Welcoming the publication of the long-awaited Government consultation into audit and corporate governance, the IoD’s Head of Policy and Corporate Governance, Dr Roger Barker said:
“Credible corporate reporting is essential if trust in business is to be improved. Such reporting is ultimately the responsibility of the board of directors. It is therefore right that directors be held to account in their fulfilment of this duty.
However, although it is appropriate for a new audit regulator to consider how director accountability can be improved, the collective responsibility of the board for corporate reporting must be maintained as a central feature of UK corporate governance. Furthermore, although director accountability needs to be enhanced, it would be counterproductive if the legal and financial liabilities piled onto directors make the role excessively unattractive or risky for any capable individual to undertake.
It is also important to consider a variety of ways in which corporate behaviour can be improved – in addition to simply increasing the weight of regulation on directors. The Government should consider the endorsement of a Code of Conduct for Directors through which a less legalistic approach to director behaviour could be encouraged.
The time is also ripe to consider how director competence could be enhanced through appropriate director education and professional development. Just as the Government is advocating the establishment of a new professional framework for auditors, a parallel approach should be applied to directors.”