Author unpacks King IV report
‘Directors need to be more hands-on’
IF YOU focus on the best interest of society and the health and welfare of a company, you can reap the rewards in large profits later. That was the message at a business breakfast hosted by the South African Institute of Chartered Accountants (Saica) where Mervyn King, founder of the King Committee, explained the latest business model, King IV at the Osner Hotel last Friday morning.
Saica regional executive, Christiaan Voster, said the engagement was hosted for their clients and members to get up to speed with the developments in the sector.
King, 80, is a senior counsel and former judge of the Supreme Court of South Africa and is currently serving as chairman of the International Integrated Reporting Council (IIRC), chairman Emeritus of the Global Reporting Initiative (GRI) and a member of the Private Sector Advisory Group to the World Bank on Corporate Governance.
He previously chaired the United Nations committee on governance and oversight and was president of the Advertising Standards Authority for 15 years, among many other reputable titles.
Although the very first King report was published in 1994, it has evolved over the years.
The King IV model was published on November 1 and aims to achieve four outcomes, ethical culture and effective leadership; performance and value creation in a sustainable manner; adequate and effective controls; and trust, good reputation and legitimacy.
King said the framework had been implemented across listed and unlisted companies, profit and non-profit organisations as well as public entities.
“King IV applies a principle and outcome-based approach and moves away from a tick-box approach. The 75 King III principles have been consolidated into 16, each linked to very distinct items,” King said. “The concepts aim for directors and board members to be more involved, they must delegate but also interrogate and become accountable. There are so many cases, 80% whereby most directors or board members don’t look at their strategies, supply chain management, how they make money, but they are just comfortable to delegate.
“Some directors don’t even understand financial reports. Board members need to be more hands-on.”
King said companies need to be more transparent and realistic about how they were making money and what it was costing the environment and society.
He made an example of how Coca-Cola, after 100 years, started dealing with the outcomes of their products and have since established Coca-Cola life and other sugarfree products.
This after the brand took a dip when consumers believed the product was among those causing an increase in obesity.
Tax and auditing lecturer at WSU, Fungai Mushohwe, said it was great to see the man behind the reports and to see how they had evolved over the years.
“It’s all about integration now and focusing on outcomes and their repercussions and dealing with them truthfully, which is different from the previous reports which were so much profit orientated and I like what Prof King said about companies that do things differently.
“Look at MacDonald’s they are also running their business but have recently also tabled their ingredients in the public.”
Gambling board chief financial officer Rodger Hill said the principles applied to everyone and often heeded good results.
“This is a great model to be implemented in our province with everything that is going on in our economy. It gets better and interesting with every report,” Hill said. —