In today's business environment being a director has probably never been more complex or challenging in terms of expectation of scrutiny, governance and decision-making by boards. The Companies Act 2006 already has a clear set of obligations (section 172 duties) on directors as to how they should take decisions (and larger corporates should report on how they satisfy those obligations in their annual report).

Against this backdrop the Institute of Directors has launched a public consultation on a new code of conduct for directors. The proposed code, on which consultation is open until 16 August 2024, is intended to be voluntary and, reading the press launch, appears to be a tool or framework which boards can look to when tackling decisions and help frame decision-making - but obviously not replacing their existing duties in that regard. The intention is that there will be six key principles of director conduct:

  • Leading by Example – demonstrating exemplary standards of behaviour in personal conduct and decision-making.
  • Integrity – acting with honesty, adhering to strong ethical values and doing the right thing.
  • Transparency – communicating, acting and making decisions openly, honestly and clearly.
  • Accountability – taking personal responsibility for actions and their consequences.
  • Fairness – treating people equitably, without discrimination or bias.
  • Responsible Business – integrating ethical and sustainable practices into business decisions and taking into account societal and environmental impacts.

It would be hard to imagine any board that might object to those principles but equally it is also hard to imagine that many boards would consider that they don't already meet those standards and levels in their decision-making and in extinguishing their legal duties. So, this might be a further helpful framework for directors to help bring their debates and decisions to life and it will be fascinating to see the response by directors, investors and advisers as to the proposal to create this new voluntary standard.