Public Trust, Directors and a New Code
Directors’ duties are clearly set out in companies law; is an additional Code of Conduct for directors necessary? The Institute of Directors (IoD) thinks so and is proposing a voluntary “behavioural framework” to help business leaders build up public trust.
The IoD recently published a consultation paper for a draft Directors Code of Conduct (the consultation closes on 16 August). It has been developed over recent months by a Commission of 16 leading business figures, chaired by Lord Iain McNicol.
What’s proposed?
The IoD describes the draft as a practical “credible” code of conduct that would be recognised and supported by the business community and wider society. It will be voluntary.
The proposed framework is undergirded by six key principles:
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
So how is this intended to add to the principles and statutory duties directors already know about? The consultation document states that it is not intended to add to existing legal obligations, “nor is it associated with a formal enforcement mechanism”.
It says: ‘The role of the director is associated with specific legal and regulatory responsibilities, including the general legal duties defined in the Companies Act 2006.. [The Code] sets a bar for director conduct beyond the legal baseline as a means of enhancing the legitimacy and reputation of directorship in the eyes of society and stakeholders.”
Each Principle is to be underpinned by specific undertakings which directors will be expected to fulfil. The Code includes guidance with examples of how it can be applied in specific scenarios.
Lord McNicol said: “At crucial moments, when key decisions have to be made, the Code may serve as a useful tool that directors can refer to when asking themselves the question: what would a responsible director do in this situation?”
The IoD is asking for views on the code until Friday 16 August. You can respond here or email codeofconduct@iod.com.
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