is that, unlike in a family business, all acting individuals are professionals on payrolls. Technically speaking, employees must be loyal to and follow the instructions of the entities with whom their payrolls are. They must act in the interests of their direct employers, not the groups that own / control such employers. The loyalty connections formed by the“ web of employment contracts” sometimes do overlap with those in the first discussed“ corporate web” of decision-making powers and signing authorities. However, they very often fall apart namely because of organizational efficiency needs and the pooling of employees in groups we described above. In many cases, individuals are employed by the entity in their country of residence due to social security and tax constraints, but this does not necessarily mean that they are performing works only for that entity.
Finally, a third level or web of responsibilities exists, which is the one that matters most, the organizational level. This is the informal or semi-formalized set of rules allocating duties within the organization, derived from the organizational chart, the job descriptions of the personnel and the direct reporting lines. Again, in a simple one-entity structure, responsibilities within the organization would overlap with the corporate level allocations and the loyalties created by employment contracts. However, the groups we discussed operate several businesses and maintain distinct support functions, which are organized across international borders. The reporting lines constituting these businesses or functions are the third level or web, establishing the hierarchies through“ whose veins decisions would flow”. This web of responsibilities is sometimes partially documented in internal regulations or business manuals, but rarely embodied in formal documents in its entirety.
Conclusions One of the aims of every compliance process is the determination of the responsible persons, to find out why and how exactly a breach occurred.
When organizing their businesses and support functions in an international landscape, groups prioritize the efficiency of costs and taxes, business considerations and regulatory aspects. By-products of that are the wide diversity in cultures, languages, and legislations that apply in groups – this produces confusions in compliance processes.
Local laws do not fully grasp this complexity. When having to decide in connection with a compliance breach committed by an entity, whether to prioritize the corporate responsible( e. g. a board member) or the organizational person in charge( the leader of a business), a court will most likely follow the former and apply responsibility to the board member, even though the real decision-maker will have been the leader of the business. Courts and legal practitioners should start to acknowledge the strong pressures the organizational hierarchies can have over employees and that they are expected to act as employees of a group rather than a specific entity. This would ideally translate into a redefinition of the individuals’ duties of loyalty so that loyalty can also in a legal technical sense be owed to a group rather than a single entity.
In compliance processes, conflicts between the three levels of responsibilities and authorities rarely come to light. They do so namely in case a person responsible at the organizational level uses as a defense the lack of responsibility at the corporate or employment level. Compliance processes must be robust against legal challenges, hence a well-organized group should make efforts to reduce or eliminate the discrepancies between the levels.
Groups prefer these complex structures due to economic benefits. Since they will not move to simpler structures just to make life easier for compliance professionals, efforts to eliminate discrepancies most focus on more accurately reflecting organizational structures to the corporate and employment level authorities and duties. Also, a clever usage of compliance policies can be helpful to achieve that goal, however, their localization must be made professionally, at a high quality
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