• KING IV™ Aims to Broaden Adoption of Good Corporate Governance by all Businesses
Report:

KING IV™ Aims to Broaden Adoption of Good Corporate Governance by all Businesses

02 November 2016

Whilst good corporate governance has always been a fundamental element of good business practice, many organisations – from smaller private companies, to non-profit organisations, organisations of state and larger entities - have adopted the attitude that many of the King Report’s™ corporate governance principles are not relevant to them.

Amber Hensburg of Statucor, a business which specialises in corporate stewardship services, says that the introduction of King IV™ hopes to see a shift in this mind set, and aims to broaden the acceptance and adoption of good corporate governance by making it accessible and applicable to all businesses.

According to Hensburg, the King IV Report™ will see developments in the following areas:

  • Executive and director’s remuneration
  • Integrated reporting
  • Responsible investing and linkage with the Code for Responsible Investing in South Africa
  • The evolving role of social and ethics committees
  • Mandated audit firm rotation and tendering
  • Information security and protection
  • Strategic risks and dependencies
  • Group governance
  • Board diversity
  • Combined assurance

“Although the corporate governance report may be applied on a voluntary basis, there is certainly merit for businesses in doing so - even though this is not mandatory. The King IV Report™ recommends that organisations take into account their size of turnover and workforce, resources and the complexity of strategic objectives and operations when considering implementation of recommended practices. Therefore those organisations with a higher public interest should make application of the principles on a proportional basis.”

A notable development in the King IV Report™ is that shareholders have significantly more say when it comes to remuneration of executives and directors. Hensburg notes that the report recommends that the following resolutions be put to shareholders at the annual general meeting of a company:

  1. The basis for computation of the fees of non-executive directors of companies must be submitted in a special resolution for approval by shareholders within two years preceding payment.
  2. A resolution for the adoption by shareholders of the remuneration policy by a non-binding advisory vote should be tabled every two years, or whenever a change to the policy is approved by the board or whenever the policy was not adopted by a vote of at least 75% of the voting shares the year before.
  3. In addition, a resolution for the adoption by shareholders of the remuneration implementation report by a non-binding advisory vote should be tabled every year. In the event that the remuneration policy or the implementation report is not adopted by a vote of at least 75% of the voting shares, the remuneration committee should ensure that there is disclosure in the following year on the steps taken, the nature of engagement with shareholders and the outcomes.

“In effect these resolutions allow shareholders to impact on the remuneration and fees paid to both executive and non-executive directors and in turn this information can provide the board with a good indication of whether or not the shareholders are satisfied with their performance and with their achievement of long-term value for stakeholders.”

“Creating and embedding a culture of good governance in an organisation can often be challenging however the end results are well worth the effort. We recommend to our clients, large and small, that they start formalising their governance structures and aligning these to the King IV Report™ to make their business more efficient and effective,” concludes Hensburg.

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