Although the latest iteration of the ‘King Report on Corporate Governance in South Africa’, King IV, which comes into force in November, will be replaced in due course by another iteration, it is important to continually adapt to a rapidly changing world where integrated reporting only becomes evermore critical.
The continuing shifts in the corporate world mean it will always be necessary to update and adjust policies, with the next change expected to be driven by the fourth industrial revolution.
“There will be a King V. I do not know when it will be, but there will be [another revised reporting policy],” said King Committee chairperson Professor Mervyn King of the changes expected to be brought about by the Internet of Things.
King was addressing delegates at the eighth Premier Corporate Governance Conference, hosted by Chartered Secretaries Southern Africa, in Johannesburg.
He said there were many past and future drivers of change to corporate governance guidelines, including the global financial crisis, ecological overshoots, the climate change imperative, the emergence of the digital and Net generation era, radical transparency and greater expectations from stakeholders.
Companies are now required to do more with less, with ‘business as usual’ a long outdated concept that will hinder any company’s development.
It was no longer just a matter of whether a company made money – stakeholders were now concerned bout how a company made its profit, the value it added and its negative and positive impacts across the board, King pointed out.
This means financial reporting is an inadequate means of unpacking a company’s structure, only telling around 30% of a company’s “story”, particularly in the midst of continued change, where the world, reporting, strategy, tax, stakeholders, transparency, value and raising capital shift.
King IV, which is expected to embed even more integrated thinking within corporate structures, outlines six types of capital that a board has to consider today to develop strategy – financial, manufactured, intellectual, human, social and relationship and natural.
King IV builds on the integrated reporting concepts of its predecessor, King III, while reinforcing corporate governance as a “holistic and integrated set of arrangements”.
King I was introduced in 1994 to provide corporate governance guidelines for corporate companies, with amendments made in 2002 resulting in the King II report.
The third iteration, King III, emerged in 2009, following the introduction of the Companies Act, No 71 of 2008 and changes in international governance trends.