Prepare for a bolder, better King IV

The upcoming King IV’s bold and practical approach is expected to instil greater levels of ethical behaviour, and lead to increased accountability and transparency in corporate reporting.

The draft consultation paper on King IV Code of Governance for South Africa was released today, and incorporates both global public sentiment and regulatory changes made in the period since the last update in 2009.

The revision is a positive step due to its move away from being rules-based to adopting a principle and outcomes-based approach that takes into account the challenges and realities of the business world today.

Deloitte’s Nina le Riche, Partner, Risk Advisory Business and head of South African corporate governance practice, says, “The code’s outcomes-based approach is in line with current international developments, which promote greater accountability and transparency, and speaks to the expressed view that the application should contribute to the performance and sustainability of the organisation.”

King IV is bold in its relentless effort to reinforce corporate governance as a holistic set of arrangements that concerns itself with ethical leadership, attitude, mindset and behaviour. This echoes global developments in the conduct risk arena, and also seeks to address and prevent recent examples of corporate failure.

Dr Johan Erasmus, Director, Deloitte, says, “The code also brings more rigour to discussions around executive remuneration with the introduction of a far more extensive disclosure requirement.

“While we believe that this matter still warrants debate in the South African context, we acknowledge that the suggestions are in line with global proposals and perhaps more relevant than ever in a country where the income differential remains higher than desired.”

King IV builds on the fundamentals underlying King III, and the explicit goals set out in King IV incorporate a range of modern governance principles including integrated reporting, responsible investing, information security and protection, strategic risks and dependencies, group governance and combined assurance.

“Some of the more familiar misgivings on corporate transparency and governance have been in some of the most developed economies. We feel that it is fitting for South Africa to aspire to an internationally leading corporate governance code to compensate for the lack of political governance impacting on investor confidence,” says Erasmus.

In conclusion, Le Riche says Deloitte believes King IV is bolder than ever and its clear focus on ethical leadership, transparency and sustainable growth is to be commended. “It is our view that organisations that strived to comply with the spirit of King III will adjust to King IV with relative ease.”