King code

• King IV


  A code of good corporate governance in South Africa
• King IV was issued

  1st of November 2016
• Organisations that sponsored the development of the King IV Report

  The "Big Four" accounting firms
• Reasons why King IV was issued

  • Growing inequalities (South Africa is the most unequal Country in the World)
  • Globalised trade (Impact of the Ukraine Russia conflict)
  • Social tension (July Unrests, Service delivery protests on a daily basis)
  • Climate change (KZN, Global Warming)
  • Population growth and ecological overshoot (Natural Resources cannot keep up with demand)
  • The need for increased transparency (People want to know more. Covid-19 Vacs)
  • Impact of 4IR and the need to reinvent various professions and corporate governance (All professions have been affected by technology)
  • Integrated reporting (organisations must report on profit, people and planet)
  • Corporate social responsibility (Trevor Noah)
  • Technology governance and security (Information Security)
  • Financial crisis (We still recovering from the financial crisis)
  • Advancements in technology
• King IV can be applied by all organisations (16 out of the 17 principles are designed in a such a way that they can be applied by all organisations)
• "Apply and explain" approach

  King IV report approach that assumes organisations are already applying the King IV principles and requires them to further demonstrate how they are compliant
• Structure of King IV

  • Part 1 – Glossary of terms
  • Part 2 – Fundamental Concepts
  • Part 3 – King IV Application and disclosure
  • Part 4 – King IV on a page
  • Part 5 – King Code on Corporate Governance (Principles 1 – 17. Very important)
  • Part 6 – Sector Supplements
  • Part 7 – Content development and King Committee
• Glossary


  Dictionary to understanding King IV
• Definition of Corporate Governance

  The exercise of effective and ethical leadership by the governing body towards achieving the following governance outcomes: Ethical Culture, Good performance, Effective control, and Legitimacy
• Objectives of King IV

  Promote Corporate Governance as integral to running an organisation and delivering governance outcomes, Broaden acceptance of the King IV by making it accessible and fit for implementation across a variety of sectors and organisational types, Reinforce corporate governance as a holistic and interrelated set of arrangements to be understood and implemented in an integral manner, Encourage transparent and meaningful reporting to stakeholders, Present corporate governance as concerned with not only structure and process but also ethical consciousness and conduct
• Philosophies Underpinning King IV

  • Sustainable development
  • Integrated reporting
  • Integrated thinking
  • The organisation as an integral part of society
  • Stakeholder inclusivity
  • Corporate citizenship
• King IV is a voluntary code, but South Africa has legislated some good corporate governance practices in the Companies Act
• If there is a conflict between King IV and Legislation, the law prevails
• Good corporate governance does not exist separate from the law, both intent to achieve the same thing to some extent
• A court may try to establish an acceptable standard of conduct by a director by amongst others relying on the guidance provided in King IV
• Individuals involved in litigation rely on the reference King IV Report to demonstrate their actions were in the best interest of the organisation
• The governing body is the focus of King IV and the custodian of corporate governance
• King IV aspires to apply to all organisations
• Elements of King IV "on a page"

  • Leadership by the Governing Body
  • Principles
  • Practices
  • Governance Outcomes
• Principles of King IV

  • Principle 1: The Governing Body (GB) should lead ethically and effectively
  • Principle 2: The GB should govern the ethics of the organisation
  • Principle 3: The GB should ensure that the organisation is and is seen to be a responsible corporate citizen
  • Principle 4: The GB should appreciate that the organisation's core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process
  • Principle 5: The GB should ensure that reports issued by the organisation enable stakeholders to make informed assessments of the organisation's performance, and its short, medium and long-term prospects
  • Principle 6: The GB should serve as the focal point and custodian of corporate governance in the organisation
  • Principle 7: The GB should comprise the appropriate balance of knowledge, skills, experience, diversity and independence for it to discharge its governance role and responsibilities objectively and effectively
  • Principle 8: The GB should ensure that its arrangements for delegation within its own structures promote independent judgement, and assist with balance of power and the effective discharge of its duties
  • Principle 9: The GB should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness
  • Principle 10: The GB should ensure that the appointment of, and delegation to, management contribute to role clarity and the effective exercise of authority and responsibilities
  • Principle 11: The GB should govern risk in a way that supports the organisation in setting and achieving its strategic objectives
  • Principle 12: The GB should govern technology and information in a way that supports the organisation setting and achieving its strategic objectives
  • Principle 13: The GB should govern compliance with applicable laws and adopted, non-binding rules, codes and standards in a way that supports the organisation being ethical and a good corporate citizen
  • Principle 14: The GB should ensure that the organisation remunerates fairly, responsibly and transparently so as to promote the achievement of strategic objectives and positive outcomes in the short, medium and long term
  • Principle 15: The GB should ensure that assurance services and functions enable an effective control environment, and that these support the integrity of information for internal decision-making and of the organisation's external reports
  • Principle 16: In the execution of its governance role and responsibilities, the GB should adopt a stakeholder-inclusive approach that balances the needs, interests and expectations of material stakeholders in the best interests of the organisation over time
  • Principle 17: The GB of an institutional investor organisation should ensure that responsible investment is practiced by the organisation to promote the good governance and the creation of value by the companies in which it invests
• Principle 1: Leadership


  The Governing Body (GB) should lead ethically and effectively. Members of the GB should individually and collectively cultivate characteristics of integrity, competence, responsibility, accountability, and fairness, and exhibit transparency.
• Principle 2: Organisational Ethics


  The GB should govern the ethics of the organisation in a way that supports the establishment of an ethical culture. This includes approving codes of conduct, ensuring implementation and execution, and monitoring adherence.
• Principle 3: Responsibilities towards Society


  The GB should ensure that the organisation is and is seen to be a responsible corporate citizen, including compliance with the Constitution, laws, and leading standards, and overseeing that the organisation's purpose, values, strategy and conduct are aligned with being a responsible corporate citizen.
• Planned areas of future focus were taken to monitor organisational ethics and how the outcomes were addressed.
• Unit 6: The King Code of Corporate Governance
• Principles


  Embody the aspirations of the journey towards good corporate governance & guide on what an organisation should strive to achieve by the application of the governance practices.
• Practices


  Support and give effect to the principles.
• Role of the Board in CG

  Provide strategic direction, Policy development and planning, Delegation to management, Oversight.
• Core purpose


  Refers to the "reason why an organisation exists."
• Risks


  Refers to events that can harm our existence id. est. "core purpose."
• Opportunity


  Refers to events that can assists an organisation to achieve its core purpose
• Strategy


  Refers to a set of actions designed to achieve the core purpose.
• Business strategy


  Refers to plan of action on how an organisation will make money.
• Performance


  Refers to the extent to which we are achieving objectives.
• Sustainable development


  Refers to achieving the core purpose without negatively affecting others including future generations.
• Value creation


  Refers to turning resources into something with value.
• When considering the proposed strategy for approval

  The GB should challenge it constructively with reference to: The timelines and parameters which determine the meaning of short, medium and long term respectively, The risks, opportunities and other significant matters connected to the triple context in which the organisation operates, The extent to which the proposed strategy depends on the resources and relationships connected to the various forms of capital, The legitimate and reasonable needs, interests and expectations of material stakeholders, The increase, decrease or transformation of the various forms of capitals that may result from the execution of the proposed strategy, The interconnectivity and inter-dependence of all of the above.
• The GB should ensure that it approves the policies and operational plans developed by management to give effect to the approved strategy.


  The GB should delegate to management the responsibility to implement and execute the approved policies and operational plans.
• The GB should oversee that the organisation continually assesses, and responsibly responds to, the negative consequences of its activities and outputs on the triple context in which it operates, and the capitals which it uses and affects.


  As part of its oversight of performance, the GB should be alert to the general viability of the organisation with regard to its reliance and effects on the capitals, its solvency and liquidity, and its status as a going concern.
• The GB should approve management's determination of the reporting frameworks (including reporting standards) to be used, taking into account legal requirements and the intended audience and purpose of each report.


  The GB should oversee that reports such as the annual financial statements, sustainability reports, social and ethics committee reports, or other online or printed information or reports are issued as is necessary, to comply with legal requirements, and/or to meet the legitimate and reasonable information needs of material stakeholders.