Directorship is a serious matter, with many and often changing obligations on board members. The Institute of Directors (IoD) recently launched its new voluntary Code of Conduct for Directors, a practical tool to help directors make better decisions, one that aims to enhance ethical leadership and rebuild public trust in UK businesses.
The code is designed as a practical framework to guide directors. Following widespread consultation, the code establishes six core principles as a framework for directors to navigate complex decisions and uphold high standards of behaviour in their organisations.
The key components of the code are:
- Leading by example: directors should display high standards in their personal conduct and leadership roles.
- Integrity: directors must be honest, adhere to ethical values, and ensure consistent ethical decision-making.
- Transparency: promoting open and clear communication, to foster trust within and beyond the organisation.
- Accountability: directors should take personal responsibility for their actions and decisions.
- Fairness: directors should ensure equitable treatment of all stakeholders, free from bias or discrimination.
- Responsible business: directors should encourage sustainable and socially responsible practices, balancing their strategy and operations with their organisation’s societal and environmental impacts.
The IoD’s National Sustainability Group offers guidance and resources to help directors develop a strategic approach to their wider social – and sustainability – responsibilities, in a way that enhances a firm’s productivity, resilience and profitability.
Purpose and impact
Developed with input from an expert commission and through public consultation, the IoD code aims to address concerns about declining trust in corporate governance. It draws on the Nolan Principles, originally developed for public office, which highlighted selflessness, integrity and accountability. The code aims to restore confidence in corporate governance, especially in the light of recent high-profile scandals like Carillion and BHS, which have eroded public trust.
The code is not another regulatory burden but a voluntary commitment. Although voluntary, the IoD has created a ‘badge of pride’ – see below – for directors committed to ethical leadership, potentially influencing public perception and stakeholder relations.
There is no formal audit or enforcement mechanism. Organisations and directors are encouraged to publicly commit to the code. This can involve disclosures in annual reports or communications with stakeholders, reinforcing transparency and credibility. The code’s adoption signals a broader shift towards prioritising integrity and ethical responsibility in corporate decision-making, aligning with modern expectations for corporate behaviour.
The code has received endorsements from many leading figures. Jonathan Geldart, Director General of the Institute of Directors, said: “We should be proud of UK businesses, but sometimes decision-makers fall short of societal expectations. Those at the top may lose touch with the need for exemplary values and integrity. This has led to scandals and controversies, negatively affecting business esteem.
“This code aims to help UK business regain trust by embedding values already adopted by most responsible leaders. Written by directors for directors, it offers a roadmap to help them make the right decisions amid complex challenges and trade-offs.”
The IoD’s objective is to foster a culture where all directors lead with integrity, thus enhancing and strengthening the governance landscape in the UK, whereby ethical conduct becomes central to business leadership. The code is essential reading and guidance for all current and aspiring directors – and business students. It is an excellent contribution by the IOD in support of its own mission of generating Better Directors for a Better World – and thus responsible and resilient businesses.
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For more information contact Adrian Pryce on 07720 297402 or email Adrian.pryce@northampton.ac.uk
