How does the King’s IV Report on Corporate Governance 2016 differ from its predecessors in philosophy and objectives?

 

PRELIMINARY

King’s Report on Corporate Governance are reports made by Institute of Directors of South Africa where by those reports intends to govern operation of corporates in South Africa. These reports are guidelines on handling corporate activities, they’re not legislations hence they’re not enforceable before court of law[1]. Until today, there are four reports issued by King committee on corporate governance. The first report was issued 1994, the second on 2002, the third on 2009 and the recent one is that of 2016. The foundation of these reports, particularly King IV Report are, ethical leadership, the organization in society, corporate citizenship, sustainable development, stakeholder inclusivity, integrated thinking and integrated reporting. Since the publication of first king report, South Africa has strengthened the corporates management systems apart from statutory requirements. The king reports establish ethics, principles and norms to be followed during operation of corporates, when happens provisions of king report goes against principal corporate legislations, the legislations prevail[2].

There is uniqueness in every single king report release basing on structure of report, philosophy and objectives as follows; -

PHILOSOPHICAL DIFFERENCE

King IV is the fourth version of king reports which set forth the philosophy, principles, practices and outcomes which serve as a standard for corporate governance in South Africa. There is no significant difference between king report III and IV in term of philosophies, the same underpinned philosophies in King III were more developed and refined by king IV report. Philosophies in King III were governance, strategy and sustainability. The report suggested that, organizations should produce integrated report on both financial and sustainability and to depart from practices of king II report where financial issues were reported separately from sustainability and other factors of the company or organization. In contrast to King II, King III was applicable to both public, private and non-profit organizations, the reported broadened to include several new trends of the word in business such as out of court disputes resolution mechanisms, internal audit, evaluation of executive and board of directors, usage of information technology in business and business rescue technics.

The basic philosophy of king IV report is sustainable development. Sustainable development is development which sustain the needs of the present without compromising the ability of future generation to meet their own needs[3]. This philosophy is explained in four basic concepts which are, integrated thinking, stakeholder inclusivity, the organization as an integral part of the society and corporate citizenship.  Integrated thinking is a perspective of handling corporate affairs by finding solutions developed from looking several different areas or factors affecting a corporate or an organization so as to find balanced satisfying answers across all factors affecting a corporate without affecting interests of the corporate or any other third party. Stakeholder inclusivity shows the interdependence between corporate and its stakeholders in creating value for the organization and value to the stakeholders[4]. The organization as an integral part of the society is another concept of sustainable development which drive corporate bodies to be integral part of the society by cooperating with their surrounding society, corporates operate in a society which they affect and being affected by the society hence there must be cooperation to attract bond between corporates and society. Last concept is corporate citizenship, as the corporate is an integral part of the society it adopts citizenship status which comes with rights, duties and responsibilities toward society and the surrounding environment.

OBJECTIVES DIFFERENCE

King IV report intended to broaden its acceptance by making it accessible and fit for implementation across different sectors and organizational types. King IV report interpreted more concepts relevant to organization monitoring and management where it enabled private institutions or non-profit organizations to access the report and utilize it effectively. King III report was a challenge to private organization and Non-profit organization because there was no enough interpretation to allow organizations to adopt it and utilize contents of the report in their organization. Unfortunately, king IV report is not recognized as a law and few of its provisions are incorporated in companies’ statutes of South Africa but it remains as an important tool encroaching most acceptable standards of company governance in SA.

King IV report intended to encourage transparent and meaningful reporting to stakeholders. King II report had a requirement to all companies or institutions to report financial issues separately from other factors of the institution. King III came and joined together financial and sustainability reports together. King IV enhanced more reporting to stakeholders by making them important party of the corporate. Effective reporting intended to improve good governance, effective control and legitimacy of the corporate because all dealings of the company are open and transparent, nothing is done behind backs without being known by members of the companies. Also, the King IV report intended to improve not only structure and process, but ethical consciousness and conduct.

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[1] Deloitte, “King IV: Bolder Than Ever”, available at https://www2.deloitte.com/za/en/pages/africa-centre-for-corporate-governance/articles/kingiv-report-on-corporate-governance.html [accessed January 21, 2023].

[2] Polity, “The key differences between King III and King IV”, available at https://www.polity.org.za/article/the-key-differences-between-king-iii-and-king-iv-2017-01-11 [accessed January 21, 2023].

[3] Sustainable Development Commission, “what is sustainable development” available https://www.sd-commission.org.uk/pages/what-is-sustainable-development.html [accessed January 21, 2023].

[4] KIng IV Report on Corporate Governance for South Africa of 2016. Pg 27