Long before the western world adopted ESG as a buzzword in corporate Governance, Professor Mervyn King and his counterparts in South Africa had embraced and develop principles and frameworks for embracing practices that went beyond the financial bottom line.
The King I report, produced in 1994, a mere two years after the publication of the seminal work by Sir Adrian Cadbury and his team in 1992, highlighted effective and ethical leadership, sustainability in terms of economic, social and environmental performance; and good corporate citizenship as the key elements which should guide directors in fulfilling their oversight role. Like other Codes of Corporate Governance, the King Reports are not mandatory by law, but are principles which are adopted by the Johannesburg Stock Exchange for all companies on an ‘apply and explain’ basis.
The first Code was produced for South Africa at a historic point in the country’s development as it was transitioning out of the apartheid system. Prof King, Senior Council and retired Judge of South Africa’s Supreme Court was asked to lead this task, and so his leadership saw his team develop a Code which has since seen three revisions deemed King II, King III and King IV.
The Institute of Directors for South Africa described the key principles from the first King report as having covered: Board of directors makeup and mandate, including the role of non-executive directors and guidance on the categories of people who should make up the non-executive directors. It also addressed appointments to the board and guidance on the maximum term for executive directors; and a determination and disclosure of executive and non-executive director’s remuneration. King I also spoke to: Board meeting frequency, Balanced annual reporting, The requirement for effective auditing, Affirmative action programs and the company’s code of ethics.
The revision in 2002 produced King II which embraced several key principles including Directors and their responsibility; Risk management; Internal audit and continued to have a focus on Integrated sustainability reporting, and Accounting and auditing (Institute of Directors for South Africa 2012). The focus on integrated sustainability reporting was highlighted in a separate chapter which led to companies providing a separate section in their report to address this issue.
Looking back at the Second version of the Code, Prof Mervyn King told the authors of The A to Z of Corporate Social Responsibility that, in hindsight, the King II report should not have included sustainability as a separate chapter as it seemed to have sent the wrong message to companies. And so, in the third version of the Code, King III published in 2009, the report ensures that it integrated governance, strategy and sustainability to be included in companies’ Annual Reports.
The King III report also embraced emerging global governance trends such as: Alternative dispute resolution; Risk-based internal audit; Shareholder approval of non-executive directors’ remuneration; and Evaluation of board and directors’ performance.
Foresight can also be found in the King III report, which long before the pandemic and the focus on business continuity, the King Committee had incorporated a number of new principles relating to: IT governance; Business Rescue; and also, the Fundamental and affected transactions in terms of director’s responsibilities during mergers, acquisitions and amalgamations.
King IV, published in 2016 was the result of the request of a variety of organisations for the King Code to be applicable directly to their organisation irrespective of whether it was a private company, a listed public company or a not-for-profit organisation.