King V: Finally, some muscle

It’s a bit too easy to be cynical about the five iterations of the King codes that have been released since 1994. Each one has urged companies to be on their best behaviour and has relied on little more than the increasingly strident argument that this is in the best interests of a broad range of stakeholders.  

Of course, after the first King code the urging went far beyond companies. Gradually, with icy determination and absolutely no authority except the self-appointed variety, the King committee broadened its scope of assumed influence way beyond JSE-listed companies. It doesn’t apply to your neighbourhood book club, but it does to almost everything else. 

That includes private and unlisted companies, non-profit organisations, municipal entities, public-private partnerships, professional bodies and universities. Even state-owned entities (SOEs) are expected to adhere to the principles and recommendations laid out in the King code. 

But that’s exactly it: adherence is an expectation. Every one of the codes has been voluntary for this ever-growing number of supposed adherents – except JSE-listed companies.  

Since King II was released in 2003, JSE-listed companies have been required to apply the principles and recommended practices of the code. They’re also required to disclose how they’ve applied them. 

For all other entities the King code is nothing more than a string of recommendations backed by varying degrees of institutional (but not legislative) enforcement. The Public Finance Management Act and the Municipal Finance Management Act require SOEs and public entities to maintain sound corporate governance, which is perhaps where the King code assumes its most useful function. 

Legislation by persuasion

So handy is its model of “sound governance” that the courts have taken to using it as their reference for the sort of reasonable behaviour expected from all manner of entities. In this way, King has assumed a certain legislative aura. 

But here’s the thing, while journalists might bang on about poor corporate governance and contraventions of the code, there is no known instance of any entity, not even a listed company, being formally charged with non-adherence. 

What should we make of that? Particularly given that no segment of the South African economy – neither public nor private – has escaped the corrosive influence of corruption over the past 30 years. A period that overlaps uneasily with the lifespan of the codes’ existence. 

Just think about it: there were no King code charges laid against the Gupta family’s JSE-listed Oakbay Resources and Energy, or Ayo Technology Solutions, or EOH or Tongaat. Not even Steinhoff. 

So, if there are no obvious consequences does this make the 31-year-long exercise entirely pointless? Perhaps worse than pointless: have the codes merely provided an opportunity for virtue-signalling on an industrial-scale?

It’s a grim thought. 

Still, it probably does help that there is a formal code out there to which we can aspire. Even better, a set of recommendations by which executives can be held accountable; that’s always a useful thing for us here in the media.  

And it is in more effectively enabling interested parties to hold executives to account that King V could be a game-changer. This is because of the introduction of the disclosure template – potentially the most significant corporate governance development since the first codes were written. 

Until now, the critical challenge with its various iterations related to effective implementation and the absence of an oversight facility. King I suggested that a committee be set up to monitor implementation of the code by listed companies. Nothing came of that, and in later codes, there was no suggestion as to who would take responsibility. What’s more, until now there has been no set format under which companies can disclose their adherence to the codes, so they’ve reported in whatever manner they wanted. 

King V’s disclosure template looks set to fundamentally change this – it is precise and detailed and, if handled properly by companies, it will make tracking implementation much easier. It should also help comparison between companies. 

This is potentially huge progress.  

Of course, it would be even more significant if an entity was created to monitor how the disclosure template is put into action. 

But this would be an impossibly difficult task if it involved all the entities the King code currently believes it has jurisdiction over.  

Perhaps it is time to return to the code’s origins and focus only on JSE-listed companies. 

King V will be effective for financial years commencing on or after January 1 2026.

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