The Institute of Directors has made calls for board members to become more conscious of non-shareholding stakeholders as part of their wider ethical and fiduciary duties, and for legislation take account of these wider responsibilities. The IoD has responded to a consultation paper published by the Law Commission, entitled Company Directors: Regulating Conflicts of Interest and Formulating a Statement of Duties, which calls for the DTI to reform the Companies Act and for directors’ duties to be defined in more detail. The IoD would like the Act changed to allow boards to consider the effect of decisions on those other than shareholders and employees. Under their own definition, this would include customers, suppliers and the local community. “Although directors must remain legally accountable only to their shareholders, it is important that the law reflects the reality of business life,” says Tim Melville-Ross, director general of the IoD. Melville-Ross claims this wider perspective has made a material difference to his own period of stewardship. “I was chief executive of Nationwide Building Society, which went through a difficult period at the beginning of this decade,” he told the ICAEW’s FD’s Forum in October. “But things started to go right for us when we recognised that we had to be fair in all our dealings with staff, customers, suppliers, and the community.” In a merger or bid situation, for example, directors should not be held legally liable if they choose to ignore higher bids which take less account of stakeholders’ interests to the detriment of the company. But like the debate over the Combined Code, there is a question mark hanging over the extent to which directors’ duties should be defined by statute. Codifying these responsibilities would reduce flexibility, be open to interpretation (and therefore extension through legal precedent) and be nigh on impossible in any case, the IoD argues. Instead, a non-binding statement of core duties could act as a guide for directors.