Ethical requirements for non-executive directors and trustees

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Fundamentally, the same requirements apply to both NEDs and trustees. This is because the value from each role is derived from the willingness and ability of the incumbent to challenge those who are more closely involved with the day-to-day running of the entity. For simplicity, I shall refer to NEDs throughout and, for the purposes of this article, you can assume that the same message is also applicable to trustees.

Ethics is a subject that is constantly in the media these days. Open any newspaper and you will find examples of individuals and organisations that have been criticised for acting in their own interests, rather than upholding the interests of those whom they were trusted to serve. In fact, wherever there is unethical behaviour, there is a breach of the trust placed in an individual or an organisation, and perhaps a loss of trust more widely.

For example, if an accountant is paid to issue a report that is intended to provide a level of assurance over the accuracy of information in a document, and if it comes to light that the accountant acted negligently or recklessly in producing a report that was incorrect, not only do those connected with the engagement cease to trust that accountant, but the wider community may also find it more difficult to trust accountants generally.

Therefore, in addition to complying with technical standards, professionals such as accountants are usually required to abide by a code of ethics. In the case of professional accountancy bodies, such as ACCA, that are members of the International Federation of Accountants (IFAC), their codes of ethics will be aligned with the Code of Ethics for Professional Accountants, which is produced by the International Ethics Standards Board for Accountants (IESBA). In fact, the ACCA Code of Ethics and Conduct incorporates the IESBA Code in its entirety and the IESBA Code applies to members in business as well as those in practice.

One reason the IESBA Code is so important for accountants is that ethical dilemmas are not always easy to resolve. Therefore, the IESBA Code carries a framework for resolving ethical dilemmas. There is other material on the ACCA website that can help you understand this ‘conceptual framework’, so I shall not cover that here. Instead, I shall focus on the ethical principles that are most relevant to NEDs.

The beauty of the fundamental ethical principles identified in the IESBA Code is that they can relate to a wide range of situations – not only those relevant to accountancy, and not even limited to one’s professional life. Nonetheless we should consider them here in the context of an NED and the trust that fellow board members or the business must be able to place in a professional accountant in that position. The five fundamental ethical principles are:

  • integrity
  • objectivity
  • professional competence and due care
  • confidentiality
  • professional behaviour.

These are explained in the ACCA Rulebook, which is available to all ACCA members and may also be viewed by anyone on the ACCA website. It has been argued that integrity cuts across the complete set of ethical principles. Indeed, if you did not care enough to be reading this article on ethics, and so understand what is expected of you before embarking on a career as an NED, your integrity could be called into question. Nonetheless, there is perhaps more merit in focusing on the qualities expected of an effective NED: professional competence, exercising due care, and demonstrating objectivity.

Professional competence and due care

The meaning attributed to this in the IESBA Code is perfectly appropriate in the case of an NED; namely ‘to maintain professional knowledge and skill at the level required to ensure that a client or employer receives competent professional services based on current developments in practice, legislation and techniques and act diligently and in accordance with applicable technical and professional standards’.

At the point of applying for a role as an NED, you should ask yourself what qualities, knowledge and skill you have that are relevant to the function of an NED and the business of the entity concerned. That level of knowledge and skill has to be maintained, and I would suggest that it is easier to do so, and to serve the stakeholders well, if you have a strong interest in the business of the organisation (or the objectives of the charity, perhaps).


Stated simply, this means ‘not to allow bias, conflict of interest or undue influence of others to override professional or business judgements’. Yet maintaining objectivity (and demonstrating it) is not so simple. It is easy to measure your technical knowledge and to identify any shortcomings but it is not so easy to realise when your judgment might be being influenced by factors unrelated to the matter in hand.

For example, suppose you are an NED of more than one company, and one company expands its business into an area that could be said to compete with the other company. It is quite possible that you might find yourself (now or in the future) in possession of information about one company that could be useful to your role in the other company. This would put you in a position of conflicting interests. Rather than presenting itself immediately as a clear-cut independence issue* that requires an appropriate response, situations like this often evolve slowly, and it may even be difficult to identify, looking back, when the risk of finding yourself in a difficult situation first arose.


As a professional accountant and an NED, you will be in a position of trust, and you will be expected to act with integrity in ensuring that you act ethically. Your relevant knowledge, skills and experience must be supplemented by your ability to act with complete objectivity, and to safeguard that objectivity in the interests of stakeholders.

In such a trusted position, it may be argued that you also have an important role to play in promoting an ethical culture within the organisation. Therefore, not only must you act ethically, but you must be seen to do so. This is true for all NEDs and trustees - even those acting in a voluntary capacity. The responsibility for behaving professionally and ethically are not afffected by the fact that a position is unpaid.

More resources concerning ethics are available on the ACCA website. Also, in December 2011, the Consultative Committee of Accountancy Bodies (CCAB) developed a number of case studies to illustrate how the IESBA Code may be applied by professional accountants working as NEDs. These scenarios outline key considerations when attempting to resolve ethical problems. View the CCAB case studies.

*The definition and requirements regarding NED independence can vary depending on, for example, jurisdiction, governance code and listing rules, and the type of organisation. You will need to consult relevant documentation so as to act accordingly as it is not possible to cover the entire range of situations here.

About the author

Ian Waters is head of standards, within the Directorate of Governance-Regulation at ACCA. Among other things, Ian is responsible for updating the ACCA Rulebook, which includes the Code of Ethics and Conduct. Other activities relating to ethics include engagement with the International Ethics Standards Board for Accountants (IESBA) concerning the development of IESBA’s International Code of Ethics for Professional Accountants, and leading and supporting ACCA’s Global Forum for Ethics.

Other work of the Standards Department includes managing ACCA’s relationships with its lead regulators and other professional bodies, and supporting the work of ACCA’s Regulatory Board and its other public interest oversight boards.

Standards Department sits within the executive directorate of Governance, which is responsible for governance of ACCA (Council and the Executive Team), as well as governance of ACCA’s members and students. The latter includes all aspects of regulation and discipline - issuing various types of practising certificate, monitoring practitioners, investigating complaints, and the adjudication process.

This article is part of ACCA's NED and trustee advice series

ACCA accountants have a key role to play as NEDs and trustees across all sectors - public, private and voluntary - as they can contribute hugely to ensuring viability and good stewardship of assets. The ACCA Professional Insights team has developed this series of articles to help ACCA members become NEDs or trustees in what can be a challenging process. So whether you are a senior manager looking to further your career or are considering giving something back, this series of articles will give you the advice you need to help you find your feet. 

If you found this article interesting please read some of the others in our series:

  1. Cyber Security for Non-Executives
  2. The six conversations every board should be having
  3. Who can be a NED or Trustee?
  4. Financial Reporting and Auditing for NEDs
  5. How to become a NED
  6. What are board committees and their functions?

Or watch the videos in our series:

  1. How to become an NED by Japheth Katto
  2. How to become an NED by Paul Tsang
  3. Board diversity in Norway by Turid Solvang

If you are interested in finding an NED or trustee role why not start by searching ACCA Careers Job Board for relevant positions. 

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