The King Report IV on Corporate Governance for South Africa™ (“King IV”) sets out a governing body’s primary governance roles and responsibilities which is to set and steer the strategic direction of an organisation, approve the policies and planning in their organisation, the overseeing and monitoring of such policies and planning as well as ensuring accountability in their organisation.
Implementation of two principles of King IV
This can be done via the implementation of the principles of King IV which incorporates the aspirations of good corporate governance and assists the governing board in achieving its specific governance outcomes as set out in King IV, being, an ethical culture, good performance, effective control and legitimacy.
In this article we will be addressing principles 1 and 2 as tabled in King IV.
Principle 1 – The governing board should lead ethically and effectively:
Principle 1 of King IV prescribes that the governing board should lead ethically and effectively. This can be achieved by the governing board individually and collectively cultivating the following six ethical characteristics and exhibiting such in their conduct:
King IV recommends that the above six ethical characteristics should be embodied by the governing board in order to offer effective leadership that results in an organisation achieving its strategic objectives and positive outcomes over time.
King IV has further established recommended practices on the six ethical characteristics to assist the governing board in setting the tone to lead an organisation ethically and effectively.
King IV advocates that arrangements by which members of a governing body are being held to account for ethical and effective leadership should be disclosed. These arrangements would generally include the code of conduct and a performance evaluation of the governing board and its members.
Principle 2 — The governing board should govern the ethics of the organisation in a way that supports the establishment of an ethical culture:
Principle 2 of King IV prescribes that the governing board should govern the ethics of the organisation in a way that supports the establishment of an ethical culture. This can be achieved by the governing board assuming responsibility for the governance of ethics of an organisation.
The King IV recommended practices provides that the above can be brought about as follows by:
The governing board assuming responsibility for the governance of ethics and setting the direction on how such is to be addressed in an organisation;
The governing board approving appropriate code of conduct and ethics policies which articulates and gives effect to its direction on organisational ethics;
The governing board ensuring that the code of conduct and ethics policies encompass interaction with both internal and external stakeholders as well as the broader society and addresses the key ethical risks of the organisation;
The governing board ensuring that employees and stakeholders are able to familiarise themselves with the code of conduct and ethics policies; and
Delegation of the responsibility for implementation and execution of the code of conduct and ethics policies to management.
Keep a look out for further articles on King IV in the coming weeks as we will be further analysing and discussing the King IV principles in order to equip organisations in practically implementing effective good governance.