When listing the fundamental pillars of a compliance program, guidance on the Foreign Corrupt Practices Act and UK Bribery Act both stress the importance of the top-level commitment — “tone at the top” — for creating and maintaining a compliance culture within the company. Because the actions and stances of the board of directors and senior executives reflect and shape the corporate compliance culture, these directors and managers are expected to fulfill leadership roles within scope of the compliance program of the company. But the compliance leadership of the top-level management can be undermined by the reckless actions of the mid-level managers who have the obligation to meet operational targets and deal with the various problems posed in the field. Accordingly, a tone from the top is not enough to create or sustain a compliance program — especially in emerging markets — unless such tone is supplemented by the voice of the mid-level management (“tone in the middle”).
After all, although the top-level management can influence the compliance culture of the company, employees have many more opportunities to observe the behavior of middle managers during the course of the daily operations of the company. It from the middle managers that employees learn how to balance the demands of compliance with the operational requirements of the company. When employees witness the corrupt actions of a middle manager, they may infer that the so-called “compliance culture” of the company exists only on paper, and that what the top-level managers really want them to do is to retain a compliant appearance while carrying out corrupt activities when doing so would help secure a business advantage.
The importance of the middle managers is more apparent in multi-national companies active in emerging countries, as the roles of the top level and mid-level management differ in a more prominent fashion when compared with companies active in the EU and the US. When the top-level managers are busy focusing on shareholder satisfaction, they may become segregated from the business field and actual dealings of the company with its commercial and administrative counterparts. As a result, the top managers get swamped in more high level duties to the point that they cannot completely fill the leadership role in the company’s business operations. Naturally, in such circumstances, the leadership role is substantially filled by the middle managers. This tendency is compounded by the fact that many multi-national companies prefer to appoint expatriate top-level managers to their emerging-market subsidiaries. This increases further the importance of middle managers — who, like the employees, are more likely to be locals — in creating and maintaining the corporate compliance culture. These local middle managers not only work more closely with employees, but they also have a better understanding of the local business culture (e.g. the corruption perceptions, the gift giving culture, potential peer pressure in case of whistleblowing etc.) than do expatriate senior managers.
In light of the above, “tone in the middle” is what allows for a sustainable compliance culture. Even when the board and senior leadership adopt sincere and good-faith efforts to maintain a good compliance culture, this “tone from the top” can be isolated and neutralized by the middle management, especially in emerging markets where people are more keen on excuses about “exceptional circumstances” and “the realities of the market place.” This need for tone in the middle should be given more attention, particularly by multi-national companies operating in emerging markets.