Principle 4 of the King IV Report on Corporate Governance for South Africa™ prescribes that the governing board should appreciate that an organisation’s core purpose, its risks and opportunities, strategy, business model, performance and sustainable development are all inseparable elements of the value creation process.
King IV clearly articulates the responsibilities of the governing board, which is to steer an organisation strategically in line with its core purpose and values by approving as well as monitoring an informed short, medium and long-term strategy whilst taking into account risk and opportunities.
King IV recommended practices provides that the above can be brought about by the governing board instituting the following:
Assuming responsibility for your organisation’s performance by steering and setting the direction against your organisation’s core purpose and values via your organisation’s strategy;
The delegation of the formulation and development of your organisation’s short medium and long-term strategy to management;
The consideration and approval of your organisation’s short, medium and long-term strategy as recommended by management;
Approval of your organisation’s operational plans and policies to implement the strategy (which is to include key performance measures and targets to assess the achievement thereof over the short, medium and long-term periods);
The delegation of the implementation of your organisation’s strategy and operational plans to management (against your agreed performance measures and targets);
Continuous assessment of any negative consequences of your organisation’s outputs and activities as well as the capital used to affect the strategy of your organisation;
Being alert to the general viability of your organisation’s resilience and effects on capital, solvency and liquidity and your organisation’s going concern status;
Assume responsibility and approve your organisation’s reporting frameworks for the above;
Overseeing that your organisation’s annual financial statements, sustainability reports, social and ethics committee reports and/or other online and printed information or reports issued are legitimate and comply with legal requirements as well as meets the reasonable information needs of material stakeholders;
Ensuring that your organisation issues an integrated report annually;
Approve management’s basis for materiality for the purpose of deciding which information should be included in the external reports;
Ensuring the integrity of your organisation’s external reports; and
Ensuring that all of your organisation’s corporate governance disclosures in terms of King IV, the annual financial statements and other external reports is published on your organisation’s website or on other platforms of media which is appropriate access for stakeholders.
Keep a look out for further articles on King IV in the coming weeks, we will be further analysing and discussing the King IV principles in order to equip organisations in practically implementing effective good governance.