November 21, 2024 The new IoD Code of Conduct for Directors: what would a responsible director do?
Overview
The role of a director is increasingly complex and at times, directors are required to make decisions in the face of adversity whilst also navigating challenging trade-offs. Whilst we have a lot to be proud of with respect to UK business and commerce, on occasion, decision-makers have fallen short of public expectations. This has harmed trust.
The Institute of Directors (the “IoD”) has launched a new Code of Conduct for Directors (the “Code”). The Code is designed to provide practical guidance to help directors make more ethical and responsible decisions in their business activities which will, in turn, enhance director legitimacy and reputation in the eyes of stakeholders.
The Code Framework
The Code is made up of six key principles (the “Principles”) which are underpinned by specific undertakings:
- Leading by example: demonstrating exemplary behaviour in decision making
- Integrity: doing the right thing and acting honestly
- Transparency: making decisions openly and honestly
- Accountability: taking responsibility for actions and their consequences
- Fairness: treating others fairly without bias or discrimination
- Responsible business: being mindful of ethical and sustainable business in business decisions
The application of the Principles, in line with the undertakings, will result in the achievement of outcomes such as trust, confidence, legitimacy and reputation, fostering the business culture that we all desire.
Application of the Code
The Code is relevant to all directors and equivalents, regardless of their industry, company size or level of experience.
The adoption of the Code is voluntary, although the directors and boards of companies who believe in ethical leadership and responsible business practices are encouraged to publicly commit to the Code.
Organisations may choose to use the Code to inform their own assessment of director actions and behaviour.
The Code is not intended to be a new burden of compliance but instead, is there to provide practical guidance.
The Vision
Elemental is committed to helping the IoD achieve its vision of getting board members from all types of organisations to sign up to the Code on a voluntary basis. Commitment to the Code signals a willingness to apply high ethical standards in business governance, decision making and business activities.
How can Elemental help?
Our team of governance experts are on hand to help directors and boards demonstrate their application of and commitment to the Code.
The Code and its Principles have enhanced the statutory position of directors’ duties as set out in legislation. We view the Code as a practical guide for all directors on how to perform and discharge these duties, regardless of what type of entity they serve.
We have seen how the Code enhances director training and how it plays a crucial role in Board and director evaluations.
It is clear that directors can no longer undertake their roles separate from wider society. It highlights the need for directors to recognise the role that businesses play in society and their impact.
Elemental advises clients on their corporate governance, for further information or to discuss your requirements, please feel free to contact us. To see a copy of the new Code, please see here.
