IoD calls for new directors’ watchdog following Carillion collapse

The Institute of Directors (IoD) has called for a new body to police the directors of major companies following the collapse of construction giant Carillion.

The watchdog, which the IoD says would help to rebuild public trust in business, would have powers to recommend that directors be ‘struck off’.

The IoD said on its website: “The Institute of Directors has called for an examination into the creation of a new ‘Framework of Professional Conduct and Competency’ for board members of significant corporate entities. The new body would oversee the directors of major companies and hold them to a code of conduct, examining cases where directors have failed to adhere to it.”

The proposal, which was included in the IoD’s response to the report by two parliamentary select committees into the collapse of Carillion, also includes the suggestion that directors that signed up to such a professional framework would also be required to undertake a targeted programme of “continuing professional development”.

It said: “The damning report by MP’s into the collapse of Carillion highlighted the damage that can be inflicted on investors and wider stakeholders when a company’s governance goes wrong. Other examples such as BHS and Sports Direct also highlight the importance of high levels of competency and best practice at the boardroom level. The proposal has a wider application in sharpening the focus on governance and helping directors and boards to show how they are fulfilling their important duties.

“The IoD believes that such a framework would improve boardroom accountability and emphasise the need for the role of the director to be that of a competent professional with a practical understanding of fiduciary duties and responsibilities.”