12 June 2024 Wilma Rix Corporate Governance

IoD seeks to promote director integrity with new voluntary Code of Conduct

The Institute of Directors has published a consultation paper on a new voluntary Code of Conduct. This aims to assist directors of entities of all sizes with their decision-making and to promote high levels of integrity. It is hoped that, in turn, this will also build and maintain public trust in business activities, following high profile corporate scandals, including recently at the Post Office, and in previous years relating to the collapses of Carillion and BHS.

The Code is not, however, meant to replace other best practice guidance. Instead, the IoD's Director General has described it as written “by directors for directors" as a roadmap for making the right decisions in the face of increasingly complex challenges and trade-offs (including in relation to sustainability and social issues).

As such, it could be a helpful resource for directors and other senior managers. However, there may also be a risk of increased scrutiny in the future for individuals if there are failures to maintain high standards.

Structure and format

As with the UK Corporate Governance Code, and other best practice recommendations, the proposed new Code is structured around key Principles, each of which is underpinned by a number of specific provisions (expressed as Undertakings). A note in each section also comments on the desired Outcomes which will be achieved.

Directors will be expected to apply each of the Principles and to fulfil the Undertakings, so as to achieve those positive Outcomes.

The six key Principles of Director Conduct in the Code are:

  • Leading by example: Demonstrating exemplary standards of behaviour in personal conduct and decision-making.
  • Integrity: Acting with honesty, adhering to strong ethical values, and doing the right thing.
  • Transparency: Communicating, acting and making decisions openly, honestly and clearly.
  • Accountability: Taking personal responsibility for actions and their consequences.
  • Fairness: Treating people equitably, without discrimination or bias.
  • Responsible business: Integrating ethical and sustainable practices into business decisions, taking into account societal and environmental impacts.

Code consultation

The IoD is seeking views on the draft Code from the business community and from the general public. The deadline for responding is 16 August 2024.

The questions to be addressed are:

  • whether there are any additional issues that should be addressed in the Code;
  • how awareness of the Code can be encouraged amongst directors and the wider public;
  • whether directors should make a public declaration or disclosure of their adoption of the Code;
  • whether there is a role for government, regulators or professional bodies in encouraging adoption of the Code; and
  • whether existing directors would be willing to commit to the principles and undertakings of this Code.

Background

The Code of Conduct has been developed for the IoD by a specially constituted Commission which was set up in December 2023. The IoD has stated that such a Code would support its Royal Charter obligation to promote high levels of integrity on the part of directors while also satisfying IoD member demands for a code to underpin high standards of professional ethics.

More information

See the Consultation paper: Code of Conduct for Directors and press release. For more information about how a Code of Conduct is expected to work, see also these IoD FAQs.