Corporate governance

Filling king-sized shoes


The King Committee on Corporate Governance, led by Judge Mervyn King, has been one of the shining lights in South Africa’s efforts to raise corporate compliance and best practice at a time when the country is slipping on various international ratings boards

In July 1993, the Institute of Directors in Southern Africa (IoDSA) asked King to chair the first official committee on corporate governance, and The King Committee on Corporate Governance issued its first report (King I), a comprehensive code of corporate practices and conduct, in 1994.

Now, 24 years later, King, who is 81 years old, has handed the baton onto highly respected businessman, Professor Suresh Kana, who holds several top board positions within key sectors.

He will remain a member of the Committee in his new role as Chairman Emeritus. The move is in line with King’s role at the International Integrated Reporting Council (IIRC) also changing from Chairman to Chairman Emeritus in October 2018. King will continue his advisory and advocacy roles to both these committees.

The acclaimed Roy Andersen, the Chairman of Sasfin Limited and a member of the King Committee since its inception said, “It has been a privilege to have worked with Mervyn King from the first meeting of the Committee that produced King I. Since then, I have been in awe of how he has changed the corporate governance landscape, not only in South Africa, but also internationally. His intellect and insight are exceptional and he has made an extraordinary contribution. I have also worked with Suresh Kana and have no doubt that he is a worthy successor.”

Prof. Kana is currently the Chairman of the Imperial Holdings Group, the Chairman of Murray and Roberts, Lead Independent Director of JSE Limited and a board member for Quilter plc. He also chairs the Audit Committee of the United Nations World Food Programme based in Rome. Prof. Kana joined the King Committee in 2000 and has been involved in the development of the King II, King III and King IV Reports. The talented all-rounder was appointed as a Non-Executive Director to the board of Imperial in 2015 and was appointed as the Independent Non-Executive Chairman of the board later that year.

Parmi Natesan, an Executive at the Centre for Corporate Governance at IoDSA said IoDSA was delighted that King would remain as a member of the committee in his capacity as Chairman Emeritus and continue to play an advisory and advocacy role. She pointed out that under King’s leadership; the King Report was regarded around the world as the premier corporate governance model. The Report is often used as a template for the drafting of corporate governance codes in other countries around the world.

Natesan also welcomed the leadership of Suresh Kana, with whom they’ve had a long-standing relationship within various capacities, including his participation in the IoDSA’s Chartered Director SA Governing Body. “Suresh has the leadership capabilities, gravitas and experience to lead this important Committee into the future,” said Natesan.

The 63-year-old’s cross-sector experience will be vital as he fills some big shoes as the leader of the committee. Prof. Kana says, “Mervyn King is a legend and has helped move governance from where it was to where it is now. I am truly honoured to chair the King Committee and, together with my colleagues on the Committee, I will continue to build on the internationally acclaimed work performed under the leadership of Mervyn King over the past 24 years.

“I was involved with the standard setting on the international arena with the International Audit and the Assurance Standards Board, which sets the standards for auditors worldwide, making sure that the consistency of standards around the world is kept. The main reason for my passion for corporate governance is around enhancing governance so that we can all operate in an ethical environment and create wealth for everyone, for all stakeholders. In that context, capital markets are very important, corporate citizenship and the responsible handling of current issues, like the environment, are very important. I do have a broad business and international business mindset and coupled with that, I’m quite a steely person. In that context—if I take on something, I am determined to deliver,” Prof. Kana explains.

The evolution of King

The evolution of best practice has come a long way since 1994, as the King Commission developed and innovated, changing the face of accounting and reporting best practice.

Prof. Kana continues, “Tremendous evolution has taken place. In fact, I started writing a book in 1986 called Corporate Reporting—that was in an accounting space where we spoke about best corporate reports, and how companies should report. In those early days it was focused on companies to say, ‘We shouldn’t just be reporting in terms of what the Companies Act says or legislation requires, we should be moving towards excellence in reporting’, and I suppose those were the seeds of the evolution of integrated reporting.”

New leadership styles

Prof. Kana has also witnessed a shift in the way leaders lead, with a move from a hierarchical approach to a more inclusive, collaborative mindset that Millennials prefer to operate in.

“Leadership has to move with the times. Leadership styles used to be very hierarchical but when you have the new generation of Millennials coming through the workforce, the leadership style had to change from being a hierarchy to being more collaborative. In that context, what mattered in the earlier years is not what matters now. Now, what matters is young people want to know about the environment and whether you are a good corporate citizen? So, the evolution, even from King I to King IV, tries to pick up on that social context of what’s moved on. Social media has evolved very significantly in that regard.

“When you start looking at how things evolved, for example, maybe even up to King I and King II, we were talking about shareholders, and we have now moved onto stakeholders. That’s a very big move in terms of who we are trying to appeal to and to whom we owe a responsibility.

“How should organisations operate when, previously, you had the primacy of the shareholder? Today, it’s not necessarily the shareholder, the shareholder matters, but so do a lot of other people, like society, your employees, your suppliers—everybody matters in that chain. So that’s a very important move,” Prof. Kana explains.


The committee has also been a proponent in getting stricter environmental awareness control within the mining and heavy industry, for example, which appears to be taking the environment more seriously in the last five years, together with more of a focus on working with communities and not against them in rural areas.

“As more research came to light around the environment and some of the crises, everybody responded to that, including the King Committee. That’s the evolution of some of these very important moves—moving from shareholders to stakeholders, moving from profit to planet, the environment, employees and communities. All of those aspects are significant evolutions—the area of executive compensation and where that has moved in the past 20 years. The disclosure, as far as executive pay, has improved tremendously over the last 20 years, so when you talk about evolution from King I to King IV, it’s changed substantially,” Prof. Kana says.

But is Prof. Kana seeing more companies really taking the environment seriously, or is it a tick-box approach?

“You always get some people who take things more seriously and some who don’t. One of the big changes we’ve made in King IV was encouraging a move away from a tick-box approach because a lot of companies took King III and used it as a tick box. If we do all of these little things, that means we’ve complied with good governance—that was not where we wanted governance to go.

“Integrated reporting is a journey; I don’t think anyone has gotten it right immediately. Much development still needs to take place, but that is moving. The JSE has made it a requirement that every company listed on the JSE has to prepare an integrated report, which is quite a good development. When you start looking at that as an evolution from where King I was to where King III and King IV ended up, the concept of integrated reporting is evident, and there are so many countries that have adopted this integrated approach,” Prof. Kana explains.

High-profile fallouts

We’ve had some high-profile fallouts over the last twelve months, with the likes Steinhoff and KPMG coming under fire. Prof. Kana goes on to put the current crop of reported corporate oversight into context.

He explains, “One has to think about it in the context of a corporate governance chain. If you go back to 2008, when we had the global financial crises, the criticism was that the rating agencies had issued ratings relating to various capital instruments that weren’t appropriate. Due to that, there was a bubble and the bubble burst.

“Governance is not a single person’s role. You have a board of directors, audit committees, shareholders, investors, auditors and suppliers—everybody has to play a role in the governance chain.

“The challenge is, a chain is as strong as the weakest link and sometimes, as we’ve seen with Steinhoff where, at this stage, we don’t know what the ultimate cause of all of this is. Having said that, the pointing is all at the auditors but one also has to ask the questions: where was the board? Where was the audit committee? Where were the internal auditors, where were the bankers, where were all the rating agencies?” Prof. Kana says.

Feedback from King IV

King IV reportedly builds on its predecessors’ positioning of sound corporate governance as an essential element of good corporate citizenship.

Good corporate governance requires an acknowledgement that an organisation does not operate in a vacuum, but is an integral part of society and, therefore, has accountability towards current and future stakeholders. With the introduction of an ‘apply and explain’ regime, King IV asks organisations to be transparent in the application of their corporate governance practices.

King IV reinforces the notion that good corporate governance is a holistic and interrelated set of arrangements to be understood and implemented in an integrated manner—good governance is not a tick-box or compliance exercise.

Prof. Kana provides some feedback from the latest report, “Overall, it’s positive. When I look at it, in King III, we had something like 75 principles. We’ve reduced that to 16 in King IV, the others were called principles but were actually practices.

“What we said is, ‘Think about these 16 principles and how you implement them—the rest of them are indicators of good practice’. From that perspective, we tried to take away the tick-box approach and that’s been welcomed. At the same time, people look for checklists to get an easy way out and to be able to say that, ‘I’ve ticked these 10 things so I’ve done governance’. We tried to move away from that because we emphasised ‘governance is about spirit’ and it’s about how things are implemented, with the right intent, not just a tick-box exercise.

“If you look at a lot of the state entities and the issues they face, whether it’s Eskom or Transnet, the Reports all indicate that they have done the right things, they have complied with the Public Finance Management Act (PFMA), but you see what’s happened. The application of it has to be done in a responsible way and there has to be intellectual honesty when people say they’ve applied with King IV,” he says.

Technology as a watchdog

The explosion of technology globally has fundamentally changed the way companies report and the assessment of a company’s compliance. Prof. Kana outlines the role of technology as a watchdog and some of the developments.

“When we start looking into the future it was another big evolution. We didn’t mention information technology in King II, we started with King III, talking about information technology and trying to up the profile of information technology and the governance of information technology in an organisation. In King IV, we’ve pushed that even further, and particularly now that we talk about the Fourth Industrial Revolution, robotics and artificial intelligence. In a couple of years time, we’re talking about driverless cars and similar things—it’s all about technology and if organisations and businesses don’t take that into account in their strategic plans, they will fall short of their fiduciary responsibilities. That’s why we have raised the game as far as information technology is concerned in King IV,” he explains.

Prof. Kana has vast experience outside of the finance sector, with a deep knowledge in construction and logistics, for example. He explains the state of play in those two areas have been taking a few hits of late with operational costs and FDI slowing down.

The state of logistics and construction

“When you look at the logistics industry, it’s driven largely by GDP growth. When there’s development in a country, people tend to buy more cars, they buy more products and logistics is required for that. When you don’t have that, you don’t have economic growth in the country. Everybody chases the top revenue line but at the same time, they have to manage their costs to be sustainable and continue creating wealth for all the stakeholders.

“In the construction industry, the lack of major infrastructure spend in this country over a number of years is particularly hurting the infrastructure industry and the construction companies because they rely on mega-projects to come through. If that doesn’t happen, they struggle.” he says.

Prof. Kana concludes with his outlook on the economy for the next few years, might we be seeing better things to come with President Ramaphosa in charge?

“Well, one is hopeful of that because he is a businessman that understands what matters in an economy, in companies and in capital markets.

“The World Bank is projecting a growth rate of 1.5%. If we can achieve that, that will be very good compared to where we are at the moment, with all the flat growth—we’re almost talking about recession. There’s a lot of uncertainty—policy uncertainty is a big one. And there are the issues around land redistribution, around mining and mineral rights—these are major issues for foreign investors. The economy needs to grow locally, but how do you get foreign direct investments if you have major policy uncertainties of this nature?

“As a businessperson, it’s sad to see that at the World Economic Forum for seven years running, we were number one in the world in terms of accounting standards, auditing standards, stock exchange regulations, corporate governance and, all of a sudden, in a matter of two years, with all that’s happening in terms of corruption in the country, we are now in the thirties.

“The thing is, we’re so good at scoring own goals at the moment, we’ve got to get ourselves out of that position. We don’t need to be there, we have human capital, but we have issues like youth unemployment. Why should we have youth unemployment when we have a country that is so abundant with potential? We could build great tiers of industry, a great mining industry with beneficiation, a great agriculture industry—there’s so much potential,” concludes the learned Prof. Kana. 

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