The Institute of Directors (IoD) is launching a voluntary Code of Conduct for directors to improve integrity and transparency in business. This code sets out good practices and is a practical guide to help directors make better decisions without adding extra bureaucracy. It is based on the following six key principles:
- Leading by example: Directors should demonstrate exemplary personal conduct and decision-making, avoiding behaviours that could harm the organisation's reputation or contradict its values.
- Integrity: Directors must act honestly, adhere to strong ethical values, and do the right thing. They should be vigilant about conflicts of interest, manage them appropriately, and voice constructive challenges and disagreements on matters of concern.
- Transparency: Directors should communicate, act, and make decisions openly, honestly, and clearly. They should foster a business culture that does not conceal wrong-doing or mistakes
- Accountability: Directors must take personal responsibility for their actions and their consequences. They should comply with the organisation's legal duties and hold management accountable.
- Fairness: Directors should treat people equitably, without discrimination or bias, and make decisions based on objective evidence.
- Responsible business: Directors should integrate ethical and sustainable practices into business decisions, considering societal and environmental impacts. They should avoid prioritising the short-term financial interests of shareholders over the long-term interests of the organisation.
What this means for company directors
This Code of Conduct is designed to assist directors in exemplifying these principles, thereby promoting a culture of integrity, transparency, and accountability within their organisations.
It clearly defines appropriate conduct and serves as a practical tool to aid directors in making informed decisions. It is not meant to impede directors or introduce additional compliance burdens.
The Code aims to restore trust in UK businesses following several high-profile corporate failures, including those at the Post Office, Carillion, and BHS. By incorporating values of integrity, honesty, and transparency into the expected behaviour of company directors, the Code aims to reflect standards that, according to the IoD, most responsible business leaders already practice routinely.
Jonathan Geldart, director general of the IoD, said:
"On occasion, business decision-makers fall short of what society expects. Those at the top may lose touch with what really matters - namely, the need to demonstrate exemplary values and integrity in both their business decisions and their personal behaviours.
"As a result, we have in recent years observed corporate scandals - including at the Post Office, Carillion and BHS - which have exerted a negative effect on the esteem in which business leadership is held.
"The purpose of this Code is to help UK business win back public trust by embedding the ethics and values that are already adopted as a matter of course by most responsible business leaders.
"Written by directors for directors, it offers a roadmap that can help individual directors make the right decisions for themselves and their organisations, often in the face of complex challenges and trade-offs."
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