Director code of conduct proposed by IoD

June 23, 2022

Measures to maintain high standards of professionalism and ethics

A code of conduct for UK directors has been proposed by the Institute of Directors (IoD), as part of a recent policy paper published by the body.  

If developed, UK directors would be encouraged to become signatories and commit themselves to the principles laid out helping to create a better professional and inclusive environment for business. 

Some of the draft recommendations include directors being collectively responsible for the organisation, acting in good faith in the best interests of the company, ensuring that the organisation behaves in a socially responsible manner, and more. 

This would help directors simultaneously meet the high standards of professionalism and ethics, according to the IoD. 

In its proposal, the IoD has expressed how a heavily regulated regime for directors runs the risk of inducing a “counterproductive focus” on compliance which detracts from the capacity of boards to be strategic and innovative. 

Because of this, the IoD’s policy paper proposes the creation of a flexible approach that ensures the code is not inhibitive to either directors or businesses. 

Proposals to adopt a voluntary code of conduct have also been welcomed by many within the industry with the policy paper citing that 79% of respondents to a survey in May 2022 agreed to the implementation of standards. 

Of the remaining respondents, 17% were against its implementation and 4% were unsure.  

Introducing the proposal, Dr Roger Barker, director of policy and governance at the Institute of Directors, said: “There is a risk that each new corporate scandal or collapse will renew pressure on government to impose prescriptive regulatory obligations relating to directorship. 

“Our paper proposes an alternative, more flexible approach which emphasises individual responsibility and the importance of a business-led solution. 

“A voluntary code – albeit one that is recognised and supported by government – would be the right way to articulate standards for directors without adding to the overall burden of business regulation.” 

To integrate these practices and codes into the UK’s industry leaders, the IoD is now calling on the UK government to “commission a high-level working group that could draft a voluntary code of conduct."