The King IV Code (‘Code’) is an important South African corporate governance code which adopts an inclusive approach and was first introduced in 1994 by the King Committee, chaired by Mervyn King. The Code has been revised multiple times to maintain national and international standards.
What is it?
The aim of the Code is to provide a practical, principle-based approach to good corporate governance, which also incorporates both global public sentiment and international regulatory change.
The King Code or to give it its correct name; The King Report on Corporate Governance, is a set of principles and recommended practices for South African based organisations.
The Code is voluntary (unless prescribed by law or stock exchange listing requirements) and one of the objectives of the Code was for it to be applicable across several different types of corporations.
The Code has a number of aims all of which are crucial to building and retaining value and creating a better society:
- create an ethical culture in organisations;
- improve the organisation’s performance and increase the value they create;
- ensure there are adequate and effective controls in place;
- build trust between all stakeholders;
- ensure the organisation has a good reputation; and
- ensure legitimacy.
Why implement the Code?
A well governed organisation inspires the confidence of its stakeholders and can lower the cost of its capital. It also supports the sustainability of the organisation and ensures that it is fit for the future. The King Code also understands that corporate governance is a leadership issue. Ethical leadership is exemplified by integrity, competence, responsibility, accountability, fairness, and transparency.
The King Code defines corporate governance as “the exercise of ethical and effective leadership by the governing body”. Therefore, the King Code could be deemed vital for organisational success especially given the three elements that it covers:
- Sustainability; and
- Good corporate citizenship.
In conclusion by adopting the King Code organisations prioritise good governance, which is essentially for effective, ethical leadership. Mervyn King believes that leaders should direct the company to achieve sustainable economic, social, and environmental performance. He views sustainability as the primary moral and economic imperative of this century.
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