As 2014 ends, many companies and their employees in sales and marketing functions will think about next year’s marketing plan and sales plan. How to expand the company’s sales and therefore increase revenue? But for law firms, corporate law departments and even compliance departments, how much emphasis has been spent on business plans? Probably not much. (more…)
The Future of the Korean Legal Services Industry
By Bryan Hopkins
( Originally printed in the Korea Herald, April 23, 2012)
The recent Korea US FTA has not only resulted in a discussion of the pros and cons of such an agreement but a debate regarding the entrance of major international law firms into the Korean legal marketplace. What will be the impact on Korean law firms now that the major US and European law firms announced they will soon open offices in Korea? Most of the international law firms ( Paul Hastings, DLA Piper, Clifford Chance, etc. ) have offices in Hong Kong, Singapore or Shanghai besides the US and Europe and it is questionable if such firms truly need to open offices in Seoul. Most of the international firms have been providing sophisticated legal services on cross border transactions, out bound deals, M&A and project financing for years without having to open offices in Korea. But the opening of the Korean legal services market is causing concern. (more…)
Legal Significance of the Corporate Structure
When conducting legal risk management audits, it is important for in house counsel as well as managers to consider the topic of corporate structure. For companies with subsidiaries it is increasingly important to review the corporate structure in place to determine whether or not the parent is shielded from liability. One of the major features of a corporate organization in the United States is that it insulates shareholders from personal liability for the debts of the corporation. Therefore, under normal conditions, a corporate parent will not be held liable for the obligations of its subsidiary. The court will not impose liability upon a parent for the obligations of its subsidiary in the absence of compelling legal reasons. However, under certain circumstances courts will hold the parent or stockholders of the company liable. It will, in other words, “pierce the corporate veil” and go past the subsidiary and hold the parent liable. Or in absence or a parent-subsidiary relationship, the court could hold the shareholders themselves liable for corporate debts. The major legal doctrine allowing the courts to do this are set forth below.
When it comes to compliance- just do it!
Recently, I read that the Securities and Exchange Commission sanctioned numerous firms for violating auditor independence rules when they prepared the financial statements of brokerage firms that were their audit clients. Specifically, the agency found that during audits, the firms relied on data from financial statements and notes that the audit firms themselves had prepared for the clients. Obviously they couldn’t do it because they were in effect auditing their own work. In another example, I recenlty read that a former paralegal of a well known pharmaceutical company, claims she was fired in retaliation for revealing a huge scheme involving kickbacks to doctors in violation of US Law. So why then, in these examples, years after the implementation of SOX and the FCPA ( which forbids these actions) did such a number of firms violate SOX and probably their own internal rules? If the former paralegal 's allegations are true, why didnt the pharmaceutical company have a FCPA process in place to pick up the kickbacks? The answer is simple: the companies in question failed to implement a proper compliance program that adequately addresses their major processes and procedures .
Risk Management Must Always Be Proactive
For Risk Mitigation It’s Time to Plan for Next Year
The end of the year is almost upon us. That means of course it is time to plan for next year. What risk management processes should be implemented or updated? What updates to the compliance program should be made in light of DOJ announcements? What should be done to better protect the company and mitigate risk? Though there are numerous items to consider here are some to think about doing if you have not done them especially if you are a manufacturing company or a subsidiary of a manufacturing company. Remember, risk management must always be proactive if it wants to mitigate risk.
1. Maybe it’s time to establish a task force to think about updating compliance guidelines. After all if the DOJ or regulatory authorities change positions on antitrust investigations, compliance guidelines should be modified to reflect the changes. Has anyone checked with outside counsel about this?
Recently , the New York Times reported several fatalities and numerous injuries linked to defective airbags manufactured by a company named Takata. The defective design or nature of the airbag revolves around defective propellant in the airbag and has resulted in a massive recall involving millions of cars. According to documents reviewed by Reuters, not only did Takata know about the airbag problems in 2004 ( which it did not report to federal regulators) but its management instructed the engineers researching the problem to destroy all data and evidence regarding the investigation.
Not only is this turning into a media nightmare for Takata , but what is coming to light is a complete failure of risk management processes especially those involving manufacturing and safety protocols. Namely, Takata switched propellant chemicals in the airbags. The new propellant caused the metal airbag to burst open due to excessive air pressure caused by high humidity. It also was discovered that Takata's manufacturing plant in Mexico allowed a defect rate eight times above acceptable limits. Takata's problems could have been avoided had it followed appropriate risk management processes and procedures. Lives could have been saved. And injuries could have been prevented. What does Takata's problems with air bags have to do with risk management- well everything. Its all about the planning! Its all about the implementation of a properly designed and thought out Legal Risk Management Program.
When manufacturing products, especially those that could cause injuries, it all goes back to product planning. I recommend using checklists to help in the product planning and designing process. When designing products, manufacturing companies need to be very detailed to avoid product liability litigation, especially in the United States. Product planning is a very detailed process involving many departments. As part of an overall plan to reduce risks of product liability litigation as well as class actions and government investigations raised by CPSC or FTC concerns, it is recommended manufacturing companies develop a detailed design risk program or “DRP.” Such processes can minimize, reduce, or prevent liability when claims are brought as a properly designed DRP will minimize product failure as well as alert all concerned as to the major issues of product and design defects before such defects happen.
I recommend the use of a checklist cover such DRP matters. Checklists are a handy tool to use when looking at processes and procedures to minimize legal liability, especially in the product planning and design phases of product development. Product planning and design process considerations should normally include the following:
If Takata had followed the processes outlined above, it could have easily discovered the potential danger caused by the new propellant. It could have put in place a system which monitored and tested all aspects of its manufacturing processes. If it created a checklist covering all issues reflected above, there probably would not have been any issues.
Does your company have detailed design and manufacturing processes in place? Do you have a handy checklist to use as a tool when designing and manufacturing product? Remember, use of a checklist can help a detailed design risk program. When designing and manufacturing product- its all about risk. Implement a DRP today and put in place a handy checklist!
