The Institute of Directors (“IOD”) announced the introduction of a new code of conduct on 23rd October 2024, following a consultation process which was chaired by Lord McNicol of West Kilbride.

The IOD has explained that the new code is not designed to hold back directors or create another level of compliance, specifically that it does not add to a directors’ legal duties under the Companies Act 2006. What the new code is designed to do, is to support directors in becoming respected leaders.

Within the introduction to the code, there is an explanation that the code is applicable to directors of organisations of all sizes in private, public and not-for-profit sectors. The code also addresses that directors are often subject to public scrutiny including in the media.

There are six key principles to the new code of conduct, and they are:

• Leading by example – which means 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, taking into account societal and environmental impacts.

Applying the code

Under the ‘applying the code’ heading, it does state that the code is entirely voluntary and a source of guidance for directors. It’s also explained that if there is a conflict between legislation, regulation, contractual obligations, professional standards or organisational rules then those obligations would prevail over the code of conduct.

Despite its voluntary nature, the IOD is encouraging directors to publicly commit to the code using its kitemark.

Comment

As is acknowledged within the code, directors are already subject to scrutiny and regulation in the form of directors’ duties and in the form of the new powers from Companies House. Although this code is being sold as being voluntary (which it is), if a breach of directors’ duties scenario was to arise, there’s no doubt that a litigator on the opposing side would use any breaches of the code against the director, particularly if the company the director is an officer of is displaying the kitemark.

The code can be viewed in full here.