all applicable state, federal and international laws that deal with business operations. A Riordan organization is facing very many legal and ethical responsibilities that are viewed to have a great impact on the customer relationships, employees and ultimately the future of the organization. Therefore in line with the current economic challenges that prevail in the United States, it is crucial for organizations like Riordan Manufacturing to comply with the laid down corporate rules and regulations as specified by the existing regime on corporations.
This document intends to follow the structure that has been recommended and upheld by the Committee of Sponsoring Organizations of the Treadway Commission. This framework shall be used in discussing the vital areas the directors of Riordan Manufacturing need to put into consideration with respect to their legal responsibilities.
2.0 Alternative Dispute Resolution (ADR)
It is important as a first step forward, for the Riordan Manufacturing to incorporate an alternative resolution clause. Reordan's Manufacturing alternative resolution clause, should read, "Any person or persons that violates the organization's Corporate Compliance Plan is likely to face disciplinary action". The type of discipline action to be applied on the perpetrator shall include verbal and written warnings, suspension and even expulsion from work. Nonetheless the action undertaken by the organization will depend on the intensity of the violation." The alternative resolution clause will create that kind of awareness to the employees of Riordan Manufacturing regarding to the seriousness of as per this Corporate Compliance Plan. The changes will have greater impact on the organization's productivity and that is it will increase production and above all it will allow the organization to meet its compliance obligations.
However the organizations can hire the services of a consultant to act as an arbitrator in cases of organization's dispute with employees. The arbitrator will have the responsibility of evaluating the cases for the Riordan Manufacturing and give advice on the best approach to dispute resolution. The alternative dispute resolution is a creative remedy defined by set timeline, making it private and less expensive and with better control from the parties. It is therefore imperative for a policy to be put in place when the organization needs to use alternative dispute resolution. This alternative dispute resolution can be used in cases of employee grievances, contracts and other areas where potential legal matters can crop up, (Mackie, 1991).
3.0 Enterprise and product liability
In the contemporary business it is important to develop an action with regard to risk for a corporation. This prompts an organization to put in place a corrective action plan for any contingency.
The Committee of Sponsoring Organizations of the Treadway Commission gives a description of the control activities of the organization as the actions that facilitate the implementation of the defined organization's rules and the regulations that adhere to the fundamental risk management initiatives that have been instituted by Riordan Manufacturing. The control activities entail endorsement as well as authorizations of specified operating performance that is intended to achieve the mission statement of the organization. In view of this it is clear that the officers and the directors are liable for this part of the organization's operations. There is an existence of a similar statute on the ratified Sarbanes -Oxley Act which is manifested in s303. This provision provides conditions that, manipulation, coercion and fraudulent influence on the activities that relate to the approval and authorization, more so the organization's financial statement, with the sole intention of misleading the public is considered unlawful. This in effect has an implication that the control activities like assets segregation has to be free from any kind of manipulation. It is therefore imperative for the financial statements and the financial information to give a fair presentation about the financial condition of the company regarding a given fiscal year. If they fail to be fair, the directors and the officers will be held liable for civil and criminal charges as provided in the section s3(b)(1) of the ratified Sarbanes-Oxley Act. The organization's house of counsel is as well bound with the law to report any actions of the organization that appear to be contrary to the public policy. This is clearly spelt in Sarbanes-Oxley, section s30.
With regard to the product liability, this is covered in the section s402 of the Restatement of Torts. Section s402, pertains to the responsibilities and liabilities of distributors and sellers with regard to the harm done by their products. Hence organizations are to be held liable in cases of manufacturing defects, design defects and inadequate instructions or warning defects.
4.0 International law
The executives of Riordan Manufacturing need to ensure that they are fully compliant with the Sarbanes-Oxley Act to free the organization from any product liability issues as well as to reduce the occurrence of issues that include negligence, intentional tort and strict tort liability. It is imperative to report of any legal or illegal actions through the organization's Corporate Compliance Officer who will then convey the information to the Chief Legal Counsel, whose duty is to oversee all legal matters that affect the organization. The organization's Chinese partners have the responsibility to handle the hazardous waste cleaning up at the Hangzhou facility. The Chinese partners also supply labor, provide capital and do interfacing with the local vendors, governments as well as the regulatory agencies.
The organization's directors and officers have no direct control over the Chinese partners. The directors and officers have the duty to provide minimal American staff to support the Chinese venture. At the moment, the organization's legal firm, Litteral & Finkel does not have offices in China but with high profile activity that is currently involved with the Yin Motor and the Center for Disease Control (CDC), there is need for the organization to add additional legal counsel with experience in Chinese regulatory compliance. This has to be implemented prior to the expected shift to Shanghai. Since Riordan Manufacturing is conducting business globally, it has the duty to abide by the rules and principles of the hosting nation as spelled in the International Law and any local jurisdiction.
5.0 Tangible and intellectual property
There is an existence of certain statutes that provide protection for Riordan Manufacturing regarding their tangible and intellectual property. The statutes include the following;
Copyright Act 1976
This act has the effect of providing the holder of the copyrights, an exclusive of use of their products. In addition it grants the holder, the power to undertake legal action to people or organizations infringing on their respective rights.
This act refers to the federal statute that gives provision for the protection of certain activities including infringement, dilution, and false advertising.
This act tends to cover the area of patents. This legislation as such, covers the application of patent, examination of patent holders and the hiring process of the professional patent examiners.
6.0 Legal forms of business and Governance
The Sarbanes-Oxley Act requires organizations to maintain high standards of corporate governance. The following examples give areas where provision of corporate governance is as provided by law.
Information Access Management
The law gives provision that organizations, specifically the directors and officers need to have the right amount of information and to ensure that these data are substantial enough. However this is achieved through sorting out of these data. Besides creating Information structures and channels, the law orders the organization's directors and officers to always give a news brief to the board members in order to maintain a high level of transparency.
Creating an Audit Committee
The law demands that, organizations have to establish an autonomous auditing committee that will have the responsibility of reviewing the accounting and financial reporting of the organization. The statutes in the Sarbanes-Oxley Act give the specification on the responsibilities of the audit committee.
7.0 Prevention and Management Guidelines of Legal Aspects
The Sarbanes-Oxley Act requires organizations like Riordan Manufacturing to have material event monitoring. The section s409 of the Sarbanes-Oxley Act affirms the importance of the information systems to follow the provisions of the Act. With respect to the Riordan Manufacturing, the information systems needs to connect to the four vital locations of the organization, which include the Pontiac Office (the headquarter), the Albany office, the San Jose Office and lastly, the one located in China. Nonetheless the crucial thing that directors and officers need to adhere with is the disclosure procedure that has been provided for in s406 and s407.
The part s406 deals with the creation of the code of ethics for senior financial officers which affects or waives the provisions of the Act. The other part, s407 affirms on the necessity of board designation for the organization. In addition it emphasizes on the need for the organization to disclose the audit committee's financial expert. On the other hand, both the CEO and CFO have the responsibility of monitoring the organization. According to the parts s302 and s906, of the ratified Sarbanes-Oxley Act, it is required of the CEO and CFO to present a certification that confirms that they have viewed the report and understood what is required. This provides an implication that they are liable for any instances of discrepancy arising from the investigation of the Securities and Exchange Commission (SEC).
8.0 Implementation of Risk Management
Risks are known naturally to be everywhere and are quite pronounced both in both in external and internal environments. The Riordan Manufacturing employee handbook provides for the fundamental objectives the organizations intends to achieve. Hence it is under these objectives upon which the risk assessments of the organization are approved. It is imperative for the organization together with its directors and officers to know that the law requires them to carryout risk assessment. The section s107 of the Sarbanes-Oxley Act gives a definition of risk assessment as being the "process that involves analysis of holistic risks and threats to achieve an organization's defined objectives and goals." The risk assessment therefore should include changes in the operating environment, technologies and information systems as well as accounting pronouncements.
The process should fall into five steps: in the first step, the company is supposed to determine its control objectives; the second step involves the establishment of the requirements and setting up of the list of priorities to attain the subsequent course of action by the organization. What entails the subsequent course of action by the organization is simply the process of identification of the risks that have been provided for in company's operations. This second step also includes the verification of the actual probabilities of the risks. After establishment of the risks that are apparent to the organization together with their likelihood of occurrence, then the next step is for the company to manage the risks. The management of the risks is achieved through coming up with a series of policies which have the effect of promoting the general flexibility of the organization.
9.0 Handling situations when laws are violated or in question
There are manifold defenses that can be used in mitigating the liabilities of directors and officers in instances of the violation of laws. These are as follows;
Establishment of the business judgment
It is the responsibility of directors to establish that the act that has been done is reasonable and as such, it is within their authority as provided by the corporation's charter.
Defense of Due Diligence
This defense implies that the organization's directors and officers have fully explored all possible avenues with respect to the violations which they are being charged for.
In a nutshell we can say that the ratification of the Sarbanes-Oxley Act has effectively added liabilities and responsibilities of the officers and directors managing public organizations like Riordan Manufacturing. The ratification of the Sarbanes-Oxley Act has in effect permitted the state to prosecute any scenarios that amount to financial fraud in the organization. Though the Sarbanes-Oxley Act appears to be very deficient in certain aspects as it is considered to be rushed legislation, it has given public organizations that opportunity to regain public confidence. The Sarbanes Oxley Act specifically has helped the public corporations in restoring public trust after what was experienced during the days of Enron. The recent events that have manifested through declaration of bankruptcy by allegedly stable organizations in the financial sector have necessitated the need for organizations to be transparent and disclose their financial aspects to the public.
The extensive and quite comprehensive restructuring undertaken by the Sarbanes-Oxley Act can be viewed to be calling for a greater responsibility on the side of senior management from public corporations. The Act emphasizes on senior management of public companies to very diligent in their operations. With regard to Riordan Manufacturing, there is need for the officers and the directors to undertake a proactive role in the operations of the organization, with respect to the reports provided to the public. In taking a critical observation on the said Act, we find that the statute provides for a strict interpretation of the legislation and due process favors the investors against the public corporation. Nonetheless, issues regarding civil liabilities and criminal liabilities that have been imposed on the directors and officers are given equal recourse. The Act has a provision for mitigation in a situation where the violations are clearly held by the public corporations. Thus we can say that the organization's compliance with the ratified Act, in its objectives and operations, will lead to greater success for both the public and the public corporations.