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Boards Face 'Stiff Challenge' To Win Trust Says IoD Report

Reputational damage to some of Britain's biggest firms from the EU referendum and a series of scandals will be tough to repair, a business group report has warned.

The Institute of Directors (IoD) delivered the rebuke while ranking companies on their approach to corporate governance - an issue brought into sharp focus by the collapse of BHS following its sale for £1, the troubles at Sports Direct and Tesco (Xetra: 852647 - news) 's £260m accounting probe .

It released the findings a day after new whistleblowing rules for financial firms came into force - encouraging workers to report bad practice.

The chairman of the IoD report's advisory panel, Ken Olisa, said: "This has been a difficult year for business, with MPs lambasting the directors of major high street brands, and the Prime Minister making clear that corporate boards are in her crosshairs.

"This all came hot on the heels of the EU referendum, during which big companies were often presented as the bad guys. This is bad for business and bad for the country - business is a part of our society, not apart from it.

"Given the mood music, it has never been more important that directors understand what good governance looks like, and what practical measures can be taken to improve and to convince the outside world they are delivering it."

The rankings - prepared in collaboration with Cass Business School and the Chartered Quality Instiute (CQI) - had British American Tobacco at the top of the pile for good practice, followed by Unilever (NYSE: UL - news) , Diageo (LSE: DGE.L - news) , Sage Group (LSE: SGE.L - news) and Next (Other OTC: NXGH - news) .

At the bottom of the list was Tesco - with Berkeley Group, aerospace firm Rolls-Royce, Associated British Foods (LSE: ABF.L - news) and WPP (LSE: WPP.L - news) following close behind.

The authors stressed that while the rankings highlighted issues such as performance and pay controls , there was little between the top and bottom with the UK generally having an "enviable reputation" for good governance across the world.

Estelle Clark, head of profession at the CQI, said it was clear there was room for improvement.

"In recent years, the public has looked on with barely contained contempt as countless examples of quality failure reach the front pages.

"Be it horsemeat appearing in beefburgers or software glitches depriving customers of access to their own money, the public, the shareholder and the consumer will no longer tolerate corporate governance that is anything less than outstanding."