Our colleague Laura Tye wrote about the recently published Institute of Directors (IoD) consultation paper on a Code on Conduct for Directors on 24 June. 

The Code follows on from a policy paper published by the IoD in June 2022, which called for the UK Government to commission a high-level working group to draft a voluntary code of conduct for directors. The policy paper was published in the wake of a number of corporate scandals, including BHS.

In the foreword to the IoD Consultation paper Lord Iain McNicol of West Kilbride, Chair of the IoD Code of Conduct Commission notes that “The purpose of this Code is to help UK business win back that trust by embedding the values that are already adopted as a matter of course by most responsible business leaders.”

The Code has been developed by the IoD in support of its Royal Charter obligation to promote high levels of integrity on the part of directors. 

The Code is applicable to directors of organisations of all sizes in the private, public and not-for-profit sectors and is seen to be a code, which will complement existing codes of conducts that many directors may already be subject to arising from memberships of other organisations and/or professional bodies.

The Code says that it does not seek to add to the general legal and regulatory duties/obligations placed on directors but rather, “… it 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.”

The consultation paper notes that increasingly, director conduct is a source of business and reputational risk for both organisations and individual directors and that the Code helps directors to fulfil their responsibilities by providing a clearly articulated statement of what good conduct looks like.

The Code is structured around six key Principles of Director Conduct:

• 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.

As readers of this blog will be aware, over the last few months we have looked at what we describe as an emerging trend towards corporate safeguarding. Traditionally safeguarding has been associated with the protection of children and vulnerable adults from abuse and/or neglect. However, we are now in a world where safeguarding is much wider in its application and there is now a need for all organisations whatever their size or purpose, to consider ensuring that they consider safeguarding as part of their suite of concerns and something which should be included in their risk registers.

As social and cultural expectations as to what constitutes “vulnerability” are ever changing, including as a result of organisations like #MeToo and Everyone’s Invited, we are seeing the principles of safeguarding extending beyond the protection of vulnerable groups, to the protection of people generally and specifically examining how an imbalance of power in any organisation can make anyone, at any level, within that business/organisation “vulnerable”.

This trend is in our view further evidenced in some of the issues and behaviour that this Code addresses and the undertakings it asks directors to give, going forward to deliver that promised enhanced conduct:

• Exhibit high standards of personal conduct and professionalism.
• Avoid behaviour which might adversely affect the reputation of my organisation, or which contradicts its values.
• Challenge words, behaviour or attitudes that fall below expectations.
• Promote an open business culture, which does not cover up wrong-doing or mistakes.
• Seek independent advice on matters of concern at an early stage.
• Encourage the adoption of ‘speak up’ mechanisms, which enable employees and other relevant stakeholders to report concerns about any misconduct or actions that are not aligned to the organisation’s values.
• Engender an inclusive culture where all employees can bring their best selves to work.

The IoD invites written comments by Friday 16 August 2024 and you may also submit feedback to codeofconduct@iod.com.