Enterprise liability is criminal liability imposed on an entire company for the crime committed by a constituent business, department, or unit (Enterprise Liability. 2010). Liability insurance does not cover enterprise liability. The company needs to make sure that all laws are followed and no crime is committed to avoid this liability. Management must make sure all products sold meet state and federal guidelines. Management must avoid any product liability issues and reduce the chance of negligence or tort liability.
Enterprise liability can be reduced with enterprise risk management. Enterprise risk management (ERM) is a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives (Enterprise Risk Management — Integrated Framework. 2004). ERM consists of eight parts which include: an internal environment that covers the tone of a company; objective setting in which objectives must exist before identifying potential events; event identification of events both internal and external; risk assessment in which risks are analyzed; risk response in which management must respond to risk; control activities to establish policies and procedures to carry out risk response; information and communication to people to carry out responsibilities of activities; and monitoring ERM and modify if necessary. Everyone in the company has a responsibility for ERM.
The company needs to create an enterprise risk management plan for both internal control needs and to improve the risk management process. The Committee of Sponsoring Organizations of the Treadway Commission (COSO) recommends that internal control is an integral part of ERM. The COSO issues the Internal Control – Integrated Framework to help companies enhance their internal control systems. This framework has been incorporated into policy, rule, and regulation, and used by thousands of enterprises to better control their activities in moving toward achievement of their established objectives (Enterprise Risk Management — Integrated Framework. 2004). Riordan should establish measures and internal controls to prevent, identify, and manage risks appropriately.
Product liability is the liability of manufacturers, sellers, and others for the injuries caused by defective products (Cheeseman. 2010. p. 94). Persons, who are injured by defective products, may be able to recover damages under either negligence or misrepresentation. Negligence is the breach of the duty of due car occurs when a person get injured due to product design, failure to assemble properly, failure to inspect, and failure to warn. Misrepresentation occurs when the seller fraudulently misrepresents a defect in a product or the quality of the product.
Riordan must make sure that the products are not defective. A defect can occur when the company fails to assemble a product properly, fails to test a product properly, or fails to checks the quality of a product adequately. A defect can occur if the product is improperly designed. A defect can occur if the company does not place a warning on a package in which a person could be injured if the warning is not known. A defect can occur if the product is not packaged safely.
International law is a law that governs affairs between two different nations. No single source of international law exists. No one court exists that handles all international law interpretations. National court decides international disputes. If a contract does not state the location where disputes are to be decided, then the location of the buyer will determine the location for the dispute to be heard.
Riordan should make sure there two clauses in an international contract. These clauses are the choice of forum clause and the choice of law clause. The choice of forum clause states whose nation’s court has jurisdiction to hear a contract case. A choice of law clause states whose nation’s laws will be used to decide a contract case. Absent these two clauses, and without the parties agreeing to these matters, an international dispute may never be resolved (Cheeseman. 2010. p. 857).
The United Nations Convention on Contracts for the International Sale of Good (CISG) is an act for international sales contract. The CISG has combined rules from many major legal systems. In order for the CISG to apply to an international sales contract, either (1) both of the nations must be parties to the convention or (2) the contract may specify that the CISG controls (Cheeseman. 2010. p. 163). Riordan must follow these rules unless the company decides to opt out of it.
Renting or owning a manufacturing plant in which the plant is considered real property and the materials inside the plant is tangible property. Tangible property is any property that can be seen or touched but is not real property (such as land or building). Riordan must develop a way to track all tangible assets. Riordan must develop a tight security plan to protect the tangible property at each facility.
Intellectual property includes trademarks, copyrights, patents, trade secrets, and industrial design rights. Trademarks are used to tell a company’s goods or services from others by either a symbol or a catch phase. Copyrights are original works of authorship (such as computer programs, advertising, and technical drawings). Patents are rights to an invention or product. Trade secrets are information that provides the company with a competitive advantage in the marketplace.
Riordan creates innovative plastic designs that have earned international acclaim (Riordan Manufacturing. 2004). Riordan has design capabilities that need to be protected. To protect an industrial design it must be registered. An industrial design may also be protected as a work of art under copyright law, depending on where you are located. In some countries, Protection of industrial design and copyright can exist at the same time.
Riordan must protect the intellectual property not only externally but internally as well. Riordan must have confidentiality and non-disclosure agreements with its employees to keep the employees from leaking any intellectual property such as trade secrets. Employees should only be told trade secrets on a need to know basis.
Managers must make sure that their organization does not violate another’s intellectual property rights. Managers are responsible to ensure the intellectual property rights of others are not violated by adhering to copyright laws. Management should consult the United States patent and trademark office as a precaution before creating a mark that is already in existence and protected. Using others’ property will cost the company in penalties, fines, and damages.
Riordan Manufacturing is a corporation. A corporation is a fictitious legal entity that is created according to statutory requirements (Cheeseman. 2010. p. 557). A corporation is a legal entity. The corporation can be taken to court and held criminally liable for violations of the law. Shareholders are not personally liable for corporation debt or contracts. Shareholders are liable only up to their capital contribution in the corporation.
This company has one centralized management. It has a board of directors whom make policy decisions about the corporation’s operations. The board of directors carries the responsibility of overall management of business affairs of the company in accordance with state corporate requirements, the articles of incorporation, and its by-laws (Riordan Manufacturing. 2004). The shareholders elect the board of directors. The board of directors determines the officers to run the day-to-day operations. Both the board of directors and the officers are corporate management.
When the corporation was formed a governing document had to be created. The document needed to contain name of corporation, number of shares authorized, name and address for registered agent and incorporators (Cheeseman. 2010. p. 562). Most importantly the document must have been filed with the secretary of state of the state of incorporation. This document is called the articles of incorporation.
The articles of incorporation can be amended. The amended can be any provision that was missed in the original document. The amendment must show that the board recommends the amendment and that the shareholders voted to approve amendment. All amendments must be filed with the secretary of state. If the amendments are not filed with the secretary of state then they will not be valid.
The employment-at-will policy permits an employee or Riordan to end the employment relationship at any time for any reason (Riordan Manufacturing. 2004), as long as the reason is not illegal. A handbook is designed to acquaint the employee with Riordan and provide the employee with information about working conditions, employee benefits and some of the policies affecting ones employment. An employee should read, understand and comply with all provisions of the employee handbook.
Riordan must abide with the handbook and not violate an employee’s right to work at the company. Title VII of the Civil Rights Act states that it shall be an unlawful employment practice for an employer (1) to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin; or (2) to limit, segregate, or classify his employees or applicants for employment in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee, because of such individual’s race, color, religion, sex, or national origin (Cheeseman. 2010. p. 513). Riordan must follow OSHA rules and regulations such as establish safety requirements for equipment (e.g., safety guards), set maximum exposure levels for hazardous chemicals, regulate the location of machinery, and establish safety procedures for employees. Riordan must up-hold a no tolerance policy on sexual harassment.
Employees have the right to work in a company without any form of discrimination. If discrimination occurs the employees have a right to contact the Equal Employment Opportunity Commission (EEOC), who will conduct investigation and determine it there is a case. EEOC can sue the employer on the complainant’s behalf. If EEOC chooses not to sue, it will issue a right to sue letter and the employee can get a lawyer and sue the company.
Employees have other rights as well. If they get hurt on the job, then the employee can file a workers compensation claim with a state agency. If the injury is due to a safety issue, the employee can contact OSHA to have the safety issue resolved. If sexual harassment occurs, the employee should notify his or her supervisor and if the harassment has not ended, then the employee could sue the employer.
If the company violates any laws, this must be brought up to Lowell Bradford, Chief Legal Counsel, is in charge of all legal matters for Riordan Manufacturing. Department heads forward all legal questions to Mr. Bradford who answers them from his personal knowledge and experience or after consulting with the attorneys at Litteral & Finkel, the law firm retained by Riordan Manufacturing (Riordan Manufacturing. 2004). The law firm will not be involved unless Mr. Bradford deems it necessary.
A Corporate Compliance Plan for Riordan has addressed many key concepts necessary to be in compliant with many federal laws which include breach of contract, enterprise liability, product liability, international contracts, property rights, form of business liabilities, and governance. Riordan’s Corporate Compliance Plan focused on managing the legal liabilities of Riordan officers and directors. This Corporate Compliance Plan must be followed by Riordan.
References
Cheeseman, Henry. (2010). Business Law: Legal Environment, Online Commerce, Business Ethics, and International Issues, (7th Edition). Upper Saddle River, NJ. Prentice Hall.
Enterprise Liability. (2010). Retrieved on July 24, 2010 at:
Enterprise Risk Management — Integrated Framework. (2004). Retrieved on July 26, 2010 at:
Riordan Manufacturing. (2004). Retrieved on July 19, 2010 at:
