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Mind the Gap: Middle Management’s Critical Role in Compliance

Mind the Gap: Middle Management’s Critical Role in Compliance Background Decorative Image

In order to effectively drive a culture of ethical conduct, companies must ensure that compliance priorities set by executive leadership extend to even the lowest level employees. Establishing an appropriate ‘tone at the top’ with the Board and senior leadership resonates with most companies, but it is easy to overlook the application of compliance standards to middle managers and supervisors. Failing to engage middle management results in a gap between senior leadership who set corporate compliance requirements and the rank and file employees who must follow them. Middle managers share a critical role in promoting compliant culture throughout an organization. For many companies, middle managers are the first line of defense, well-positioned to identify compliance risks, respond to questions and concerns, and to address and resolve issues before they are escalated to a hotline complaint or an internal investigation. Middle managers also serve as compliance interpreters, helping employees to understand how the compliance objectives set by senior leaders apply to their individual jobs and responsibilities.

But middle management often is poorly equipped to serve these important functions. Too often they are left out of the discussion concerning compliance strategies, and where they are included, compliance is viewed as an ‘add-on’ to an otherwise busy schedule managing sales targets and business objectives. Managers also are often poorly trained, if at all, to respond to allegations of employee misconduct.

To ensure that a company’s culture of compliance extends from the most senior to the lowest level employees, middle managers must be engaged, empowered, and incentivized to drive compliance forward in their business units. Compliance leaders should make it a priority to include managers in risk analysis discussions, ensuring their input is captured in any compliance risk assessment. Companies also should provide dedicated training for managers and supervisors (“train the trainer” sessions) covering such topics as proactively identifying risks, promoting a “speak up” culture, and appropriately responding to employee concerns and advertising the company’s policy on non-retaliation. Arming managers with talking points, presentation materials, and sample hypotheticals through dedicated training will allow for more consistent compliance messaging across the organization. Managers should be encouraged to conduct portions of local training sessions, lead town hall or focus groups on compliance topics, and send regular compliance reminders to their organizations to reinforce with employees that their immediate supervisors are engaged and dedicated to compliance.

To incent and hold management accountable, many companies now include compliance criteria as a component of annual appraisals, setting goals for managers such as conducting certain training sessions in a given year. While every company’s compliance program is different, one thing is certain: without the engagement of middle management, companies will struggle communicating effective and uniform compliance messaging to all facets of the organization, identifying and resolving nascent compliance issues, and guiding employees’ ethical conduct on a day-to-day basis.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.