Board directors should sign a new code of conduct to help “embed the expectations of society” in the boardroom.

In a new policy paper, the UK’s Institute of Directors has called on the government to commission the development of a voluntary code of conduct for directors to guide good behaviour.

According to Roger Barker, director of policy and governance at the IoD, recent and future corporate scandals are driving government towards ever more prescriptive legislation focused on company directors and boards. A voluntary approach would place the stress on “individual responsibility” and a “business-led solution”. Barker believes the IoD’s membership is behind the move, after 78% said in a survey they backed the idea of a code.

“The IoD’s members are strongly supportive of the introduction of a code of conduct for directors—either on a mandatory or voluntary basis,” said Barker. “In our view, a voluntary code—would be the right way to articulate standards for directors without adding to the overall burden of business regulation.”

Professional codes

In its policy paper the IoD argues more prescriptive regulation is problematic. New rules can “become a drag on growth and competitiveness”; cause directors to focus on compliance as “an end in itself”; trigger reluctance among many to serve on boards; or result in a push to move jurisdictions “where the regulatory burden is lighter”.

The IoD also highlights the range of other professions—lawyers and accountants, for example—who have already embraced codes of conduct. The paper argues board directors should be no different. Codes for directors already exist in other countries, including Hong Kong, Singapore and South Africa.

“Board members serves as role models in their respective organisations and beyond. The behaviour of directors is just as important for society as the behaviour of doctors, lawyers, accountants and other professionals,” says the paper.

“Hence we believe that an important missing element in our business framework is a code of conduct for directors, which could play a significant role in building trust and respect in the UK business community.”

Trust in business

Ironically, the 2022 Edelman Trust Barometer shows that globally, trust in government figures has fallen following the pandemic, down one percentage point to 52%, while trust in business has remained steady at 61%.

However, in the UK trust fell six percentage points to 43%, though that remains ahead of NGOs (37%), government (29%) and the media (22%). Edelman also finds that more people want businesses to do more on climate change, workforce skills, tackling inequalities and providing “trustworthy information”.

An Institute for Business Ethics study published in January found that 40% of people survey believe business is ethical.

In recent weeks the government has pushed ahead with proposals for the audit profession after a series of corporate scandals. Some of those affect company directors, among them audit committee members. But they go some way to support the IoD’s point that rules are becoming ever more detailed and prescriptive.

Whether that is good thing or not remains unknown. Either way, codes of conduct will always help set pointed expectations. That can’t be a bad thing.