A voluntary code devised by the Institute of Directors (IoD) aimed at bolstering trust in UK business could amount to little more than “virtue signalling” without some means of enforcement, ICAEW is warning.

Currently under public consultation, the IoD says its Code of Conduct for Directors provides leaders with a behavioural framework that can help them build and maintain the trust of the wider public in their business activities.

Jonathan Geldart, Director General of the IoD, said corporate scandals, such as those at the Post Office, Carillion and BHS, have exerted a negative effect on the esteem in which business leadership is held. He said the purpose of the Code is to help UK business win back public trust by embedding the ethics and values that are already adopted as a matter of course by most responsible business leaders.

The Code of Conduct was developed for the IoD by a commission chaired by Lord McNicol of West Kilbride, and is structured around six key ‘Principles of Director Conduct’. These are: leading by example; integrity; transparency; accountability; fairness; and responsible business.

Geldart said: “We can be rightly proud of UK business organisations much of the time. However, on occasion, business decision makers fall short of what society expects. Those at the top may lose touch with what really matters – namely the need to demonstrate exemplary values and integrity in both their business decisions and their personal behaviours.”

Lord McNicol said most of the undertakings contained within the Code are matters of common sense. “However, at crucial moments, when key decisions have to be made, the Code may serve as a useful tool that directors can refer to when asking themselves the question: what would a responsible director do in this situation?”

Peter van Veen, ICAEW’s Director of Corporate Governance and Stewardship, said the intentions behind the code are well-meaning. “It’s good to see initiatives that are aimed at strengthening ethics and professional standards at board level.”

However, he said there were concerns about the effectiveness of a voluntary code with no enforcement mechanism or register of signatories. “Our members who serve on boards are already covered by the ICAEW code of ethics,” Van Veen added.

Chartered Accountants are expected to demonstrate the highest standards of professional conduct and to take into consideration the public interest. A revised version of ICAEW’s code of ethics applied from 1 January 2020. The Code, which is enforceable, adopts a principles-based threats and safeguards approach pioneered by ICAEW. 

Meanwhile, from 1 November 2023, as part of the revised ICAEW CPD Regulations, ICAEW introduced a requirement for members and others within scope of the regulations to undertake at least one hour of ethics training each year. ICAEW’s free Ethics CPD Course provides 12 hours of verifiable CPD activities divided into modules designed to help members develop confidence and competence when making ethical decisions.

The closing date for consultation responses is 16 August.