On 1 November 2016, the Institute of Directors in Southern Africa (IODSA) released the final King IV™ Report on Corporate Governance for South Africa 2016. The latest report brings South Africa up to date with international corporate governance codes and in line with the shift towards inclusive, sustainable capitalism and integrated reporting.
King IV™ completely replaces King III™ and is effective in respect of financial years commencing on or after 1 April 2017. This means that companies with a year-end of 31 March 2018 will be the first to report under the new code.
South Africans are becoming increasingly aware of the importance of ethical leadership in society. The report highlights the importance of ethical and effective leadership in organisations of all sizes, listed and unlisted. King IV™ is particularly significant for the public sector because, for the first time, it has been designed to be applied by most types of public sector entities, including municipalities and state-owned entities.
King IV™ has been simplified and made more user-friendly. The previous code contained 75 principles, the new code consolidates these into 17 principles. Governing bodies have more flexibility when implementing the recommended practices, but are required to be transparent when disclosing how they have achieved their goals.
King IV™ places the onus on the governing body (the board in companies) to take a much more hands-on approach in applying the code. Instead of the old ‘tick-box’ method, the governing body is required to pro-actively apply the principles of the code and explain the outcomes.
King IV™ is voluntary (unless prescribed by law or by a Stock Exchange listings requirement). Some of the principles have been legislated.
The report includes the code, as well as helpful, separate sector supplements for Small and Medium Enterprises, Non-Profit Organisations, State-Owned Entities, Municipalities and Retirement Funds. King IV™ is an essential tool for successful, responsible and effective corporate governance and all organisations and governing bodies should follow the principles and practices laid down in this document.
It is important that you become familiar with King IV™ and start planning how to apply it in your organisation.
Should you require any assistance or further information on this topic, please contact our offices.