King Code IV PDF

It was published way back in 1994 and we have had King I, King II, King IV, with King IV being the latest edition (The King IV effective date was 1 April 2017). The King Reports have undergone many changes since 1994. KING CODE IV - POLICIES GOVERNING ETHICAL BEHAVIOUR The...

It was published way back in 1994 and we have had King I, King II, King IV, with King IV being the latest edition (The King IV effective date was 1 April 2017). The King Reports have undergone many changes since 1994. KING CODE IV - POLICIES GOVERNING ETHICAL BEHAVIOUR The King Code is an internationally acclaimed report on GOOD corporate governance. It was drawn up by a South African committee chaired by former High Court judge, Mervyn King. The King Code provides policies, principles and guidelines for good and ethical corporate governance.  KING CODE IV – ETHICAL LEADERSHIP Leadership in a company is provided by the board of directors (“the board”). The board is elected by the shareholders of the company and is responsible for managing and controlling the affairs of the company. The board has a legal obligation to act in the best interests of the company and an ethical duty to direct the company in a responsible, professional and transparent manner. Principle: “The board should provide effective leadership based on an ethical foundation.” KING CODE IV – ETHICAL CORPORATE CULTURE Ethical conduct is not only required from corporate leadership, but should exist throughout the company. King IV provides that the board should also take responsibility for ensuring that there is an ethical corporate culture in the company. This policy is broadly covered in the following principle: Principle: “The board should ensure that the company’s ethics are managed effectively.” KING CODE IV – ETHICAL CORPORATE CULTURE Principle: “The board should ensure that the company’s ethics are managed effectively.” In order to accomplish this objective, King IV stipulates that the board should ensure that: it builds, promotes and sustains an ethical corporate culture in the company. it determines the ethical standards of the company these standards are formulated in a code of conduct the code of conduct is adhered to by all members of the company the company‘s ethical standards are integrated into all the company‘s strategies and operations. the company‘s ethical performance is assessed, monitored, reported and disclosed. the company complies with all applicable laws.  KING CODE IV - SUSTAINABILITY Sustainability may be defined as the ability to maintain economic, social and environmental resources. King IV emphasises the need for companies to address sustainability issues, operate in a sustainable manner and consider the interests of society. King IV provides the following principle: Principle: “The board should appreciate that strategy, risk, performance and sustainability are inseparable.” King IV expands on this principle, by providing that the board should ensure that the: company’s strategy is aligned with its sustainability objectives and values. the legitimate interests and expectations of all its stakeholders are considered. company’s strategy results in sustainable outcomes taking account of people, planet and profit.  KING CODE IV – CORPORATE CITIZENSHIP The concept of corporate citizenship stems from the fact that companies are, in many ways, regarded as citizens of the countries in which they operate. As such, companies are expected to adhere to the same standards of ethical behaviour that are required from ordinary citizens. Thus a company that is a responsible corporate citizen should operate in an ethical, responsible and sustainable manner. King IV provides the following principle: Principle: “The board should ensure that the company is and is seen to be a responsible corporate citizen.”  KING CODE IV – INTEGRATED REPORTING Integrated reporting requires companies to broaden their accountability beyond simply reporting on financial performance. Companies are now also expected to report annually on their social performance and their impact on the environment. Social performance INTEGRATED REPORT Economic performance Environmental performance King IV provides the following principle: Principle: “The board should ensure the integrity of the company’s integrated report.” the integrated report discloses both the positive and negative impacts of the company and conveys the company’s plans to improve the positives and eradicate the negatives. SOCIAL AND ETHICS COMMITTEE Another significant feature of the new Companies Act is the requirement of all public companies and state owned companies to appoint a social and ethics committee. The committee must comprise at least three directors, of whom at least one should be an independent non-executive director. The primary function of the social and ethics committee is to monitor the company’s activities relating to, amongst other: social and economic development; good corporate citizenship; the environment; consumer relationships; and certain employment-related matters. The social and ethics committee is required to report to the shareholders at the AGM. This provision is very much in line with the policies of King IV and in particular relates to the principle that requires the board to ensure that the company’s ethics are managed effectively.  KING CODE IV – RISK GOVERNANCE One of the key responsibilities of the board is to ensure that risks are governed, managed and controlled effectively. The board has an ethical duty to ensure that the company does not operate in a reckless manner or take excessive risks. Furthermore, the board should ensure that effective processes and systems are established to uncover fraud, corruption, unethical behaviour and any other irregularities. Principle: “The board should be responsible for the governance of risk.” RISK!  KING CODE IV – DIRECTORS’ PERFORMANCE EVALUATION King IV provides a number of policies relating to the evaluation of directors’ performances. These policies help to ensure that directors are accountable for their actions. In addition, these policies help to provide transparency by requiring the disclosure of certain information relating to the performance of directors. King IV provides the following principle relating to performance evaluation: Principle: “The evaluation of the board, its committees and the individual directors should be performed every year.” King IV further recommends that: The performance evaluations should be carried out by the chairman or an independent service provider. The results of performance evaluations should be: - used to identify training needs for directors. - disclosed in the integrated report. - considered when a director is nominated for re-appointment. - considered in determining the remuneration of a director.  KING CODE IV – DIRECTORS’ REMUNERATION These policies aim to ensure that directors are remunerated in a fair and ethical manner. King IV recommends that a remuneration committee should be established to assist the board in setting and administering remuneration policies. King IV provides the following principle relating to remuneration of directors: Principle: “Companies should remunerate directors and executives fairly and responsibly.” In addition, King IV advises that: Remuneration policies should be linked to the director’s contribution to company performance. Companies should disclose the remuneration of each individual director and the salaries of the three most highly-paid employees. The board should determine the remuneration of executive directors in accordance with the remuneration policy put to shareholder’s vote.