The Institute of Directors in Southern Africa (IoDSA) and the King Committee have made the draft version of the latest King Report—King IV—available for public comment today. Those wishing to comment will be able to access the document via an electronic portal, which will also provide a mechanism for submitting comments.
The King Committee under the leadership of Prof Mervyn King and the King IV task team, led by Ansie Ramalho, the former CEO of the IoDSA, have been working on the new document since late 2014. Ramalho says that a number of developments in corporate governance made a new version necessary. Among these developments are the increased focus on executive remuneration; the key role of social and ethics committees, the regulations for which only came out after the launch of King III; and the continuing development of Integrated Reporting, which was first recommended in King III.
“The King Codes have helped make South Africa a global leader in corporate governance—subjecting King IV to the rigor of public comment is thus important,” says Prof Mervyn King. “King IV breaks new ground by offering an integrated approach to corporate governance encompassing the economic, social and environmental spheres as well. It also impacts on sectors other than listed or large companies such as state-owned enterprises, local government, non-profits, SMEs and retirement funds, among others. Quality and effective corporate behaviour offers a way out of many of our current economic and sustainable development challenges.”
King IV differs from King III in a number of ways. The Code is now integrated into the Report, with a clear differentiation between principles and practices, with the latter linked to outcomes—these and other innovations are designed to make it easier to use. Especially noteworthy, King III’s “apply or explain” has become “apply and explain”. The intention here, Ramalho explains, is to help organisations move beyond a compliance mind-set to describing how implemented practices advance progress towards giving effect to each principle – the application of which is assumed due to it being basic to good governance.
The process of obtaining public comment will take place over two phases. The current first phase will cover the King IV Report (bar the Sector Supplements), which sets out philosophy, concepts and the foundational principles. Comment on the Sector Supplements, which are dependent on the main report, will be sought in phase two.
While the main report is in the public domain for comment, this approach will allow Ramalho’s team will solicit further specialist comment on the sector supplements before they are released for public comment. The main report has already had the benefit of comment from institutional members of the King IV Committee, corporate governance specialists, directors, preparers, users and academics.
“Too many people see corporate governance as a compliance issue whereas it is actually a critical tool for strengthening all our public and private institutions, to the benefit of the whole economic system. The overriding message of King IV is that good corporate governance practices help any organisation improve its ability to sustain itself and the social and environmental context in which it operates. The process of public input will also help to drive buy-in across the various stakeholder communities,” concludes Ramalho. “The more difficult the external circumstances are, the more valuable a strong corporate governance culture is.”
Any member of the public may comment, either in a personal capacity or on behalf of an organisation. Comments may be made on any aspect of the Report, but the drafting committee has also posted a list of questions to which it would particularly value input. However, no anonymous contributions will be entertained, and the details of each commentator and their comments will be in the public domain. The comment period for each of the two phases is two months.