The IIRC welcomes the publication of South Africa’s new corporate governance code, King IV, which is the first outcomes-based governance code in the world and modeled on the International <IR> Framework. Johannesburg Stock Exchange (JSE) will now consult market participants with a view to incorporating King IV within listing rules which apply to over 400 JSE-listed companies. The code, which launches today, recognizes Integrated Reporting as a key principle of corporate governance.
Corporate reporting is an essential and inseparable part of corporate governance – it is the outcome of a corporate governance process – grounded in the purpose, values and activities of the business and reflecting on the behaviours, from the board and management team, through the business.
South Africa is the first country in the world to adopt Integrated Reporting as a mainstream component of corporate governance. An increasing body of evidence from the five-year take-up of Integrated Reporting demonstrates that an integrated and inclusive corporate governance system delivers practical benefits to businesses and investors, such as improved share price performance. Integrated Reporting is fast becoming the information architecture that connects corporate governance and investment stewardship.
King IV has been written through the prism of the six capitals and on the basis of the value creation process. These concepts are explored in detail in the International <IR> Framework, a framework recognized by the Integrated Reporting Committee of South Africa, which includes the Institute of Directors South Africa, in March 2014. The architect of King IV – Professor Mervyn King – is also Chairman of the IIRC Council.
King IV echoes the IIRC’s call for three gear shifts in terms of global economic governance: from financial capital market system to inclusive capital market system; from short-term capital markets to sustainable capital markets; and from silo reporting to Integrated Reporting. King IV acknowledges the vital importance of encouraging all of these shifts and the IIRC believes its introduction will be a further step towards achieving these shifts in South Africa. The World Economic Forum, in its Global Competitiveness Report 2016-2017 ranked South Africa as number one for the strength of auditing and reporting standards globally and third for the efficacy of corporate boards.
Richard Howitt, CEO, IIRC said, “South Africa has a unique history where inclusion and integration have been fundamental to building the pillars of a modern corporate governance system. Increasingly, economies around the world are discovering that a more inclusive approach, respecting the multiple resources that contribute towards value creation, is the best way to achieve resilient, long-term performance.
Today, South Africa sets a new standard of corporate governance for developed and developing economies alike. I am delighted that the Code so clearly embeds Integrated Reporting, which will help businesses and investors to meet their stewardship responsibilities, incorporate sustainable development as a core part of their strategies and contribute towards a more inclusive economy.
This evolution in corporate governance and thinking would not have occurred without the leadership, insight and wisdom of Professor Mervyn King, our Council chairman, and I pay tribute to his energy and foresight in constantly pushing the boundary of corporate governance best practice. He has set the bar high, and rightly so.”