The King Report and King Code on Corporate Governance in South Africa defines corporate governance as “the exercise of ethical and effective leadership by the governing body”. This is why the King Report and King Code is so important – it sets out what ethical and effective leadership is. The article is a short summary of the King Report and King Code, links to source documents, and enables you to comment on it.
Why the King Report and King Code is Important
The purpose of King is to:
- create an ethical culture in organisations,
- improve their performance and increase the value they create,
- ensure there are adequate and effective controls in place,
- build trust between all stakeholders,
- ensure the organisation has a good reputation,
- ensure legitimacy.
These are all crucial to build value and create a better society.
Who does it apply to?
The King Code applies to all organisations in South Africa, including organisations listed on the JSE, unlisted companies, trusts and NGO’s. The King Code has always applied to all organisations but because of its complexity, smaller organisations have seldom applied the principles. The latest version tried to address this by making it simpler and easier to understand. Smaller organisations and NGOs will therefore find it easier to apply the principles to their organisation.
King is voluntary, you do not have to comply
What is different in the versions?
It was published way back in 1994 and we have had King I, King II, King III with King IV being the latest edition. The Kind Reports have undergone many changes since then. With all the changes in business (such as technological changes) it was inevitable that the King Report and King Code would have to be updated from time to time.
Although King IV is based on the underlying principles of the previous King Reports, it emphasises stakeholder inclusion, IT governance and disclosure. Each version of King builds on the one before.
King III had 75 principles whereas King IV only has 17 principles in total. The 17th principle only applies to institutional investors. The King IV report has been scaled down to only 82 pages. Previously the codes and reports were published separately but King IV integrates the code into the report. The Report has decreased in size and is more applicable to its audience. The document is easier to read and understand. This helps smaller companies to apply the principles in their businesses.
King IV is more effective as it contains all the principles of the previous King reports but it is updated. The content is applicable to the current needs of the business world. Emphasis on technology and information is prominent. With the introduction of the Cybercrimes and Cybersecurity Bill last year there was a need to address cyber risks in the new code. King IV does this.
The King committee published the five King IV supplements that will be used in conjunction with the King IV Report and Code. The supplements offer guidelines to specific sectors on how to apply the King Principles within their organisations.
Countries with Similar Codes
By updating the Report, South Africa is keeping up with international practices. Other countries have codes similar to the King Codes. These countries include the US, Canada and Australia.
Where can you find the King Report and Code?
You can find the King Reports and Codes on the website of the Institute of Directors of Southern Africa (IoDSA). Public commentary on the King IV report closed on 15 May 2016. According to the IoDSA the final King IV Report will be available by 1 November 2016.