Corporate Compliance Plan Team B: Trevor Adams Leonard Hamelitz Jennifer Truong Angielia White LAW 531 August 8, 2011 Michael V. Pundeff, B.A., M.A., J.D.

Within the four legal issues Riordon may have enterprise risk to manage from the possible eight interrelated components: • Internal Environment – The internal environment encompasses the tone of an organization. Michigan. The Corporate Compliance Plan manages the legal liability of officers and directors of Riordan. the Board of Directors will need to focus on Riordan’s Corporate Compliance Plan. California. Albany. including risk management philosophy and risk appetite.CORPORATE COMPLIANCE PLAN Corporate Compliance Plan 2 Riordan Manufacturing Inc. Opportunities are channeled back to management’s strategy or objective-setting processes. Pontiac. . • Event Identification – Internal and external events affecting achievement of an entity’s objectives must be identified. and sets the basis for how risk is viewed and addressed by an entity’s people. Georgia. is a global plastics manufacturer with facilities in San Jose. The projected annual earnings for Riordan is $46 million. and Hangzhou. and international law. integrity and ethical values. real and intellectual property. distinguishing between risks and opportunities. China. compliance with regulatory requirements. and the environment in which they operate. The plan will focus on four legal issues: enterprise liability. • Objective Setting – Objectives must exist before management can identify potential events affecting their achievement. 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. In order to achieve the projected earnings and financial profitability.

initially partnered with Litteral & Finkel because his cousin was a partner of the law firm. • Information and Communication – Relevant information is identified. Dr. immigration matters. 2004). Effective communication also occurs in a broader sense. Riordan. workers compensation. real estate transactions. and communicated in a form and timeframe that enable people to carry out their responsibilities. Enterprise Liability Internal Enviroment. separate evaluations. • Monitoring – The entirety of enterprise risk management is monitored and modifications made as necessary. and up the entity. Monitoring is accomplished through ongoing management activities. captured. labor law. The owner of Riordan Manufacturing. • Control Activities – Policies and procedures are established and implemented to help ensure the risk responses are effectively carried out. Litteral & Finkel is a large international law firm providing “Riordan Manufacturing with legal services in the areas of tax law. Riordan’s cousin. or sharing risk – developing a set of actions to align risks with the entity’s risk tolerances and risk appetite. flowing down. reducing. considering likelihood and impact.CORPORATE COMPLIANCE PLAN • 3 Risk Assessment – Risks are analyzed. • Risk Response – Management selects risk responses – avoiding. 2006). After the death of Dr. as a basis for determining how they should be managed. and customs regulations” (University of Phoenix. All legal issues are addressed to Litteral & Finkel and . across. accepting. or both (University of Phoenix. Risks are assessed on an inherent and a residual basis. employment law. Riordan Manufacturing has maintained the partnership between the two companies. civil litigation.

(2) attend board meetings on a regular basis. often involves a director’s or an officer’s failure to (1) make a reasonable investigation of a corporate matter. Riordan’s Board of Directors and Officers have a fiduciary responsibility of making decisions and taking action on behalf of the corporation. A breach of a directors or officers duty of care is “normally caused by negligence. (2) with the care that an ordinary prudent person in a like position would use under similar circumstances. Objective Setting. For Riordan Manufacturing to pay a retainer plus excess charges above the retainer and any unused retainer funds are not carried forwards appears to be a misuse of service retainer. which consist of “their duties (1) in good faith. The relationship of the Dr. Risk Assessment. The directors and officers need to meet duty of care.CORPORATE COMPLIANCE PLAN 4 are paid a monthly retainer. (3) properly supervise a subordinate who causes a loss to the corporation through embezzlement and such. The internal and external events are the relationship of Dr. and (3) in a manner they reasonably believe to be in the best interests of the corporation” (Cheeseman. The relationship and payments are identified as possible risks or perhaps opportunities for Riordan Manufacturing. Riordin and his cousin could pose a conflict of interest. or (4) keep adequately informed about corporate affairs” (Cheeseman. The use of a retainer is normal in a field where services are paid up front usually with a form of a discount or unlimited services for the month. Riordin and his cousin as a partner. “if a director or an . A possible enterprise risk is if the officer. Event Identification. 2010). and also the use and payment of a retainer. According to Cheeseman. 2010). Dr. Riordin profiting from the misuse of the retainer. Riordan Manufacturing pays legal fees in excess of the retainer and all monthly unused retainer funds are not carried forward.

Real and Intellectual Property. officers and employees to conduct business in accordance with the letter. officers. and other possible enterprise risks.CORPORATE COMPLIANCE PLAN officer breaches his or her duty of loyalty and makes a secret profit on a transaction. Monitoring. Riordan will comply with all applicable laws and regulations. Having strong internal controls will help monitor the possible enterprise risk. It states that “as an organization. the corporation can sue the director or officer to recover the secret profit” (2010). avoiding to make a secret profit. A team should be provided to monitor internal controls on a global level. 2006). and we expect our directors. making a secret profit. Riordan Manufacturing requires that all of their employees follow their policy on Business Ethics and Conduct. Directors. Information and Communication. It is the job of management to ensure that Riordan and its employees are abiding . 5 Risk Response. The policy will need to be updated to include avoiding conflict of interest. dishonest or unethical conduct” (University of Phoenix. or other possible enterprise risks. Riordan Manufacturing will need a large team to deal with their enterprise risk through the international dealings and laws. The policy and contracts will be a way of identifying and communicating directors and officers to enable them to carry out their responsibilities. Control Activities. Updating the Corporate Governance Policy is one of the ways of communicating the information to directors and officers. and officers to sign a contract discussing their fiduciary responsibility and duty of care as well control activities of avoiding risk. Another is for all directors. or even other staff members will need to avoid conflict of interests. Riordin Manufacturing has a Corporate Governance Policy in place to establish policies and procedures. The current policy lacks the implementation of avoiding risk. spirit and intent of all relevant laws and to refrain from any illegal.

Management is required to check and ensure the quality and safety of all the products that are manufactured in each location. and customer lists. This includes protection of intellectual property. It is also the job of management to ensure that Riordan Manufacturing is in compliance with all building codes in the locations of each building. Should any problems arise. to ensure that all applicable laws and regulations are being followed. Prevention. Management is responsible for the safety and security of all product information at the different locations. The following training and development guidelines are set forth for all Riordan employees: The following mandatory training for all employees within 90 days of hire: •New employee orientation (1 day) — offered once per month •Six Sigma — for all production. ISO 14001 standards do not dictate absolute environmental performance requirements but acts as an assistant to organizations to develop their own 6 environmental management system.CORPORATE COMPLIANCE PLAN by the laws and regulations. and to continue to improve on both. shipping and quality employees Supervisors are also expected to attend the following workshops within 12 months of becoming a supervisor: •Interviewing guidelines . Mr. and the welfare of the public are protected in regards to the construction and occupancy of the buildings structures. data. Bradford is to be contacted immediately. safety. Each location has different products. Riordan Manufacturing will comply with all standards set forth by ISO 14001 standards to ensure that the organization does not cause negative effects on the environment. designs. These laws are set in place to ensure that health.

. Along with these strategies. However. As a corporation. Compliance with Regulatory Requirements Riordan Manufacturing is in need of a corporate compliance plan that minimizes risk of litigation in a number of areas. 2006) 7 In addition to the current training process. and can be personally liable for civil and criminal wrongdoings related to Riordan’s corporate obligations. Riordan’s shareholders. Internal Environment Riordan is a profit corporation. and directors have limited liability. Each of the following sections contain preventative and management strategies the company can implement to minimize risk. officers. It is imperative that the trainers specify disposal procedures for all chemicals and wastes. the plan presents specific regulation requirements of each subject as well the procedures should a violation occur. That will ensure compliance with government laws and regulations. Riordan Manufacturing is led by Ethical standards and practices which allows employees to meet expectations and goals. The CEO is responsible for ensuring that all employees are knowledgeable of internal and external practice’s that are acceptable standards and procedures within the work environment. As part of the contract that was signed by each employee. it is grounds for termination if any employee is caught violating any laws governing intellectual property. these groups are not immune from all risk.CORPORATE COMPLIANCE PLAN •Preventing EEO claims and sexual harassment in the workplace •Performance reviews (University of Phoenix. or limited liability company. The company integrity and ethics are essential and crucial values and these values are the foundation of its success. as opposed to a sole proprietorship. partnership. employees will be trained in environmental protection and safety. This information is talked about again during the training process.

This structure is an effort by the COSO to effect responsibility on executives and directors through informed organizational procedures and processes that assist these individuals in reporting organizational management metrics (Applegate. Officers and directors of Riordan must also adhere to the Corporate Opportunity Doctrine. For effective risk management. Riordan’s boards of directors need to establish an compliance and risk management committee to ensure adherence to their corporate procedures and to the governments regulatory requirements.CORPORATE COMPLIANCE PLAN Objective Setting 8 Managing Riordan’s risk for officers and directors requires a clear set of bylaws that establish internal rules and govern corporate procedures. ERM efforts are on developing a strategy to introduce cognizantinternal risk control throughout the organization. 1999). Enterprise risk management (ERM) is the approach assisting management in identifying and managing uncertainties and in attaining positive risk intents. which prohibits officers and directors from personally taking advantage of an . the bylaws define the rules and limits of authority for the officers and directors. In addition. Event Identification A large portion of management’s responsibility is to identify and facilitate direction for uncertain risks to business operations globally. The business judgment rule requires officers and directors demonstrate that they make decisions only after careful consideration and receive reliable expert consultations. The business judgment rule and the corporate opportunity doctrine are two laws that apply to officer and director liability. Control Activities The Model Business Corporation Act (MBCA) provides a liberal set of corporate laws that most states have adopted for corporate governance in this financial environment.

Riordan must ensure regulatory compliance with the SarbanesOxley Act of 2002. Risk Assessment In addition to the MBCA. This act takes precedent over state laws and requirements. and at least one member of the audit committee must be a financial expert . Riordan’s risk management committee must develop a culture that values ethical decisions over meeting internal or external goals. and Smith. The Sarbanes-Oxley Act requires Riordan follow and adhere to the following: 1) Prohibits Riordan from make personal loans to officers and directors 2) Disclosure obligations on auditors and accountants 3) Legal counsel requirement to report and initiate an investigation if the belief that a material violation has occurred 4) Creation of a legal compliance committee for escalating violations to the board of directors if not corrected by Riordan officers 5) Majority of Riordan board members must be independent: 6) Chair of audit committee must be an independent. like the MBCA. Stimmel. The compliance committee will be responsible for monitoring internal and external corporate goals to ensure they are cost effective and reasonable within Riordan’s ethical standards.CORPORATE COMPLIANCE PLAN opportunity that could benefit the corporation without first presenting it to the corporation (Stimmel. 2004) Information and Communication 9 Regarding risk associated with business ethics. The employee handbook serves as one type of governance that provides written guidelines for reference. Pressures of meeting far-reaching and unattainable goals can lead to costly and unethical decisions.

Riordan’s code of ethics should include annual ethics awareness training for all employees. Monitoring Riordan will thoroughly investigate all violations of Riordan’s governance and compliance rules and procedures to determine the circumstances that led to the violation. Riordan’s reputation as a civic supporter. As warranted. officers and directors are at risk for criminal liability if they are aware of the violations and fail to correct the violation. In addition. Risk Response The COSO enterprise risk management structure recognizes an organization’s need to infuse risk management into strategic objectives and the organization’s culture. all layers of Riordan are exercised and evaluated on how the response protects assets and personnel. including officers and directors. earnings. Intentional and external violations will result in immediate termination. state or federal governmental regulations expose the organization to regulatory risks and liability that impact assets. Riordan must establish a means for employees to obtain ethical advice and anonymously report misconduct. Entities within Riordan Manufacturing that fail to comply with local. Riordan will modify procedures and awareness training sessions to address reoccurrences of non-intentional violations. and most important. 2002) 10 Although not required.CORPORATE COMPLIANCE PLAN 7) Establish a written code of ethics (107thCongress. Non-intentional violations will result in corrective action and consideration of termination based on the severity of the violation. . the compliance officer is responsible for administering and ensuring adherence of Riordan’s code of ethics. As described in the preventive section. In addition. It is also imperative Riordan thoroughly investigate reports of ethical misconduct. To protect against unplanned or unforeseen risk.

2008). The company’s risk management process looks at potential risks that may affect the company and determine to what extent the risk will be taken. the company should be able to realize a substantial profit. Conclusion Governance is defined as a guidance or control of an activity to meet a specific objective (Fox. International Law Info… Conclusion Info… .CORPORATE COMPLIANCE PLAN 11 Violating the Sarbanes-Oxley Acts can result in criminal liability for the officers and directors. competitive advantage. As long as Riordan adheres to COSO guidelines regarding financial and auditing practices along with The Sarbanes-Oxley Act. The underlying goal is to make a profit for the shareholders and the careful steps planned for liabilities and risks will greatly determine the future and profit of the company. including federal penalties for certifying false statements. and longevity. It keeps employees and officers from engaging in activities that may bring harm to the company. Corporate governance is a necessity to run Riordan effectively and be cost effective.

sec. (2006). N. and Smith. University of Phoenix.pdf . 59(3). http://www. SUPPLEMENT: Enterprise Risk Management . (2004). (2010). What governs governance. Stimmel.html Applegate. and how does it evolve? The sociology of governance-in-action.). (2004).Corporate responsibility.Integrated Framework. Business Law: Legal Environment. COSO. SUPPLEMENT: Riordan Manufacturing.116 STAT 145... Upper Saddle River. (2002) . 519-538. Struggling to incorporate the COSO recommendations into your audit process? Here's one audit shop's winning strategy. R. Retrieved from University of Phoenix. 107thCongress. The British Journal Of Sociology. Fox.. K. Dennis. LAW531 website. LAW531 website. (1999). Stimmel. University of NJ: Prentice Hall. Business Ethics. http://www. Retrieved from University of Phoenix. and International Issues (7th (2008).CORPORATE COMPLIANCE PLAN References 12 Cheeseman. H. Online Commerce.stimmel law. & Ward.

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