How can King IV add value to business. This is a presentation by Prof Mervyn King himself made to our CEO forum in 2017.

1. KING IV -
A VALUE ADD
TO BUSINESS
EGN
22 February 2017
Presented by Prof Mervyn King

2. Corporate Legal Advisers
COMPONENTS OF MARKET VALUE
(SAICA)
83
68
32
20 19
17
32
68
80 81
1975 1985 1995 2005 2009
S&P 500
Physical and financial assets Other assets

3. Corporate Legal Advisers
COMPANY
No mind of its own
Sovereign
Immortal
No owner of company
Company owner of assets and its own
liabilities
Tangible and intangible assets

4. Corporate Legal Advisers
PRACTICES AND ENTERPRISE
Governance about practices, principles and
outcomes
Enterprise - strategic
Risk for reward – business judgment calls
Good governance and BJ call errors
Acceptable with quality of governance
Bad governance - error - scandal
Not acceptable

5. Corporate Legal Advisers
THE GOVERNANCE EQUATION
Governance
UNIFIED
 Governance Enterprise and
 principles and business judgment
 best practice calls (strategy)
 BJR

6. Corporate Legal Advisers
ORIGINAL THINKING
Inclusive stakeholder centric model
Basic good governance principles
To achieve four outcomes
Regimen of apply and explain
Parity of sources of value creation and
stakeholder relationships
In the best interests of the company

7. Corporate Legal Advisers
STEPPED APPROACH
3
_______________
Governance outcomes
(Intended benefits)
2
________________
Principles
(Objectives)
1
_______________
Practices

8. Corporate Legal Advisers
APPLY AND EXPLAIN
75 principles in King III
Application register
16 principles in King IV plus one
Apply and explain
Explain how achieved or striving
User draws inference on quality
And on achieving the outcomes

9. Corporate Legal Advisers
FOUR OUTCOMES
Ethical culture and effective leadership
Performance and value creation in a
sustainable manner
Adequate and effective controls
Trust, good reputation and legitimacy

10. Corporate Legal Advisers
AN ORGANISATION’S VALUE
CREATION PROCESS
10

11. Corporate Legal Advisers
IFAC
G20 meeting in China, September 2016
IFAC proposed IR at G20 meeting
On 11 January 2017 IFAC issued a position paper
adopting IR for global reporting coherence
Chief Value Officer rather than Chief Financial
Officer

12. Corporate Legal Advisers
KING IV CONCEPTS
Independent director
Variable remuneration
Performance targets
Say on pay – 25% invited
Tax policy
Audit Committee determines independence of
external auditors

13. Corporate Legal Advisers
KING IV CONCEPTS
Organisation and governing body
Responsible citizen
Strategy and sustainable value creation
Integrated report to enable informed
assessment
Diversity and composition appropriate to the
organisation

14. Corporate Legal Advisers
KING IV CONCEPTS
Delegate but interrogate because accountable
Shareholders appoint directors and audit
committee
No split of authority and responsibility
Directors appoint board chairman
Board appoints CEO
Evaluation to lead to more effectiveness –
every two years

15. Corporate Legal Advisers
PLUS 1 - RESPONSIBILITES OF
INSTITUTIONAL INVESTORS
 Principle 17. The governing body of an institutional investor
organisation should ensure that responsible investment is
practiced by the organisation to promote the good
governance and the creation of value by the companies in
which it invests:
 Practise responsible investment
 Adopt the responsible investment code
 Asset manager to adopt code and principles
 The adoption of the code by asset managers should be disclosed

16. Corporate Legal Advisers
KING IV BASICS
I C R A F T
Incapacity
Good faith, care, skill, diligence
Essence of corporate ethics – acting with
intellectual honesty in the best interests
of the incapacitated company of which
the director is its heart, mind and soul

17. THANK YOU
Prof Mervyn E King SC