IoD: Voluntary director code of conduct will help prevent future Carillions

Directors of companies should follow a code of conduct to prevent Carillion-like scandals from happening again, according to the representative body for business leaders.

Some 78 per cent of directors agree a set of rules should be created to boost corporate compliance, the Institute of Directors (IoD) said in a policy paper published today called ‘A voluntary code of conduct for directors’.

The IoD said there is a risk of the government bowing to public pressure in response to further corporate scandals by creating an overly prescriptive code of conduct that would hamstring boards’ ability to focus on strategic goals.

“A heavily regulated regime for directors runs the risk of inducing a counterproductive focus on compliance,” Dr Roger Barker, director of policy and governance at the IoD, said.

“A voluntary code – albeit one that is recognised and supported by government – would be the right way to articulate standards for directors without adding to the overall burden of business regulation,” Barker added.

The IoD has written to the business secretary and the chairman of the Financial Reporting Council, calling on the government to support the new initiative.