The Committee on the Financial Aspects of Corporate Governance, chaired by Adrian Cadbury, describes corporate governance as ‘the systems by which companies are directed and controlled’. Corporate governance includes the rules, practices and procedures of the Company which are meant to govern corporate behaviour.
It seeks to balance the interests of its various stakeholders such as the board, management, employees and shareholders and encompasses every sphere of management of a company, including company strategy and the companies’ objectives.
King IV is a code addressing the best corporate governance principles and practices in South Africa.
For companies listed on the Johannesburg Stock Exchange, i.e. a public companies’ application and establishing of how the code is applied in practice is compulsory. For companies not listed on the JSE, the application is voluntary. However if a director’s standard of conduct was ever to be called into question, South African courts may have reference to King IV for considering the standard of the director’s conduct.
Certain corporate governance obligations in terms of the Companies Act 71 of 2008 (“the Act”) include that a director is to act in good faith and for a proper purpose; in the best interests of the company and with the requisite degree of care, skill and diligence.
Further the Act obliges a director of a company to disclose personal financial interests in advance, by delivering to the board notice of such personal financial interest (or to the shareholders in the case of a company where there is only one director who does not hold all the beneficial interests of all of the issued securities of the company).
The goal of King IV is to make the Company a force for good in the world and the communities within which Companies operate. It strives to provide guidance in order for a Company to utilise its resources in a manner which has positive or neutral and not negative impacts.
Where to start with Corporate Governance and King IV?
In respect of the Act, one would determine the legislative obligations applicable to the Company and then implement a plan to ascertain current compliance as well as determine corresponding action items.
The King IV report is to be implemented on an “apply and explain” basis. One applies the principles and then records and maintains an account of how the principles have been applied.
In the application of King IV, the following could be applied:
- Commence by providing a training brief for directors on King IV Code highlighting the application of the Code, the duties of directors in performing their duties, the establishment of an ethical culture within the company, covering the need to establish codes of conduct policies, key considerations in corporate decision making, the relationship between stakeholders and the company and delegation and reliance on management.
- Thereafter, the board can meet to understand the principles of King IV and its application to the company itself and to determine a practical plan in the development and implementation of the King IV Code as well as the governance structure of the company.
- Development of a board of directors’ code of conduct as well as codes of conduct for other standing committees of the board with focus on standards of conduct, conflicts of interest, confidentiality, Competition Laws and implementation thereof.
- Development of an organisation code of conduct for all employees of the company, addressing the values of the company and general rules of conduct such as harassment, discrimination, use of company time & property, intellectual property, processing of personal information, procurement etc
- Development and implementation of an ethics policy binding on all employees of the company and addressing points such as conflicts of interest, competition, honesty, dealing with suppliers and customers, bribery and corruption etc
- Development of various reports, namely a sustainability report; social and ethics report; King IV Disclosure Report; Renumeration Report; Integration Report.
- Development of a risk management action plan. Consideration of risk is an integral part of decision making of the board. The board may establish a risk committee and their activities and the plan would include the ascertainment of categories of risks, the nature of the risk, the severity of the risks, the likelihood of the risk to occur, current controls and improved controls.
- Development of a Legal Action Compliance plan
- Development of a King IV disclosure plan
- Board and Committee Charters
- Board Resolutions for Delegation of Authority & Establishing of Committees
- Board Member Disclosure of Personal Financial Interests. As stated above a director is obliged to disclose personal financial interests in advance, by delivering to the board notice of such personal financial interest. The disclosure notice may include the nature and extent of the interests (Shareholder, member, beneficiary or other) as well as other important information such as how a director is related to another entity which may be relevant to the Company’s affairs.
- Shareholder resolutions appointing audit Board Committee; approving director fees; ratifying personal financial interests of board of directors, ratifying conduct of board members and approving governance rules.
How can we assist with Corporate Governance?
Boogaard Attorneys assists in:
- advising on various aspects of the Companies Act 71 of 2008;
- advising on legislative corporate governance obligations under the Act;
- advising on obligations under the King IV Code of Corporate Governance & JSE Listing Requirements;
- assistance with preparation of written Briefs on Corporate Governance for the Board; Governing Body Code of Conduct; Organisational Codes of Conduct; Ethics Policy; Risk Management Action Plan for discussion purposes and completion by management; Legal Compliance Action Plan; Board Resolutions for delegation of authority; Board Resolutions for Establishing Committees; Written Disclosures of Interest.
We can service Clients in various areas in Johannesburg including Bryanston, Dainfern, Fourways, Midrand, Sandton to name a few and we also can facilitate online meetings throughout South Africa at client’s convenience.
By L Boogaard