Attorney, arbitrator, mediator, corporate director, commission chair, author and speaker – this former High Court judge has corporate governance in South Africa covered. King shares his views on current-day corporate governance in South Africa with Leadership Magazine.
In 1992 Mervyn King, a former Supreme Court judge of South Africa, was tapped by soon-to-be-elected president, Nelson Mandela, to formulate a new code of corporate governance for a transforming South African private sector.
Two decades later, the various King reports (King I, II and III), issued by the King committee, have become the gold standard in corporate governance around the world and compliance has become the rule for all companies listed on the Johannesburg Stock Exchange.
“Good governance is not simply a corporate issue; rather it applies equally to all entities in society. And realisation of this is vital for the future of South Africa.” King points out.
“Our political leaders … face the same challenge. In the face of mass unemployment, poor education, the non-delivery of textbooks, it is clear that currently we are stuck in a mindset in which our leaders do not instinctively act in the best interests of the citizens,” he says.
Since the Marikana tragedy, the country has had to ask serious questions of the varied relationships between labour, capital, and government. For King, the solution to the violence seen in strike action around the country is integrated thinking in the corporate sphere.
“The critical question to ask of the mining companies, is whether there has been ongoing communication with all the stakeholders of the company, such as the employees and the labour unions. Do the companies know the stakeholders’ expectations and needs? Do the employees know what the companies expect of them? It is a two way street,” says King.
There is no government intervention that can simply solve the issue.
"Interventionist acquisition is not the answer – the answer is ongoing communication with all stakeholders as a management process. Every board meeting should have this on the agenda,” he says.
“One of the features of the integrated thinking and reporting we have been propounding is that companies can no longer work in silos of human resources, finance et cetera.” A company’s resources are not just material. Human capital, intellectual capital, human rights, and societal capital are all assets of modern day companies.
“Today, we speak of the triple context of business – no longer can business simply be interested in the bottom lines. Instead, business must live in the triple contexts of finance, society and the environment,” he says.
In 2002, Johannesburg hosted the Earth Summit, and King I revised to include issues of sustainability in King II. King III would later call for the integration of environmental reporting with financial reporting.
Directors have had to change their mindsets because we live in a changed world of turbulence and ecological overshoot in which companies are the biggest users of natural assets.
For King, the issue is huge. “A company that does not integrate environmental sustainability into its reporting will not survive. A beverage company has to have a long-term strategy to sustain water supplies or it will not survive. We’re seeing South African Breweries and Coca-Cola hiring water engineers and reducing, recycling and replenishing.
“They need to show investors that they are good corporate citizens who have the ability to survive in a century of change and turbulence,” he says.
In the face of the new Protection of Personal Information Bill, King declares the same to be true of a company’s approach to the integrity of their information systems.
“I am all over the world right now promoting the concept of integrated reporting. It is a concept whose time has come. The corporate reporting of the last century is no longer fit for purpose and does not lead to informed decisions by investors regarding the ability of companies to create sustained value in our world. For this we require holistic reporting that reflects each company’s ‘state of play’,” King says.
He is able to summate succinctly the essence of his wide-reaching governance philosophy – a summation that acts as a kind of poignant warning for all of our country’s leaders.
“Act in the best interests of South Africa and its citizens. Focus on intellectual honesty. Use all your efforts in doing those things,” the voice of corporate governance concludes.
It is simple advice but hidden in those words is a revolution of good governance waiting to be unfurled.
For the full video interview with Mervyn King click here.
See the online version of the print mag for the full article.