The 6 key principles in the code of conduct for directors, plus the benefits of employee ownership
Today we explore the voluntary code of conduct for directors to see whether it will be utilised by companies, plus we take a look at the key benefits of shifting to employee ownership such as effects on employee retention and the impact on the local economy.
Voluntary Code of Conduct for Directors: will it make a difference?
The Institute of Directors (IoD) have published a consultation document on a code of conduct for directors.
The new code would be voluntary and is designed to help directors and business leaders build trust from the public in their business activities. It has been prompted by recent corporate scandals, such as the Post Office, that have had a wider impact on the public losing trust in business leaders.
The code of conduct is centred around six key principles: Leading by example, Integrity, Transparency, Accountability, Fairness and Responsible Business.
Because the code is voluntary and contains no means of enforcement, questions have been raised over how useful this code will be and what the take up is likely to be.
The IoD is looking for views from both the business community and the general public.
For more information and to respond and read the full consultation document, see: https://www.iod.com/resources/governance/iod-public-consultation-on-a-code-of-conduct-for-directors/
Base rate plateau a concern for small businesses
In the wake of the Bank of England’s decision to maintain the base rate at 5.25%, the Federation of Small Businesses (FSB) has expressed concern about the impact on small business growth and investment.
FSB National Chair Martin McTague commented on the decision, stating, “Yet again, the MPC has opted to stick instead of twist, a move which was widely predicted but which is no less disappointing for it. The high plateau rates are currently stuck at is now undermining growth, as small firms struggle to access affordable finance to help them expand.”
McTague emphasised that although inflation is now back on target, the lack of a rate cut could hinder the fragile signs of economic recovery. “Holding off a cut in the base rate until a future date risks snuffing out tentative signs of a recovery in GDP, with the flat growth in April a warning sign,” he noted.
Despite the recent higher-than-expected services inflation, McTague warned that the threat to growth must not be overlooked. He feels to do so would “have potentially devastating consequences for small businesses.”
The FSB is hopeful that the Bank of England will soon reach a tipping point for a rate cut, which would provide small firms with the much-needed opportunity to invest and scale up their operations. McTague concluded, “Small firms will be hoping that the tipping point for a cut will be reached sooner rather than later, to help them invest and scale up.”
This sentiment is shared widely among small business owners who are looking for more favourable financial conditions to drive their growth and sustainability. The need for accessible and affordable finance is vital.
If you would like to discuss your business finances in light of these developments, please do not hesitate to contact us.
See: https://www.fsb.org.uk/resources-page/base-rate-plateau-risks-stifling-growth-say-small-firms.html
Could employee ownership be the answer for your business?
The Welsh Government were excited to announce a significant milestone in its own mission to increase the number of employee-owned businesses in Wales. The number of such businesses in Wales has doubled, reaching 74 almost two years ahead of their 2026 target.
While this initiative is partly aimed at keeping Welsh businesses in Welsh hands, employee owned business models do foster a sense of ownership and commitment among employees. Therefore, you might wonder if employee ownership could be a good ownership model for your business. Let’s look at some of the things you might consider.
Benefits of employee ownership
For businesses contemplating a change to employee ownership, the benefits are numerous:
- Enhanced Employee Engagement and Retention: When employees have a stake in the business, they are generally more motivated and committed to its success. This can lead to higher productivity and lower turnover rates.
- Preservation of Company Legacy: For family-owned businesses, transitioning to employee ownership can be a way to ensure that the company’s legacy and values are maintained.
- Local Economic Stability: Keeping businesses locally owned helps sustain the regional economy and can prevent the adverse effects of external buyouts, such as job losses and the erosion of local business culture.
- Resilience and Innovation: Employee-owned companies often demonstrate greater resilience and adaptability, as employees are more likely to contribute ideas and innovations when they have a direct stake in the outcome.
How to make the transition
Businesses interested in exploring employee ownership are likely to need some additional support, but here are the basic steps:
- Seek Specialist Advice: There are different models of employee ownership that can be used, so it’s good to explore and understand the options so that you can determine the best fit for your business.
- Understand the Financial Implications: Employee buyouts can be structured in various ways, including direct share ownership or through employee trusts which can have differing financial effects. In addition if you are selling a business or retiring then you will also want to look at the tax implications involved.
- Engage Employees Early: Communicate with your employees about the potential transition and involve them in the process. Their buy-in and enthusiasm will be crucial to the success of the new ownership model.
- Plan for the Long Term: Consider the long-term governance and management structures that will support the business under employee ownership. This might include setting up a board with employee representatives or establishing committees to handle various aspects of business operations.
Transitioning to employee ownership is not only a strategic move to secure the future of a business but also a way to foster a more inclusive and motivated workforce.
As business advisers we have experience of many different ownership models and can talk you through the tax and other financial implications involved in changing structure. Please get in touch at any time and we will be happy to help you. See: https://www.gov.wales/not-your-run-mill-business-model