The definition of corporate governance for the purposes of King IV (copyright the Institute of Directors South Africa), is defined as the exercise of ethical and effective leadership by the governing body towards the achievement of the following governance outcomes: Ethical culture, Good performance, Effective control and Legitimacy.
Ethical Leadership is exemplified by integrity, competence, responsibility, accountability, fairness and transparency. It involves the anticipation and prevention, or otherwise amelioration, of the negative consequences of the organisation’s activities and outputs on the economy, society and the environment and the capitals that it uses and affects.
Effective leadership is results-driven. It is about achieving strategic objectives and positive outcomes. Effective leadership includes, but goes beyond, an internal focus on effective and efficient execution.
Ethical and effective leadership should complement and reinforce each other.
King IV:
- Talks to broader base including the private, public, other sectors and organisational types referring now to ‘governing bodies’.
- Is on an ‘Apply and Explain’ basis.
- Advocates an outcomes based approach which means that it is expected of companies to consider the impact of their operations on the 6 capitals being Financial, Manufactured, Intellectual, Human, Social and Relationship, Natural.
Three things have happened with the application of the King code and its principles:
- The King code is common place in contract law. As a standard now, well-crafted commercial agreements are all King compliant and embrace corporate governance and due diligence.
- King is now part of South African common law. King does not need to be part of statute law. Millennials together with social media will ensure that it works. Outcomes support integrated reporting which is integrated with people’s future. Governance supported by King IV is an aspirational code.
- The business judgment rule has become part of our DNA:
- If you are conflicted you don’t decide whether you are conflicted, the other party decides.
- We live in a knowledge world; you cannot act if you are not properly informed; you need to stress test and check your info. You need to know enough and question with an understanding mind. How did you come to your decision? If you don’t know, say so. Be true to yourself, I don’t know, be honest, go and learn.
- You need to operate in the best interests of the organisation (a lawful organisation).
Even our State Owned Entity (SOE) boards are finding out that you can ignore these principles for only so long.
In summary a few points worth noting about the King code:
- It’s not just another layer of regulation but a real value add. It’s here to help us.
- The King code appeals to a way of life rather than just a way of doing business; Governance supported by King IV is an aspirational code.
- People who understand King, embrace it.
- Don’t ignore the millennials; understand the value of the 3 Ps (People, Planet and Profit).
- It’s not only about risk but also the opportunity within the risk.
- Appreciate the value of information and technology, business disrupters, artificial intelligence and millennial thinking.
Mervyn King, his committee and the Institute of Directors Southern African needs to be applauded for giving South Africans such an exceptional corporate governance blueprint which when applied ethically and effectively, improves the lives of all.
For more information on King IV you can see:
https://iodsa.co.za/page/king-iv
https://barnowl.co.za/knowledge-centre/integrated-grc-insights-blog/king-iv-launch-conference-2016/
The journey from King I to King IV as presented by Michael Judin
https://api.barnowl.co.za/insights/king-iv-report-risk-compliance-and-assurance/
https://barnowl.co.za/knowledge-centre/integrated-grc-documents/the-integrated-report-and-integrated-thinking-in-the-reign-of-king-iv-2//