While the final King IV Report is anticipated for release on 1 November 2016, the Draft King IV Report on Corporate Governance for South Africa 2016, issued by the Institute of Directors in Southern Africa (IODSA) was released for public comment on 15 March 2016.
KPMG supports good governance in South Africa and has contributed to the inclusive and consultative drafting process of King IV. This means that KPMG will be providing its formal input into the public comment process.
The Draft King IV builds on King III. It has been revised to bring it up to date with international corporate governance codes; to align it to the shifts in the approach to capitalism (towards inclusive, sustainable capitalism with integrated reporting) and to take account of specific corporate governance developments in relation to inter alia effective boards, increased compliance requirements, new governance structures such as Social and Ethics Committee, emerging risks and opportunities from new technologies such as Cyber-Crime and Social Media, and new reporting and disclosure requirements.
KPMG is honoured to be part of the collective that has contributed to the drafting process of the King IV Report. Our inclusion truly acknowledges the global nature of KPMG as a brand and celebrates the holistic value we bring to good governance in South Africa.”
King IV is outcomes orientated. It places accountability on the governing body (that is, the board in companies) to attain organisational outcomes of an ethical culture, sustainable performance that creates value, adequate and effective control and sound stakeholder relationships. This can be attained through the discharge of its responsibilities relating to strategic direction, approval of policy, effective oversight and disclosure. It aims to reduce the ‘tick box’ or compliance approach to governance.
As a consequence of this approach, King IV has only 16 principles, compared to King III which has 75 principles.
Draft King IV requires an “Apply AND Explain” approach, as opposed to King III which is “Apply OR Explain”. This means that application of the principles is assumed, and that an explanation is disclosed on the practices that have been implemented and the progress made towards governance outcomes. Draft King IV provides an example of a King IV Application Register which organisations should use as guidance for required King IV disclosures.
It is without a doubt that a well governed organisation inspires the confidence of its stakeholders and lowers the cost of its capitals. Inclusive and integrated governance that is sustainable is good for society, the economy and South Africa. Whilst Draft King IV is not law, the governance outcomes achieved and the practices adopted and implemented, will likely become the criteria by which the required standard of care and appropriate standards of conduct of the governing body and its members are measured.