King IV ‘may be a code too far’
Just three months since the launch of the fourth iteration of the King code on corporate governance and there are already signs of King fatigue. Within the corporate community and among experts who advise them on governance, there is a sense King IV may be a code too far.
Just three months since the launch of the fourth iteration of the King code on corporate governance and there are already signs of King fatigue. Within the corporate community and among experts who advise them on governance, there is a sense that King 4 may be a code too far.
Remgro’s Johann Rupert may have voiced many people’s frustrations when he said at December’s annual general meeting that he was “sick of the King code nonsense”. (Although his specific complaint about auditor rotation had nothing to do with the code.)
The first King code, launched in 1994, sparked excitement and enthusiasm around what was then a relatively new idea, formalising restraints on the behaviour of corporate executives. Twenty-two years later, and the excitement and enthusiasm have largely disappeared.
Now much of the online discussion about the code concerns the plans of the Institute of Directors (IoD) to charge a royalty fee for its use. The concerns may have been prompted by the prominence given to the issue, with page one devoted to “copyright and trademarks”.
The IoD owns all copyright and titles of the King code “in its entirety”. Fair use is permitted for “research, private study, personal and private use, criticism, review or reporting of current affairs”. Beyond this, prior written permission is required and the IoD reserves the right to charge a royalty fee, says page one of the code.
In the absence of any details from the IoD, it seems many potential users are fearful of a fee-charging frenzy. Some are concerned about making any reference at all to the code in public presentations; even academics are fearful of being slapped with a hefty fee if they discuss it with their students.
Others are miffed that the IoD is using the code to generate profit and claim it is the product of input from members of the business community (and nonprofit organisations) and is, therefore, the property of the business community.
All of this leads to questions about what the IoD, as a nonprofit organisation, intends to do with whatever royalties it receives. “Is there a specific account and would the proceeds be used to the benefit of the members of IoDSA?” asked one chartered director.
Angela Cherrington, CEO of the IoD, dismisses the concerns, saying the IoD has no intention of chilling discussion of King 4. It boils down to whether the affected organisation is promoting governance or aiming to earn fees. “Teaching, consulting and advisory work fall within the description of ‘fair use’, so a university that wants to lecture on the code would not have to pay a fee, neither would an audit firm that wants to consult on it,” said Cherrington.
But if a private firm organised a commercial presentation or conference around King 4, it would attract a “marginal royalty fee”. For a full-day training session, the IoD is looking at a fee of about R20,000, she says.
“We don’t believe it’s unreasonable and we’re not looking for the IoD to make a profit.”
A fee would be charged only if 85% of the content of the session is on King 4 and if attendees have to pay. Anyone planning a public for-pay session related to King 4 has to provide the IoD with a breakdown of the material being presented so its technical team can determine if the 85% level has been reached.
Cherrington is adamant the IoD is not making any money on the code and says it is merely trying to recover some of its R7.5m costs. To date, nothing has been invoiced for King 4. In 2016, royalty income on King 3 was less than R200,000.
Cherrington says that unlike King 3, which was available only for reading, King 4 can be downloaded from the IoD website and printed without charge.