Directors Code of Conduct (2006)

Organization: 

Restaurant and Catering Society of South Australia

Source: 

CSEP Library

Date Approved: 

2006

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Directors Code of Ethics

Purpose of the Code

The Code of Conduct for directors was introduced in 2006 to promote the highest ethical and professional standards in directorship of the association. Initially based on the model provided by the Australian Institute of Company Directors, the Code provides guidance to directors to assist them in carrying out their duties and responsibilities and defines the standards of professional conduct which R&CSA members expects of its elected board.

The principles set out in the code are relevant to directors of all organisations, and apply equally to both executive and non-executive directors.

Board Members of R&CSA have agreed to be bound by the code. Other directors of member businesses are likewise encouraged to comply on the basis of best practice. Effective the 2006 annual general meeting incoming directors of the association are requested to sign a statement to the effect that they will comply with the principles contained in the code.

The document is not an exhaustive statement of directors’ obligations. It should be read in conjunction with the law applying to all directors. The Australian Institute of Company Director’s publications Duties and Responsibilities of Company Directors and Officers and Corporate Practices & Conduct would be recommended in this regard.

Codes of Conduct and Ethics

R&CSA’s code is but one element supporting a self-regulatory approach to the conduct of association governance. There will always be a requirement for regulation to establish a framework to meet the expectations of the association to its members and the legislation that covers its activities. In a broad sense the level of regulatory control over associations in the long term will be proportionate to the trust shown by society in the willingness and ability of associations to meet these expectations.

The adoption of this code of conduct or statements of ethical standards tangibly demonstrates the association’s commitment to meeting the expectations of society and the members that make up the association’s stakeholders. Another of the important longterm outcomes to the association of introducing such best practice initiatives is expected to be a reduction in compliance costs. The AICD publication Corporate Practices & Conduct lists additional benefits that codes of conduct and ethics can bring which include:

  • enhance the organisation’s reputation for fair and responsible dealing 
  • help to maintain high standards of behaviour through the organization  
  • give all employees a clear idea of what the association is setting out to do and how it will do it  
  • help to develop a pride among board and staff and to give a focus to the organisation as a whole. 

But what are ethics? For the philosopher Socrates, ethics involve behaviours motivated by the sense of duty captured in the question, “What ought one to do?” as distinct from what one must do by law or by regulation. This question can challenge every aspect of daily life and the way business is conducted. The decisions may not always be easy.

The benefit of codes of ethics is that they provide a degree of permanence in a code of behaviour that stands outside the constantly changing legal and regulatory framework. The broad application of ethical standards embodied in a voluntary code imposes upon individuals and organisations a greater degree of accountability for professional behaviour than does regulation.

The Code of Conduct for directors will, if properly embraced, contribute to the development of a culture of accountability and bring about greater member confidence in the association and the directors that oversee matters on their behalf.

Moreover, such codes enhance the image and standing of the associations which adopt them. By reducing reliance on regulation to control outcomes, adherence to the Code of Conduct by directors will also reduce the emphasis on regulatory conformance and promote innovation, enterprise and performance within companies.

RESTAURANT & CATERING SA DIRECTOR’S CODE OF CONDUCT

1. A director must act honestly, in good faith and in the best interests of the association as a whole.

2. A director has a duty to use due care and diligence in fulfilling the functions of office and exercising the powers attached to that office.

3. A director must use the powers of office for a proper purpose, in the best interests of the association as a whole.

4. A director must recognise that the primary responsibility is to the association’s members as a whole but should, where appropriate, have regard for the interests of all stakeholders of the broader food service industry.

5. A director must not make improper use of information acquired as a director.

6. A director must not take improper advantage of the position of director.

7. A director must not allow personal interests, or the interests of an associated person, to conflict with the interests of the association.

8. A director has an obligation to be independent in judgement and actions and to take all reasonable steps to be satisfied as to the soundness of all decisions taken by the board of directors.

9. Confidential information received by a director in the course of the exercise of directorial duties remain the property of the association from which it was obtained and it is improper to disclose it, or allow it to be disclosed, unless the disclosure has been expressly authorised by the association, or the person from whom the information is provided, or is required by law.

10. A director should not engage in conduct likely to bring discredit upon the association.

11. A director has an obligation, at all times, to comply with the spirit, as well as the letter, of the law and with the principles of this Code.

Guidelines for the interpretation of the principles of the Director’s Code of Conduct

The following guidelines are intended to assist directors in complying with the core principles of the Code of Conduct. They are not meant to be exhaustive and may be added to over time address issues of importance as they arise.

1. Duties to the Association

1.1 Each director should endeavour to ensure that the functions of the board have been specified clearly, are properly understood and are competently discharged in the interests of the association.

A director should endeavour to ensure that the management of the association is competent and is devoting its best endeavours in the interest of the association.

In evaluating the interests of the association, a director should take into account the interests of the members as a whole, but where appropriate or required by law should take into account the interests of creditors and others.

2. Duties to Members

2.1 Each director should endeavour to ensure that the association is financially viable, properly managed and constantly improved so as to protect and enhance the interests of the members.

2.2 A director should seek to ensure that all members or classes of shareholders are treated fairly according to their rights as between each other.

2.3 A director should consider whether any benefit to be received by the director or an Associated Person is of sufficient magnitude that the approval of the broader membership should be sought, even though not required by law.

2.4 A director who is appointed to a board at the instigation of a separate legal entity should recognise the particular sensitivity of the position. Fiduciary duty requires the director to make a contribution in the interests of the association and the members as a whole and not only in the interest of the nominator. Where obligations to other people or bodies preclude an independent position on an issue the director should disclose the position and seriously consider whether to be absent or refrain from participating in the board’s consideration of the issue (see also Guideline 6.2). Before taking the decision to be absent, the director should consider whether that absence would deprive the board of essential background or experience. The matter should be disclosed to and resolved by the rest of the board.

3. Duties to Creditors

3.1 While the obligations of a director are primarily owed to the association (that is to the members as a whole), there are situations in which it is necessary to evaluate the interests of the creditors. This is particularly so where the association’s financial position is uncertain or where insolvency may be pending. In cases of doubt, a director should, with some urgency, seek professional advice.

4. Duties to other Stakeholders/Members

4.1 All associations and their directors must comply with the legal framework governing their operations and must be conscious of the impact of their business on society. Without limiting in any way the nature of the issues with which the director must be concerned in the running of the association, particular attention should be paid to the environment, questions of occupational health and safety, industrial relations, equal opportunity for employees, the impact of competition and consumer protection rules, and other legislative initiatives that may arise from time to time. Although a director owes primary duty to the members of the association as a whole, the responsibilities imposed on associations and the director under various Acts of Parliament clearly demand that the director evaluate actions in a broader social context.

5. Due Diligence

5.1 A director should attend all board meetings but where attendance at meetings is not possible appropriate steps should be taken to obtain leave of absence.

A director must acquire knowledge about the business of the association, the statutory and regulatory requirements affecting directors in the discharge of their duties to the association, and be aware of the physical, political and social environment in which it operates.

In order to be fully effective, a director should insist upon access to all relevant information to be considered by the board. This information should be made available in sufficient time to allow proper consideration of all relevant issues. In the extreme circumstances where information is not provided, the director should make an appropriate protest about the failure on the part of the association to provide the information and if necessary abstain from voting on the particular matter on the basis that there has not been the time necessary to consider the matter properly. Any abstention, and the reasons for it, should be included in the minutes. It may also be appropriate to vote against the motion or move for deferment until proper information is available.

A director should endeavour to ensure that systems are established within the association to provide the board, on a regular and timely basis, with necessary data to enable them to make a reasoned judgement and so discharge their duties of care and diligence. An internal audit of systems supporting the board should be conducted from time to time.

A director should endeavour to ensure that the relations between the board and the auditors are open, unimpeded and constructive. Similarly, the auditors should have direct and unimpeded access to the board.A director should be satisfied that the scope of the audit is adequate and that it is carried out thoroughly and with the full co-operation for management and the internal auditors.

A director should endeavour to ensure that any organisation on whose board the director sits complies with the law and strives for the highest standards of business and ethical conduct. 5.7 A director from time to time may need expert advice (whether it be legal, financial or some other professional advice and whether it relates to fiduciary or other duties) in order to discharge the director’s duties properly. The director should ensure, to the extent possible, that any advice obtained is independent of the association. In that regard the services of advisers independent of those advising the association may need to be sought. In any case of doubt, separate independent advice should always be sought on their position vis-à-vis the association.

6. Conflicts of Interest

6.1 A director must not take improper advantage of the position as director to gain, directly or indirectly, a personal advantage or an advantage for any Associated Person, which might cause detriment to the association.

6.2 The personal matters of a director, and those of the director’s family must not be allowed to prevail over those of the association’s members generally. A director should seek to avoid conflicts of interest wherever possible. Full disclosure of any conflict, or potential conflict, must be made to the board. In considering these issues, account should be taken of the significance of the potential conflict for the association and the possible consequences if it is not handled properly.

When a conflict does arise, a director must consider whether to refrain from participating in the debate and/or voting on the matter, whether to be absent from discussion of the matter, whether to arrange that the relevant board papers are not sent, or, in an extreme case, whether to resign from the board. Where a director chooses to be absent from the meeting, consideration should be given as to whether expertise that would be contributed by the director is otherwise available. In the case of a continuing material conflict of interest, a director should give careful consideration to resigning from the board and consider the provisions of Guideline 7.3.

6.3 An executive director must always be alert to the potential for conflict of interest between management interests and the director’s fiduciary duties.

6.4 The payment of “success fees” in situations of potential conflict of interest is unacceptable.

7. Use of Information

7.1 A director must not make improper use of information acquired by virtue of the director’s position. This prohibition applies irrespective of whether the director would gain directly or indirectly a personal advantage or an advantage for the Associated Person or might cause detriment to the association.

7.2 Matters such as board papers and minutes, financials, lobbying strategy, trade secrets, processes, methods, advertising and promotional programs, sales and statistics affecting financial results are particularly sensitive and must not be disclosed.

7.3 A director who takes the serious step of resignation on a point of principle should consider whether the reasons for resignation should be disclosed to shareholders (members) or the appropriate regulator. In deciding whether or not to make public the reasons for resigning and composing any resignation statement, a director should have regard to the following:

(a) the duty not to disclose confidential information so as to damage the association; and

(b) the duty to act bona fide in the interests of the association.

7.4 A director who has been nominated to a board by outside parties should recognise the particular sensitivity of the position and should be especially careful not to disclose to the nominators matters that are confidential unless the prior agreement of the board has been obtained.

8. Professional Integrity

8.1 An executive director should recognise that the position occupied is particularly sensitive. A director must be prepared, if necessary, to express disagreement with colleagues including the managing director. However, in the absence of a need to express disagreement, an executive director should be prepared to implement the decisions of the board and the instructions of the managing director as a loyal member of the board.

8.2 If there is any doubt whether a proposed course of action is inconsistent with a director’s fiduciary duties then the course of action should not be supported. Independent advice should be sought as soon as possible to clarify the issue.

8.3 When a director feels so strongly as to be unable to acquiesce in a decision of the board, some or all of the following steps should be considered:

(a) making the extent of the dissent and its possible consequences clear to the board as a means of seeking to influence the decision;

(b) asking for additional legal, accounting or other professional advice;

(c) asking that the decision be postponed to the next meeting to allow time for further consideration and informal discussion;

(d) tabling a statement of dissent and asking that it be minuted;

(e) writing to the Chairman, or all members of the board, and asking the letter be filed with the minutes;

(f) if necessary, resign, and consider advising the appropriate regulator.

8.4 ‘Opinion shopping’ and the search for loopholes in the law is unacceptable.

Keywords: 

Year Published: 

2006