King IV - Steering point

A summary of the King IV Report on Corporate Governance™ for South Africa, 2016

Overview

If one was asked to summarise King IV™ in one word, ‘transparency’ would come to mind. King IV™ builds on its predecessors’ positioning of sound corporate governance as an essential element of good corporate citizenship. Good corporate governance requires an acknowledgement that an organisation doesn’t operate in a vacuum, but is an integral part of society and therefore has accountability towards current and future stakeholders. With the introduction of an ‘apply and explain’ regime, King IV™ asks organisations to be transparent in the application of their corporate governance practices.

King IV™ reinforces the notion that good corporate governance is a holistic and interrelated set of arrangements to be understood and implemented in an integrated manner – good governance is not a tick-box or compliance exercise. King IV™ asks for mindful application of the King IV Code™ and for its recommended practices to be interpreted and applied in a way that is appropriate for the organisation and the sector in which it operates. Mindful application harnesses the benefits of corporate governance in the interests of the organisation.

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"The overarching objective of King IV™ is to make corporate governance more accessible and relevant to a wider range of organisations, and to be the catalyst for a shift from a compliance-based mindset to one that sees corporate governance as a lever for value creation”

Prof Mervyn King

King IV™ in a nutshell

 

  • A set of voluntary principles and leading practices.
  • Drafted to apply to all organisations, regardless of their form of incorporation.
    Sector supplements explain how the King IV Code™ should be applied by certain organisations/sectors.
  • Proportionality is explained and advocated.
  • King IV™ focuses on outcomes. The King IV Code’s™ principles and practices are linked to desired outcomes, therefore articulating the benefits of good corporate governance.
  • The Code™ differentiates between principles and practices. Principles are achieved by mindful consideration and application of the recommended practices.
  • 'Apply and explain’ regime (as opposed to ‘apply or explain’ regime in King III).
  • New ‘look and feel’ to the King IV Report™ and King IV Code™.
  • Philosophical underpinnings in King III retained but refined in King IV™.
  • ‘Corporate governance’, for purposes of King IV™, has now been defined.

 

 

Key new or enhanced features of King IV™ relate to:

  • Fair, responsible and transparent organisation wide remuneration;
  • Responsible and transparent tax strategy and policy;
  • Balanced composition of governing bodies and independence of members of the governing body;
  • Delegation to management;
  • Delegation to committees;
  • Corporate governance services to the governing body;
  • Performance evaluations of the governing body;
  • Audit committee disclosures;
  • Risk governance;
  • The combined assurance model;
  • Social and ethics committees;
  • Performance evaluations;
  • Responsible institutional investors; and
  • Technology and information.

Steering point - Governing structures and delegation

A comparison between King IV™ and King III

Considering that most of the King III principles have been retained in King IV™, albeit as recommended practices rather than as principles, one could easily assume that the content of King III has remained largely unchanged in King IV™. A comparison of the detail, however, crystallises the nuances between the two codes.

In this publication we compare the recommendations of King IV™ that are focused on governing structures and delegation, which are primarily contained in Part 5.3 of the King IV Code™, to the related recommendations of King III.

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Anton Van Wyk
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