Nine point summary of the IoD’s New Code of Conduct for Directors

Key principles

The Code is built around six key principles that guide directors in their duties, which we have condensed below.

1. Integrity and leadership: Directors are expected act honestly, comply with all applicable laws and regulations and set an ethical tone for the company. This includes promoting a culture of honesty, responsibility, and accountability across all levels of the organisation. Directors are expected to make decisions that prioritise the company’s interests over personal gain. Directors must always strive to lead by example and set a high standard for others to follow.
2. Transparency and accountability: The Code encourages directors to maintain transparency by clearly communicating their decisions to a company’s stakeholders. Accountability enhances decision-making quality by ensuring the stakeholders are given the opportunity to scrutinise director’s decisions. Directors should also carefully consider if they have the right skills to fulfil their role and undertake appropriate training to fill any gaps or step down where such gaps cannot be remedied. Directors should safeguard confidential information and avoid situations where personal interests could conflict with those of the company.
3. Ensure fairness and conduct business responsibly: Directors should treat all individuals equitably, without any discrimination or bias. Directors must make impartial decisions and promote a culture of inclusivity. Directors are encouraged to consider the societal and environmental impacts of their actions and make decisions that will promote the long-term success of the business over short-term financial interests.

Practical tips for compliance with the Code

1. Lead ethically: Directors should promote ethical standards. This can be done by setting up a code of ethics, training employees on ethical practices, and putting in place processes for reporting and addressing unethical behaviour. It would be helpful to regularly assess ethical standards to ensure it aligns with the Code.
2. Documentation: Directors are advised to document board decisions comprehensively, including the rationale for key. Maintaining open communication with shareholders about significant decisions is also essential.
3. Manage conflicts of interest: Directors must disclose any interests that could potentially conflict with the company’s interests. Establishing a conflict register and periodically reviewing it can help mitigate potential risks. Additionally, the Code suggests procedures for recusal from discussions or decisions where a conflict is present.
4. Continuous learning: Directors are encouraged to stay informed through workshops, courses, and industry events. This ongoing education helps directors respond to regulatory changes, adopt innovative practices, and enhance their understanding of their roles.
5. Commit to sustainable practices: Directors will benefit by putting in place measures to ensure sustainability and ethical business practices. Due consideration should be given to the impact of a company’s operations on environment and society.

Comment

The principles set out in the Code will help directors protect themselves from potential liability and contribute to a culture of trust, accountability, and ethical governance. While adherence with the Code is voluntary, committing to it, regularly reflecting on and integrating these principles into board activities will enable directors to act confidently and responsibly for the long-term success of the company.

Contact our Corporate & Commercial team if you would like advice on the obligations and personal liabilities of directors.

[1] A full copy of the IoD’s Code of Conduct for Directors can be accessed here.