Supermarket giant Tesco, meanwhile, brings up the rear in a new governance ranking of the UK's top 100 companies.
BAT performed particularly well in terms of dealing with its shareholders and audit risk management. Tesco's dismal position was largely down to a rock-bottom score on audit and external accountability.
Public attention focused squarely on corporate governance earlier this year with shareholder unrest at a series of AGMs and was followed by the political and economic fall-out of the Brexit vote.
"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 cross hairs.
"This all came hot on the heels of the EU referendum, during which big companies were often presented as the bad guys," said IoD deputy chairman Ken Olisa.
Top of the class
|1||British American Tobacco|
However this has made good corporate governance all the more important, said the IoD.
"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," said Olisa.
Entitled the Good Governance Report, the IoD worked with Cass business school and the Chartered Quality Institute to rank the largest 100 listed companies in the UK.
It focused on five key attributes having taken advice from representative bodies of accountants, company secretaries and investment professionals. These included board effectiveness, audit accountability, remuneration, and relations with shareholders and other stakeholders.
Estelle Clark of the Chartered Quality Institute also stressed the importance of good governance.
"Operating without good governance equates to running a business on a hope and a prayer. In recent years, the public has looked on with barely contained contempt as countless examples of quality failure reach the front pages," she said.
Nevertheless, Olisa championed the performance of Britain’s boards in comparison to overseas counterparts.
"Despite the setbacks corporate Britain has endured this year, it still has an enviable global reputation for good governance," he said.
Bottom of the pile
|97||Associated British Foods|
Olisa added that it wouldn’t take much for the likes of Tesco – who propped up the ranking – to jump to the top.
"The range between the top and bottom companies on our list is narrow, indicating that directors could improve their governance substantially by focusing on limited problem areas," he added.