In October, MPs and peers voted in favour of an early general election in the UK, bringing to an end a Parliamentary session defined by Brexit but also characterised by the neglect of important business policy reforms.

The nature of the UK’s departure from the EU will undoubtedly dominate much of the debate in the weeks running up to the vote. However, the end of a Parliamentary session should also enable policymakers to pause and take a wider view on what legal and policy framework ought to look like over the coming years and well into the future.

One area that has requires more studied consideration from lawmakers is corporate governance. Historically, this issue tends to feature very sparingly in the manifestos of most political parties. However, both Labour and the Liberal Democrats have issued extensive policy documents outlining how they would reform the system by which companies are directed and controlled.

While Labour’s proposals were undoubtedly the more sweeping—including mandating for boards to comprise a third of workers—both parties seemed to advocate a notable shift toward a European, stakeholder-oriented approach. Meanwhile, though the Conservative Party fought shy of specific recommendations, they too stated they wish to “strengthen” the UK’s corporate governance system. In fact, the question of how companies are overseen has become central to the debate, also cutting across other key issues, such as the size and remit of the state.

With the corporate governance debate galvanised, and high-profile corporate collapses still eating away at public trust, the Institute of Directors (IoD) has issued its own Corporate Governance Manifesto to inform the discussion and help restore wider confidence in business.

Our ten specific policy recommendations are designed to achieve three broad objectives: firstly, to increase the accountability of our corporate governance system to wider society; secondly, to improve the competence and professionalism of UK board members; and thirdly, to enhance the ability of board members to pursue long-term, sustainable business behaviour.

A commitment to high standards

The vast majority of business leaders take their responsibilities seriously; however, the wider public often feels that directors lack accountability. This is not a straightforward problem to fix, but we believe that the business community needs to take measures to demonstrate its commitment to high behavioural standards. The IoD is therefore proposing that the government should support the introduction of an industry-led Code of Conduct applying to board members of our largest companies.

It appears to be something of a historical anomaly that though doctors, lawyers and accountants are all bound by professional codes of conduct, directors are not.

Failings, perceived and real, on the part of the auditing sector have provided a specific source of public concern, and the industry should be subject to a statutory regulatory body with strong investigative and enforcement powers. We therefore support the establishment of the Audit, Reporting and Governance Authority as called for by Sir John Kingman in 2018.

However, while supporting Sir John’s recommendations on the oversight of auditors, we feel that that having corporate governance and investor stewardship regulated within the same body as statutory audit is a far from ideal approach. We therefore suggest the establishment of a new Corporate Governance Commission that would be able to focus on stewardship and corporate governance working closely with industry.

Coupled with our desire to see the introduction of an industry-led Code of Conduct for our biggest firms, we would also like to see the government mandate minimum training requirements for directors appointed to boards of such entities. In the UK almost anyone over the age of 16 can become the director of a corporate entity. While that may be the marker of a free economy it is clear that the directorship of a significant entity is a major social responsibility, and a minimum level of governance knowledge could help ensure all board members take that responsibility to heart.

Additionally, externally led board evaluations have become an increasingly important aspect of how boards seek to assess their own competence. Up until now, such evaluations have been subject to limited scrutiny and there is little consistency between them. We therefore believe that the government should push forward with the introduction of a voluntary Code of Practice for the providers of board evaluation.

Defining a business purpose

The support among two major parties for a less shareholder-centric governance model is in part reflective of a wider shift in the business community itself, which seeks to put purpose alongside profit as a firm’s overriding mission. To build upon this development, government could encourage companies to adopt clearly defined ‘business purpose’ clauses in their annual reports.

Similarly, with the view that public sector outsourcers often exist under a different market environment to other businesses, we’ve suggested that the government explore opportunities to define a new corporate form—the Public Service Corporation. This form could allow those providing outsourced government services to adopt an approach that balanced the interests and obligations relating to its various stakeholders, including its shareholders, employees, pensioners, creditors and public sector clients. In doing so, we believe the Public Service Corporation could offer a way in which to address concerns about how public money is spent on private sector contracts.

Of course, climate change—perhaps the defining issue of our times—has been a key driver of the ‘shareholder-versus-stakeholder’ debate, and we believe that corporate governance can be leveraged to help deliver the government’s green objectives. The government should explore opportunities to establish a UK sovereign wealth fund to invest in the green and sustainable companies of the future and in doing so embed the highest standards of corporate governance across the economy. The government should also support the implementation on an appropriate reporting framework for climate-related financial disclosures.

We believe that, if implemented, these recommendations would reinforce the UK’s pre-eminent position in the global corporate governance space and provide a model for the rest of the world to emulate. In any event, in order to deliver its agenda, the next government will have to work constructively with business to create an environment that enables directors to lead sustainable purposeful businesses which are both profitable and internationally competitive.

Carum Singh Basra is corporate governance policy adviser at the Institute of Directors.