5. Legal and Regulatory Environment of Business Ethics

UK

Companies Act (2006)
The revised Companies Act comprises a number of important changes that are directly linked to business ethics:
Directors’ Duties

• To avoid and declare conflicts of interest
• Not to make personal use of company assets
• Not to accept benefits from third parties
• Act in a way to promote the success of the company and in doing so, have regard to …

(i) The likely consequences of any decision in the long term
(ii) The interests of the company's employees
(iii) The need to foster the company's business relationships with suppliers, customers and others
(iv) The impact of the company's operations on the community and the environment
(v) The desirability of the company maintaining a reputation for high standards of business conduct
(vi) The need to act fairly as between members of the company.

Reporting Requirements
The Board must provide a regular account of how it complies with the above duties through an

• Operating & Financial Review – narrative on how the following affect future development
• environmental matters
• employees
• social and community issues
• business relationships

Shareholder Engagement
Directors need to

• Encourage the participation of shareholders – transparency
• Provide a means for shareholders to exercise their legal and ethical responsibilities of ownership

www.berr.gov.uk/whatwedo/businesslaw/co-act-2006/index.html

The Combined Code on Corporate Governance (2006/2008)
The Combined Code contains principles regarding board structure and responsibilities (including the setting of values for the organization), remuneration, accountability and audit, and relations with shareholders.
www.frc.org.uk/corporate/combinedcode.cfm

More information on UK corporate governance regulation can be found on
www.estandardsforum.com/jhtml/country/United%20Kingdom/sp/18/6

National Association of Pension Funds (NAPF) - CSR Policy Statement 2005
This statement outlines NAPF’s position on how social, environmental and ethical issues are to be integrated into the investment management process.
www.napf.co.uk/publications/Downloads/PolicyPapers/sectioni/2005/
CSRPolicyStatement.pdf

Anti-Bribery Legislation

Anti-terrorism, Crime and Security (ATCS) Act 2001
Part 12 of this Act includes legislation on bribery and corruption. This came into force on 14 February 2002 to deter UK companies and nationals from committing acts of bribery overseas (including facilitation payments).
www.ice.org.uk/downloads/Bribery_%20Leaflet_May_2006.pdf

See also International Anti-Bribery Regulation