King IV - Steering point
A summary of the King IV Report on Corporate Governance™ for South Africa
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.
“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 KingKing 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.
