draft king ivtm report responses to the summarised public ... · draft king ivtm report responses...

Draft King IVTM Report

Responses to the

summarised public

comments

2016

DRAFT KING IVTM REPORT RESPONSES TO THE SUMMARISED PUBLIC COMMENTS

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Introduction

131 sets of comments were received from individuals and organisations ranging from 2 –45 pages each. In respect of the sector supplements which were issued as phase 2 of the commentary period, 37 sets of comments had been received from individuals and organisations, ranging from 2 –48 pages each. A commentary review process was undertaken and all comments noted and considered in the context of inter alia, other similar comments received elsewhere on the Report as well as the construct and aspirations for the Report. It should be noted that many of the comments have been superseded by the fairly extensive redraft of both the Report and the sector supplements. Due to the large volume of comments, a response cannot be provided in respect of each comment received. The comments have therefore been organised, summarised and consolidated as broad themes and the responses by the King Committee are provided accordingly. If there are any further queries on how comments were dealt with, please direct them to [email protected]

Summary of comments on the main report

Comments Responses by the King Committee

General terminology and other comments

The status of King III vis-à-vis King IV should be clarified. The repeated references to King III are confusing.

King IV replaces King III in its entirety. The finalised King IV Report states this directly.

Disagree with addressing King IV to all types of organisations. This was primary objective with King IV and it was decided to maintain this in the interest of enhancing the ecosystem of corporate governance which is made up of all types of organisations.

The first parts of the draft should be mapped to the Code to align language.

Agreed and addressed.

The first parts of the Report should be presented in a more concise and succinct manner.


Reconcile use of should and "requirement". Agreed and addressed.


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There should be consistency with using terminology, for example corporate governance and good corporate governance.


Confusion is caused by use of governance of ethics and ethical governance. Would Responsibility, Accountability, Fairness and Transparency be pillars of governance?

This is now addressed in the introductory parts of King IV as well as in the Code under ethics.

All abbreviations should be defined. Agreed and addressed.

It should be stressed that proportionality only applies at the level of practices.


Sustainable development should be clarified as being supported by ethics, corporate citizenship, stakeholder inclusivity, integrated thinking.


Clarify that sustainable development should be embedded in strategy and not be separate priority.


To include a definition of "ensure" - not reasonable that it means "make certain" only that it increases likelihood of certainty.


Stakeholder inclusivity is not the correct approach. The stakeholder-inclusive approach is fundamental to King IV as it was to King III. We have attempted to clarify this approach further.

The use of six capitals is confusing. Further explanation was added that deals with how the concept of the six capitals links with the other concepts used in King IV.

Consider differentiating between social and relational capitals; consider the quad context instead of triple context: the economic, environmental, social and relational context.

The dynamic between society and stakeholders of the organisation is now explained in the glossary and Part 2: Fundamental Concepts. It should now be evident that “society” includes stakeholders and relationships.

Clarify that the only measures that stretch across all six capitals are financial and relational.

We clarify that in respect of each of the capitals there are stakeholders that have an interest in it.

Too strong emphasis on positive wealth creation - to include externalities and negative impact.

The Report was reviewed to balance the approach so that it is clear that negative outcomes should be responded to and reported on.

Measuring and putting in place targets relating to value created across the triple context is a departure from measuring financial targets only and the challenges thereof should be addressed.

The Report addresses this at conceptual level. The issuing of practice notes in due course will be considered by the King Committee and the organisations represented in the membership


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of the King Committee.

The use of should in the principles should be explained. Now addressed in the glossary.

More emphasis needed on transformation, diversity, role of apartheid.

Diversity has been added as one of the factors that should be considered for the composition of the governing body. Economic transformation and equality is also specifically mentioned as a challenge for sustainable development. By placing such emphasis on the triple context and the capitals that organisations use and affect of which societal capital is one, it is indicated that matters such as transformation, inequality and diversity should be addressed.

King IV should address the governance of multi-national organisations; whistleblower protection should be included because it is a statutory provision which is poorly defined and weakly enforced; King IV should take stronger stance on corrupt practices that are not directly illegal; human capital should be addressed more fully.

Rather than dealing with the detail of the matters raised in a number of comments, the King Committee opted to address governance at a normative level. The principles in King IV apply whether an organisation operates in South Africa or in multiple jurisdictions’ and practices (those recommended in King IV or others as is appropriate for the organisation) should be implemented to achieve the principles that deal with an ethical culture, corporate citizenship and stakeholder relationships. The provision of specific guidance in due course will be considered by the King Committee and those organisations that are represented in its membership.

“Chair” is a piece of furniture, to be replaced with chairperson. The King Committee decided to refer to “chair” as it is becoming common practice internationally.

Include as an objective of King IV: To encourage transparency of impact and balanced reporting.

Agreed and included.

Definition of material or key stakeholders and to be consistent. Agreed and addressed.

A summary of key changes to the Code should be provided Highlights of the key changes in the Code is provided in the part of King IV dealing with fundamental concepts.

The Code should be supplemented with guidelines and practice notes.

The provision of specific guidance in due course will be considered by the King Committee and those organisations that are represented in its membership.


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Disclosure

The disclosure requirements are burdensome and prescriptive; apply and explain could be understood to be too prescriptive.

“Apply and explain” is meant to be a more flexible approach with the application of principles being assumed and the practices (either those recommended in King IV or others) to be implemented so that they support the achievement of principles within the context of the particular organisation. Due to the fact that there is more flexibility in application, there should also be more explanation of implementation and application.

The references to disclosure throughout the Code should be clarified by explaining to whom, when, how often, by what means, on what format.


Clarify purpose of application register, the inclusion of a specimen register is a mistake as it will lead to copy and paste.

After consideration it was decided to remove the specimen application register.

There should be more explanation of apply and explain. Agreed and addressed.

Address the failure of organisations to disclose on unfavourable factors.

The Code is now more specific on disclosure on unfavourable factors.

Concern about less prescription because it relies on virtuous individuals making decisions.

More prescription would not necessary lead to better governance and it may have the consequence that governance becomes a compliance exercise which is viewed as a burden. However, it is recognised that the less prescriptive approach would only be effective if stakeholders are active in engaging with organisations on their governance.

Code remains prescriptive through recommended practices. The recommended practices are meant as recommended guidance. The danger of these becoming prescriptive is addressed by not requiring organisations to provide an explanation in their disclosure against each practice.

Principles and Outcomes

Phrasing of outcomes: Reconsider the use of trust, legitimacy and reputation; use of "adequate and effective control" as outcome should be reconsidered, rather adequate and effective oversight;

The outcomes have now been rephrased.


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stakeholder relationships lead to performance and value creation, not a public relations exercise; the outcomes for stakeholder relationships should be reputation, sustainable value creation.

Principles should not be linked uniquely to one outcome, principles support more than one and in some instances all the outcomes


Proportionality

Include "at different stages of development" to the following proportionality considerations: organisations of variety of sizes, resources and complexity of strategic objectives and operations. Another proportionality consideration should be impact on society and environment.

The factors affecting proportionality have been rephrased. Also examples of application are provided in the Part 6.1: Introduction to the sector supplements.

Proportionality should be defined in glossary; proportionality to be explained more fully by including references to similar organisations and peer group or industry practice.

There is no definition of proportionality in the glossary. However, an attempt was made to explain it more fully. Also examples of application are provided in the introduction to the sector supplements.

Ethics

The characteristics of the governing body, namely, Responsibility, Accountability, Fairness and Transparency (RAFT) should be included under the principle dealing with the ethics of the governing body; explain why the particular 6 characteristics were included; include integrity as one of the characteristics.

Agreed and addressed under the characteristics of the governing body.

The governing body cannot be responsible for the organisation’s ethics to be managed effectively, it should be restated to indicate that steps taken towards it; it is an inordinate burden for governing body to oversee adherence of ethical norms by business associates and suppliers.

The practices have been rephrased to clarify the role of the governing body in this regard which is to approve policy and to oversee and monitor the implementation of policy by management. Essentially the role of the governing body is an arms-length one but it is still ultimately accountable for the performance of the organisation, including ethics.

The list of considerations under corporate citizenship are misplaced; responsible citizenship should include product responsibility from development to marketing and sales; add to corporate citizenship: responsible and transparent giving and

Agreed. The detailed list has been replaced with overarching considerations which should assist with conveying the intention behind corporate citizenship more meaningfully.


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receiving of sponsorships and donations; human rights under corporate citizenship considerations should cover, inter alia, fair labour practices and employee wellbeing.

List under corporate citizenship may convey that compliance with legislation is a practice recommendation.


Performance and reporting

Harmonise the terminology used in King IV in relation to reporting with that in the IIRC framework.


King IV should acknowledge and recommend the <IR> framework and the GRI.

The <IR> framework is now acknowledged more definitively as King IV relies on its terminology. The GRI is not expressly acknowledged but King IV does refer to sustainability and other reports, and the GRI is references in some of the sector supplements as guidance.

It is not necessary to list the elements of <IR> - just refer to leading frameworks.


Clarify the intended audience of the <IR>. The intended audience for all reports should be decided by the governing body. King IV does seek to clarify that all material stakeholders’ legitimate and reasonable information needs have to be taken into account.

Clarify <IR> and sustainability reports and their different roles. Now addressed under Fundamental Concepts and in the Code itself.

King IV should address how the 6 forms of capital impact and interconnect; how does governing body determine the potential effect of an organisation's operations on resources and relationships?; more guidelines are required for reporting across the triple context.

King IV was drafted to address matters at conceptual or normative level. The issuing of guidelines on implementation will be considered in due course by the King Committee and the organisations that are represented in the membership of the Committee.

In relation to performance: sustainable value creation, value creation, performance, core purpose of organisation, achievement of strategic objectives, stakeholders, triple context - difficult to conceive how governing bodies make sense of these various concepts; IR is an outcome and not a philosophy.

Care was taken to address and explain each of these terms and concepts and how they interconnect, in Part 2: Fundamental Concepts. A graphic has also been introduced to further clarify.


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Materiality should not be determined by the governing body – but by management with oversight of governing body; it is not for the board to determine reporting standards and frameworks - management should do so with board oversight.

The content was reviewed to explain the respective roles of the governing body and management.

Materiality should be defined. Now defined.

Replace value creation with value delivery because value creation excludes value preservation.

The definition of value creation was added to so that it includes neutral outcomes. The King Committee did not want to cause confusion by introducing yet another term which does not appear in the <IR> framework with which it is trying to harmonise.

King IV should recommend that the governing body has discussions about what short, medium and long term means.

Now included.

The practice around business rescue is misplaced. The content has been redrafted to better contextualise.

The performance criteria against which governing body can oversee management performance should include to promote desired outcomes and guard against unintended consequences.


Reporting on ecological value creation should be done in terms of actions that sustain Biodiversity and Ecosystem Services.

The detail of this is not addressed but Biodiversity is specifically mentioned as a corporate citizenship matter. Furthermore these matters are understood to be included as part of the environmental leg of the triple context and of environmental capital as one of the six capitals.

There should be a recommendation that the governing body ensures integrity of reports and applies its collective mind on whether the report is presented in accordance with standards and frameworks.


It should be specifically stated that the IR should include at least abridged AFS.

The relationship between <IR> and other reports is now dealt with.

The recommended practices with regards to reports and disclosures could potentially result in wide scope of reports that the governing body has to oversee. In this context King IV should clarify the information and assurance required for the preparation of reports and to which reports this is applicable.

Addressed under reporting and assurance.


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Governing body role and composition

Principle 3.1 should not repeat other principles. Agreed and addressed.

Balanced composition of the Board should also include dealing with factors other than independence that affect balanced composition for example gender, transformation.


Gender diversity on boards should be addressed Agreed and addressed.

King IV should include information and communication technology as part of the requirements for board composition; candidates for governing body to be considered for relational skills.

The King Committee considered this to be too prescriptive and also that it would introduce an infinite list of specialist skills to be considered. Instead it was opted to put the onus on the governing body to define the skills required.

Include terms limits for governing body members. No term limits were included as there are too many variables to cater for. It is a matter for consideration by the governing body and would in most instances be governed by the MoI which is approved by shareholders.

The CFO should be appointed to the governing body The wording has been amended to provide for the chief finance officer (CFO) or another designated executive as appropriate for the organisation to be appointed to the governing body.

What does "diversity" on the governing body include? It should include race and gender.

A definition for diversity is now included.

King IV should add that prior to their appointment, candidates for governing body vacancies should be assessed for propensity to bring the organisation in disrepute.

“Fit and proper” has now been introduced as one of the criteria, which should address this matter.

Add to considerations for size of governing body - the strategy and skills required to oversee execution of strategy - there is not enough emphasis on good, commercially minded governing board members

This falls within the ambit of “the mix of knowledge, skills and experience, including the business, commercial and industry experience needed to govern the organisation” which is how one of the considerations is now worded.

Staff should have a place on the governing body. The King Committee disagrees with representation on the governing body of employees, shareholders or other parties as a primary requirement for the composition of the governing body. The members of the governing body have fiduciary responsibilities to the organisation and not their constituencies.


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Deal with alternates for governing body members. It was considered that it is included in the definition of “director” in the Companies Act and therefore adequately dealt with there.

The holding by directors of more than 5 board positions should be discouraged; time limit on directorships will assist with transformation.

No limit to the number of directorships was introduced as there are too many variables to cater for. However, in order for shareholders and other parties to exercise the right to elect members of the governing body on an informed basis, it is recommended that professional positions be included in CVs of candidates tabled for election.

Staggered rotation: Clarify whether annual; to be recommended only for NEDs; is ambiguous and subject to abuse.

The wording has been amended to provide for the governing body to have a mechanism in place that refreshes membership regularly whilst maintaining continuity.

Delete “ideally” in majority of NEDs to be independent Agreed and deleted.

King IV is silent on directors who serve a long time and remain independent.

It is dealt with through a recommendation for an assessment of independence every year once a director has served for 9 years.

It is not enough for 3 years to have passed for a past CEO to become an independent member of the board; rather for them to be deemed fully independent there needs to be a 3 year gap between their executive role (or other professional activity associated with the company) and their role on the board.

Noted but the King Committee believes that this is addressed by having the recommended practice state that the governing body should consider the independence indicators holistically, and on a substance-over-form basis.

The independence criteria should include a reference to major donors, sponsors, funders or financier.


Being a shareholder would not affect independence in the USA. Noted, but the King Committee decided to retain this as a factor that affects independence. King IV does not equate the best interest of the company to the best interest of the general body of shareholders which is the only possible substantiation for not regarding shareholding as a factor that affects independence.

A Lead Independent Director should be appointed prior to conflicts arising.


All governing body members should sign a Declaration of Independence


Committees of governing body


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Principle on governance structures should not talk to balance of power.

The balance of power is considered as one of the key considerations when establishing committees of the governing body.

The chair of the governing body should not chair any of the committees.

The King Committee is of the view that this cannot be substantiated especially in light thereof that the principle states that one of the objective with establishing committees should be to assist with objective judgement and balance of power.

Board should take the lead in the number of appointments a chair can hold.

It is believed that this is a matter for agreement between the governing body and the chair. The governing body appoints the chair after all and has the power to remove him/ her as chair.

A separate rotation requirement for committees is not necessary if it happens at governing body, succession.


King IV should recommend an IT Committee. The drafting convention was not to be prescriptive and King IV is not definitive on any of the committees that it recommends. The governing body has the option to establish an IT Committee if it is deemed necessary.

Where provided that non committee members can attend meetings with permission of chair and only paid with permission of shareholders - to clarify that shareholder permission relates to fees, not attendance.


All members of remuneration committee should be independent, not just NEDs.

In order to exercise objective oversight of executive remuneration, it is necessary that the members of the remuneration committee do not have any relationship with an executive or employee which could affect that judgement. Other criteria that are applied to assess independence, for example not being a significant customer, mostly do not affect the exercise of judgment by members of the remuneration committee.

The responsibilities of the social and ethics committee and the audit committee overlap with regards to tax and remuneration.


The statutory scope of the social and ethics committee overlap with the normal duties of the audit, risk and remuneration

The overlap is addressed by stating in the recommended practices that: Where more than one committee has jurisdiction to deal with


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committees. King IV should provide clarity. a similar matter, the specific role and positioning of each committee in relation to such matter are defined to ensure complementary rather than competing approaches. It is the duty of each governing body to address the detail of this within this overarching consideration.

The nomination committee should be called nomination and governance committee.

The King Committee opted not to be prescriptive on the names of the committees.

King IV needs to discuss the role of audit committees in the audit of financial statements incl reportable irregularities, materiality, audit findings, unadjusted audit differences, going concern assessments.

Rather than dealing with the detail, King IV seeks to address

these matters at a high level, i.e. provide independent oversight

of, among others:

a. the effectiveness of the organisation’s assurance

functions and services, with particular focus on

combined assurance arrangements, including external

assurance service providers, internal audit and the

finance function; and

b. the integrity of the annual financial statements and other

external reports issued by the organisation.

The King Committee and the organisations represented on it may

in due course consider the development of specific guidance.

Chairman of governing body should be allowed to serve on audit committee without shareholder approval.

It is now recommended that the chair not be a member of the audit committee.

On key audit matters, it is the intent that auditors and the audit committee provide different but complementary perspectives - these are not necessarily different; it should be clarified that significant matters should extend to both key accounting decisions and key audit matters; assessment of significant audit matters by audit committee should be done independently from external auditor - alternative wording suggested.

The wording has now been redrafted and the various perspectives to be provided addressed under Fundamental Concepts.

The definition of audit firm tenure is not per IRBA’s definition. The definition has been reworded.

There is confusion with statutory duties of audit committee and Addressed.


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delegation by governing body and where authority lies.

The role of the audit committee with regards to internal audit is not sufficiently covered.

Addressed.

Integrity of reports should be referenced as fair presentation of reports.

Reports are wider than AFS and therefore it was decided to refer to integrity. Integrity is now also defined in the glossary.

The audit committee should oversee the internal control framework and risk and opportunity committee should oversee risk management framework.

Addressed.

Recommend disclosure of policy and controls in relation to the provision of non-audit services by auditor.

Addressed.

Mandatory firm rotation is an opportunity for disadvantaged firms to enter market; King IV should strengthen the recommended practices on auditor independence, for example audit firm rotation and joint audits.

Seeing as there are regulatory developments on this, King IV is not making any specific recommendations that may become outdated.

The split between audit and risk committees to be encouraged otherwise this creates a player and referee situation.

This matter is left to the discretion of the governing body depending on what is appropriate for the organisation.

The Companies Act stipulates that audit committee must comprise independent NEDs, King IV broader application - should be made clearer.

The link between King IV and the law is described in detail in Part 3: King IV Application and Disclosure.

An audit committee has only an advisory role in the public sector. This should be addressed.

This matter is now addressed in the sector supplements.

Use of audit and audit quality should make clear whether only external audit or also internal audit.

References to the external auditor is now clarified as such.

Should not limit disclosure to internal controls that resulted in material loss etc., there should also be disclose on control failures that could have led to these; do not limit disclosure to internal financial controls that resulted in material loss but also in areas of strategy, operations and compliance.

It was considered that it could be problematic to estimate the potential losses to control failures. Taking into account the scope of the duties of the audit committee, it was decided to limit the disclosure to financial controls. It is considered that the disclosure required by the other committees on key areas of focus and actions taken to monitor effectiveness and address outcomes should cover this.

There should be some report or assurance to stakeholders that This is dealt with under risk.


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risk management is effective

There should be an express reference to need for audit committee to comprise of sufficient number of members with sufficient financial literacy, skills etc.

Addressed.

Tax policy is task of board not audit committee. Addressed.

Delegation to management

CEO appointment should include key contract terms such as ethics, confidentiality, breach, restraint, conflicts.

This was deemed to be too detailed.

Succession plan for CEO can be a premature process. A succession plan does not necessarily involve having a designated successor but there should be an agreed process/ plan towards ensuring continuity of executive leadership.

Succession planning should highlight both long and short term planning.


CEO to subscribe to same ethical requirements as board. The governing body is tasked with the oversight of ethics of the organisation which includes the CEO.

Not only should execs and managers be assessed - also need clear development plans.

This was deemed to be too detailed. Enhancing human capital (as one of the six capitals) is part of the creation of value. King IV does not provide detailed guidance as to how this should be done in respect of all of the capitals.

Instead of making reference to succession planning, rather use the broader concept of leadership continuity.


The CFO should be included in performance evaluations and be included in all practices where CEO is mentioned.

The performance evaluations of the executive is now addressed generally and it includes the CFO.

Human capital should be covered under functional governance areas.

This was deemed to be too detailed. Enhancing human capital (as one of the six capitals) is part of the creation of value. King IV does not provide detailed guidance as to how this should be done in respect of all of the capitals.

The disclosure on delegation is too light. Should include board being satisfied that delegation framework is complied with and deviations which resulted in loss.

The wording has been adjusted to include the governing body’s view on its effectiveness.

Disclosure of detail of senior managers, roles, qualifications etc. Agreed and addressed.


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too extensive. Rather require confirmation by board that senior management has relevant qualifications skills and experience.

Company secretary

What does it mean that the company secretary has to formally approve disclosure re composition of board, its committees and attendance? ; the company secretary should provide assurance to the board instead of formally approving disclosure.


What is the difference between reporting functionally and administratively? ; clarification is required on the reporting line of the company secretary; instead of the company secretary reporting to the CEO, the company secretary should report administratively to the appropriate executive of the organisation.

This has now been clarified.

Empowerment for company secretary is lacking. Agreed and addressed.

Explain “corporate governance professional”; for consistency all clauses where it is referred to the company secretary should also refer to the corporate governance professional; include definitions of company secretary and corporate governance professional in glossary; the skills of the company secretary and corporate governance professional could be quite different - to clarify.

These matters have now been clarified in the drafting.

Include for the company secretary an advisory role on strategy development to emphasize the seniority of this position.

The King Committee disagrees that the role encompasses involvement in strategy.

Company secretary role in disclosure too basic, should be elevated and include drafting of <IR>.

Expanding the role of the company secretary to draft the <IR> would not be appropriate for all organisations.

Disclosure re company secretary should include remuneration and fees for services.

It was decided not to include this as a recommendation. If the company secretary is part of the executive team, this would in any event apply.

Performance appraisal

The CFO should be included when performance appraisal of CEO conducted by governing body.

This would differ from organisation to organisation and the King Committee opted not to be prescriptive on this.

A three year interval between performance appraisals is too long. It should be conducted annually and independently facilitated

The recommended practices now provide for a formal evaluation every alternate year with an informal reflection every other year.


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every three years as per UK practice; performance evaluations should be conducted every two years.

Risk and opportunity

The introduction of risk and opportunity is supported; the concept of risk and opportunity management are not well understood - legislation refers to risk and risk management; the practice of opportunity management is not well embedded; risk and opportunity: the way it is dealt with in King IV suggests that it is a single concept - not correct. Some risks do not give rise to opportunity. It should be treated separately; both opportunities and risks impact on value but in opposite directions; including opportunity with risk management may have unintended consequence of skewed risk consideration.

This matter has now been addressed to clarify that risks may also include opportunities which need to be considered and captured. There are also opportunities that are available but which do not originate from an existing risk. Risk and opportunity is no longer dealt with as a single concept.

Business continuity management should be emphasized more strongly; business continuity should be considered holistically and should include both risk and business continuity management.

Addressed.

More emphasis needed on integration of risk, part of integrated thinking.

Addressed.

Relational risk should specifically be mentioned; environmental guardianship is lost in the Code - resource depletion, climate changes etc poses significant risk to companies; consider including reputational risk; why the specific mention of fraud as just one of many risk types?

The King IV Reports seeks to address matters at normative level rather than dealing with specifics. The high level guidance is intended to be applied to specific scenarios. Thus the specific risks mentioned in the commentary should all be included and integrated as part of risk management. The specific reference to fraud was taken out as a result.

Dependencies are not limited to capitals and relationships. This is a reference to the six capitals model which is intended to cover all of the capitals that the organisation use and affect. Capitals are defined as such in the glossary.

Not all organisations will have risk management function, therefore replace function with processes.

Addressed.

What does arrangements mean? Now defined.

There should be disclosure of key risks - in the form of a matrix It is now addressed that key risks should be disclosed.


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with both inherent and residual risks.

There should be more of a focus on integration of risk - design plus embedding.

Addressed.

Technology and information

Refer to ISO and IEC standards that could assist with implementation.

It is problematic to decide which frameworks and standards are to be recommended and which not and therefore King IV refrains in so far as it can from making these recommendations.

IT strategies should be linked to organisational strategies in practices.

This principle now establishes this link.

It is unrealistic to expect the governing body to perform all functions listed for oversight of IT.

The drafting has been reviewed to differentiate governance and management of these matters.

Deal with disposal of obsolete technology and information in environmentally responsible manner; additional practices to consider for recommendation: monitoring of progress against IT strategy, significant IT investments, business resilience, and internal control framework; project governance should be introduced as part of IT; procurements issues in IT to be addressed; focus of IT to be broadened by including information classification and protection, technology disposal, protection of off premises information and intellectual property.

All of these recommended inclusions have been considered and an attempt has been made to address and organize these at a high level in the recommended practices.

The principle on information should include the preservation of confidentiality, integrity and availability of organisations’ information; information amounts to more than electronic information; separate technology and information more explicitly; consider more practices dealing with data management.

All of these recommended inclusions have been considered and an attempt has been made to address and organise these at a high level in the recommended practices. Information is now more definitively separated from technology.

ROI should rather be expressed as “return on investment and value delivery”.

Addressed.

Integration of people, technologies, information and processes should not be limited to digital value chain but extended to all business information.

Addressed.

Risk oversight should not be limited to outsourced services and Addressed.


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supply chain.

The governing body should receive independent assurance on effectiveness of IT controls.

Addressed.

What is meant by “formal review” of technology and information governance? Should "periodically carry out a formal review"; what is meant by periodic and by formal and what type of assurance is meant to be derived from this review?

This has now been clarified in the wording.

There should be provision for the appointment of a Chief Digital Officer.

King IV refrains from making such recommendation on any management or executive positions. There is a general recommendation that key functional areas be headed up by individuals with the necessary competence and authority.

The governing body should delegate responsibility for protection of information to the CEO.

This is addressed by the governing body delegating implementation and execution of technology and information policies to management.

It should be mandatory for organisations to disclose any failed attempts on information security.

This was deemed problematic to define and to police and was therefore not included.

"Digital development" open for interpretation; digital development should be expanded to wider technology, “technology” should be defined; the term technology should include all technology.

Technology is now defined and digital development no longer used.

Definitions needed for information, information management, and data governance.

Information is now defined and the practices rephrased.

The section would be better named, Technology, Information and Communications Governance.

The practices have been substantially redrafted with the view to better reflect “technology and information”.

Cyber security is sub- set of information security – it should not be singled out above other risks which are equally important; cyber security should be broadened to information protection and the word privacy should be reintroduced; cyber resilience should be highlighted; cyber security should support confidentiality, integrity and availability; business resilience should not be dealt with under cyber security; more appropriate to recommend that board receives assurance from management on cyber security risk than

The prominence of cyber security has been reduced and it is dealt with as part of information security.


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to recommend that the board oversees cyber security.

Compliance

All breaches of environmental law should be required to be disclosed.

Now included.

Disclosure of non-compliance should include finding pursuant to compliance monitoring inspections by regulators.

Now included.

There should be reference to governing body setting tone for compliance.

The first practice under the compliance principle now deals with setting the tone albeit using different terminology.

Remuneration

General

The importance of selecting appropriate peer group for benchmarking should be highlighted.

Justification of the use of remuneration benchmarks is now required.

Organisations should explain the rationale/ motivation for remuneration awarded.

Addressed by having to justify the use of remuneration benchmarks and explaining the linkage between performance and variable remuneration.

Amount paid to remuneration consultant to be disclosed. It is required that the remuneration consultants be identified but it is not necessary for the amount to be paid to them to be disclosed as it is considered to have limited value and dependent on too many variables.

“Details in employment contracts that give rise to employment considerations" - what is meant by this and consider that it may contain sensitive information.

It is now clarified to read: Details of obligations in executive employment contracts which could give rise to payments on termination of employment or office.

What is meant by "elements and design principles informing the remuneration system”?

It is explained what the elements of remuneration consist of which should assist with clarify what this phrase means.

Recommended that remuneration committees and social and ethics committees take a collaborative approach; it is not appropriate that social and ethics committees get involved in remuneration; how is the role of the social and ethics committee in relation to remuneration differentiated?; social and ethics committees should look at how employees live and also pressures faced by them; social and ethics committees are not composed for

The involvement of social and ethics committees in the assessment of executive remuneration being fair and responsible in the context of overall remuneration was reconsidered. The view taken was not to prescribe but that the governing body should decide whom this gets addressed by.


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it to be able to oversee remuneration on an informed basis.

Guidance is needed on what "fair and responsible" remuneration means - consider explaining that it means externally competitive and internally equitable; companies should develop a Fair Remuneration Framework that addresses what is considered as fair pay differential and should be engagement on it; "Fair and responsible remuneration" open to multiple interpretations not subject to context.

“Fairness” and “responsibility” are both now defined in the glossary. Ultimately this is a judgement call by the governing body.

Consider including definitions of remuneration, STI, LTI and Total Earnings; LTIs should have vesting period of no shorter than 5 years.

Rather than dealing with STI an LTI specifically, it was decided to address variable remuneration holistically. The detail will be dealt with in practice notes that the King Committee will consider in due course.

What is transparent remuneration, for example how would employee see that playing out?

Transparency is now defined in the glossary.

Basic salary and base salary - be consistent with use. Agreed and addressed.

Remuneration should be considered as part of system of human resource practices.

Agreed. One of the stated objectives for the remuneration policy is for it to accomplish the enhancement of human capital.

The implementation report needs to include a requirement to take note of pay issues in broader employee base.

It is recommended in the practices that pay elements and design for employees other than executives also be disclosed at a high level.

Loss of office payments are not variable but once off payments. Agreed and addressed.

The use of term prescribed officers is not appropriate in a context which is wider than companies.

Agreed and the reference used now is “executive management” as defined in the glossary.

Variable remuneration is generally linked to financial metric and safety performance - more guidance and clarify on how to institute across the triple context and the 6 capitals model is required; there are practical difficulties with linking pay with sustainable performance across the triple context as difficult to quantify and different variable pay schemes have different area of focus.

The role of King IV is to establish the broad framework for remuneration governance. The detail will be dealt with in practice notes that the King Committee will consider in due course.

The current requirement is for the governing body to develop policy - governing body should set framework of the policy and



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approve when developed.

There are different articulations of what must be disclosed in remuneration report - to reconcile and address variability.

Addressed.

King IV needs to be more explicit on whether the names of executive directors/ prescribed officers should be disclosed; publication of names of directors and prescribed officers should be dealt with.

This is implicit by stating in the principle that there should be transparency around remuneration and the fact that the practice recommendations include that there should be disclosure in respect of each executive manager.

There should be disclosure on criteria for performance measures, link to strategy, and performance appraisal results of executive, time frames of payment and how remuneration relate to the performance of the organisation.

Addressed.

King IV should not be prescriptive re format and content of company's disclosure of deliberations at individual remuneration levels.

It was decided to keep the disclosure recommendations at a high level.

The recommendation for illustration of application of rem policy under different performance scenarios is problematic

It is already being done by organisations, so it was not considered impractical or problematic. The practice has been rephrased to simplify.

Add to background information to be disclosed: link to business strategy

Link to business strategy is contained in the principles. It should therefore, be evident that practices should be implemented with this end in mind.

Wage gap

There should be disclosure of wage gap; address the wage gap and excessive remuneration; there should be a binding vote on executive remuneration policy due to growing wage gap; there should be a recommendation for the governing body to opine on what the appropriate pay level multiplier is and to disclose the rationale for pay gap; organisations should set target of fair wage gap and have plan to reduce it over time.

The King Committee decided to deal with this by recommending that the remuneration policy should address fair and responsible executive remuneration in relation to overall employee remuneration. It should then be disclosed by explaining how this is done.

Voting on remuneration

With remuneration disclosure and voting, a clear distinction should be made between public and private companies; voting on

The section of voting on remuneration was made applicable to companies. Those companies who do not wish to adopt the


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remuneration should be applicable, only to listed companies. practice could explain why they choose not do so.

A non-binding vote on implementation of the remuneration policy is ex post facto and could destabilise; the resolutions should be consolidated into one, practical difficulties with 2 votes.

It was decided to keep two separate votes as it assists with clarifying the issues. The responding measures recommended in the case of the vote not being passed, remain the same for either vote.

The 75% adoption when voting on the remuneration policy and its implementation is too high; the vote should remain at 50%.

As this is not a binding resolution but one that triggers very specific consequences, primarily engagement, it was determined that it was appropriate for engagement to take place if 25% or more of the votes are exercised against the policy or its implementation.

There should be binding vote on remuneration; the shareholder resolution on remuneration should be made compulsory; vote by shareholders should be legally binding.

The King Committee does not have the authority to make the shareholder vote binding. A binding vote also does not cater for the specific consequences that the King Committee considered to be appropriate to address escalating levels of remuneration at this point in time.

There should be independent assurance on steps taken by board to address shareholder concerns.

Disclosure on what steps have been taken was deemed sufficient.

The 75% vote in favour of the remuneration policy and its implementation should be changed to 25% against otherwise it may cause confusion with how votes that abstained should be counted.

Addressed.

Material severance payments should be subject to shareholders approval.

It is now dealt with by requiring that there should be separate disclosure of, and reasons for, any payments made on termination of employment or office.

Voting on the remuneration policy should take place annually. Addressed.

Obligation should be imposed on material shareholders to engage with company; more guidance is required on how engagement should be conducted; compulsory shareholder engagement which is triggered if adoption of less than 75% is problematic as remuneration committee members do not have capacity to deal with many encounters.

The audience for King IV (as is the case with any other code on corporate governance) are those charged with governance, i.e. members of the governing body. King IV can therefore not create obligations for shareholders per se. The wording of the recommended practice has been refined so that responding measures (in the event 25 % or more of the votes are exercised against the policy or its implementation) should provide for taking


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steps in good faith and with best reasonable effort towards engagement. The governing body should determine what such steps entail and as long as it can justify that it was taken in good faith and with best reasonable effort, the requirement would be satisfied.

Shareholders have more effective mechanisms than voting to make their voice heard e.g. election of directors who are retiring by rotation.

Agreed. The advisory vote serves as a pro-active warning signal by shareholders in this regard.

The practice that performance of remuneration committees is evaluated on basis of votes against, will deter directors to serve on remuneration committees.


Assurance

Internal audit

Administrative reporting is a threat to independence of CAEs. What does administrative reporting entail?; should IA and other internal assurance providers have a direct reporting line to governing body or committee of governing body?; why should CAE report administratively to CEO?

Addressed.

The IA role in IR and combined assurance should be more explicit. Addressed.

No mention is made of IA standards as basis on which IA function established; add a recommendation that IA be conducted in conformance with globally recognized internal audit standards.

It is now referred to under the definition of assurance in the glossary. It is assumed that the governing body should adopt the appropriate standards for oversight of any function, including internal audit, risk, etc.

When IA outsourced, the CAE can be provided by outsourced function.

Addressed.

IA should provide assurance on the effectiveness of risk management and internal control.

Addressed.

The audit committee should ensure that a quality assurance review is conducted very 2-5 years on IA function whether in or outsourced.

Addressed.

CAE should as minimum be invited to executive committee Addressed.


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meetings.

Include "governance" in scope of IA. Addressed.

"Adequacy and effectiveness" of control environment contradicts what is said in Chapter 3 with regard to the duties and responsibilities of risk committee.

Addressed.

Audit committee should also determine remuneration of the CAE. Addressed.

Include that IA should adhere to ISPPIA, IIA code of ethics. Addressed.

Use of "adequate and effective controls" limit to only one element of COSO. Align.

The Code now refers to only effectiveness of controls. “Effectiveness is defined in the glossary.

Clarify the role of the senior manager where IA is outsourced. Addressed.

Every company which has audit committee should have IA headed by CAE

There are too many variables and it was determined not to be prescriptive in this regard.

Include in the practice recommendations that IA should provide written assessment of effectiveness of organisation’s system of internal controls and risk management.


Combined assurance

Consider alternative term for combined assurance model; Combined assurance model should be evolved to differentiate between internal assurance (set of processes put in place by management that incorporates use of 3 lines of defence model with oversight of governing body) and independent external assurance providers (performed by assurance providers licensed).

The use of the term “combined assurance model” has been retained but a definition thereof was added to explain its purpose, who the users of it are and the components that it is made up of.

Mapping provisions for combined assurance model are overly cumbersome.


5 Lines of assurance

The term assurance is not used in King IV not in its technical sense

“Assurance” for the purposes of King IV has now been defined to clarify that it includes, but is not limited to, assurance engagements performed by independent, external assurance service providers.

Explain the move to 5 lines of assurance; the use of the term "assurance" across all 5 lines is misleading as could convey that

The use of the 5 lines of assurance has been discarded in favour of listing what assurance services and functions may include. It is


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similar level of assurance obtained from all lines; there is no clear distinction between those deriving assurance and those providing assurance; including the governing body and committees as part of 5th line appears to be circular; inclusion of regulators in 4th line may be misleading as they have different objective; forensic examiners, statutory actuaries and safety assessors typically investigate and are therefore not providers of assurance; the wording around specialists included with IA in third line is confusing; it is unclear what 5 lines are providing assurance on and to whom; the audit committee cannot oversee combined assurance model seeing as it is part of it; the third line of assurance have different levels of independence and therefore presumably would provide different levels of assurance; are second line internal to organisation and fourth line external?; who is intended beneficiary of 5th line?; where IA is outsourced is it part of 4th line?; the compliance function should be part of 3rd line; the 1st line should refer to executive management and all lines of business and not be restricted to those who own and manage risk.

then left to the determination of the governing body and audit committee on how these should be combined to accomplish the objectives of the combined assurance model.

Other comments on assurance

There is not enough guidance on assurance of <IR>; the recommendations for assurance on reports other than financial statements are supported but practically questioned in light of where developments are currently.

This may be dealt with in practice note to be issued in due course by the King Committee and the Integrated Reporting Committee of SA. King IV is not prescriptive about IRs having to be assured.

The assurance section is not complete as external audit is not dealt with.

Addressed.

The principle on assurance should be expanded to include risk management and governance.

These are dealt with under IA.

The governing body should designate which committee is appropriate to ensure adequate assurance - not necessarily audit committee.


The assurance function cannot deliver outcome as per assurance principles - that is the duty of management.



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It should be included that the governing body reports on the effectiveness of the organisation’s system on internal controls.

It is dealt with as part of the disclosure by the audit committee.

Stakeholder relationships

Stakeholders

Do not use trade off but "blended value" in respect of stakeholders; there should be explicit recognition of trade-off between conflicting values and interests of stakeholders and that win-win opportunities not always possible; re the use of terms: balancing and trade-offs - explain and be consistent; how does organisation determine trade-offs of stakeholder interests?

The matter of balancing of stakeholders interests is now dealt with in more detail in the part dealing with Fundamental Concepts where an attempt was made to clarify on the questions and comments raised.

Stakeholder inclusivity should not be positioned as alternative to shareholder inclusivity but as a symbiotic relationship.


The quality of stakeholder relationships should be put in context that directors should be able to show that took reasonable steps to become informed; robust governance structures and processes necessary to adhere to the business judgment rule should include that directors have an understanding of stakeholder relationships; information on quality of stakeholder relationships should be made public; quality of relationships should be assessed by obtaining input from stakeholders.

Part 3: King IV Application and Disclosure now states that: “Voluntary governance codes such as King IV recommend leading practices for how governance duties should be discharged, and therefore influence and affect what practices are considered and eventually adopted and implemented by governing bodies. The more widely certain recommended practices in codes of governance are adopted, the more likely it is that a court would regard conduct that conforms to these practices as meeting the required standard of care.” This applies to all practices including those dealing with stakeholder relationships. Measurement of the quality of key stakeholder relationships, and appropriately responding to the outcomes are now included as a practice recommendation and so is disclosure thereon.

If assessment is done by management will not obtain honest feedback - therefore should be done independently; the context for communication platforms and measurement of quality of relationships is still on what company is saying rather than what stakeholder might say; management of stakeholders implies a degree of control, a better word may be assessment or effective dialogue.

The King IV Codes refrains from being prescriptive about how practices are executed and therefore does not go into the detail of how quality should be measured. It is not that stakeholders should be managed but rather that the stakeholder relationships should be managed. The King Committee believes that by linking the practices to the principles and then in turn to the governance outcomes provides a proper context for stakeholder relationship


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management.

Stakeholder relationship should not only be about trust, good reputation etc. – it should be seen in terms of performance and value creation; stakeholder relationships do not seem to link closely to Trust, Good reputation and Legitimacy.

Agreed and now addressed in that stakeholder relationships are linked to all 4 governance outcomes, namely: ethical culture; good performance; effective control and legitimacy.

Definition of material or key stakeholders and to be consistent in the use of either term.


The intro phrase to the stakeholder principle limits the scope of the principle - it deals only with decision-making and not engagement

The wording of the principle has now been broadened to address this.

Disclosure of refusals of requests for information repeats PAIA, it is not necessary.


There is no specific guidance on engaging with consumers whilst government and employees are mentioned; Governance of human capital / employees should be included; this chapter is too detailed and specific - governing body to approve policy and what policy should entail too detailed; the practice recommendation re automation is too specific; the Code should draw specific attention to vulnerable stakeholders.

It was agreed to address stakeholder relationships generally with the intention that the specifics should be dealt with in accordance with the higher order recommendations.

Consider adding that the governing body should oversee risk through risk management programme and stakeholder relationship information should be used when making strategic decisions.


Key stakeholders like unions should have a seat on boards. The king Committee disagrees with this view.

There should be recognition of the responsibility to identify stakeholders and different needs and abilities to access information; The Code should distinguish between types of shareholders.


Consider recommending disclosure of material concerns raised by stakeholders.

This is dealt with by recommending disclosure on key stakeholder risks.

There is reference in intro chapter to adopt dispute resolution mechanisms and associated processes as set out in King III - clarity is and more detail of practices are required; give

This will be considered as part of a practice note to be issued in due course by the King Committee or one of the organisations represented in its membership.


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consideration to dispute resolution mechanisms imposed by legislation e.g. consumer goods and services ombudsman.

The chapter should be titled stakeholder engagement rather than stakeholder relationships since engagement is key to determining materiality, risk and opportunity. The draft uses engagement only in relation to shareholders and not stakeholders generally.

Stakeholder relationship is considered more correct as the relationship results from among others engagement.

The common law is still understood to mean that best interest of the company is acting in best interests of body of shareholders - reconsider stakeholder inclusivity.

The King Committee disagrees with this view and explains the rationale for its opinion in Part 2: Fundamental Concepts.

Shareholders

Practice that different classes of shareholders be treated equally suggests the potential for multiple share classes. This is not good practice.


Stakeholder activism should expand by compelling shareholders to publish voting policies and practices.

This is addressed under the institutional investor principle.

Shareholder practices should include dialogue, additional shares to shareholders who attend AGMs, training of shareholders.

Engagement is provide for it was decided not to include the other suggestions as per the commentary.

It is not appropriate for specific practice to focus on foreign shareholders.


Making AGM minutes publically available problematic for private companies.

Addressed.

Delete the recommendation that organisations encourage attendance of AGM.

The King Committee disagrees with this view.

Institutional investors

It is not clear whether institutional investor principle should be interpreted narrowly or widely.

The wording of the principle and its associated practices has been refined to address this.

The responsibilities of shareholders should extend to all shareholders, not only institutional investors.

After consideration it was determined not to expand the scope of this principle beyond institutional investors as there are no credible codes of practices in place for shareholders generally (such as CRISA for institutional investors) against which shareholders’ conduct could be assessed.


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Institutional investors should not only disclose investment policies but also actual practices.


King has no jurisdiction over institutional investors – the principle should be removed.

The audience of King IV are those charged with governing duties, i.e. the members of governing bodies. The members of the governing bodies of institutional investors (eg pension funds, asset managers, etc) thus fall within the ambit of the scope of King IV.

The institutional investor principle is also relevant to NPOs. After consideration it was determined not to expand the scope of this principle beyond institutional investors as there are no credible codes of practices in place for funders’ generally (such as CRISA for institutional investors) against which their conduct could be assessed.

Institutional investors and companies should disclose on matters discussed behind closed doors.

The enforcement of this suggestion is problematic and therefore it was not included as a recommended practice.

Group governance

Group governance should not be listed under this principle as does not fall under institutional investors; there should be a separate principle for group governance.

Agreed. Group governance has now been moved under the general stakeholder relationship principle as subsidiaries is a sub-set or a specific stakeholder grouping of holding companies.

For group governance framework - what about dormant subsidiaries; group governance deals with subsidiaries but what about associates; Group governance practices more appropriate for subsidiaries with external shareholders; group governance should be toned down for entities other than companies eg pension funds, trusts; it is questioned as to whether a group governance framework appropriate for groups operating across multiple jurisdictions; may be problematic for larger group to implement group governance practices.

The group governance framework is recommended for companies in a group. “Holding company” and “subsidiary” are both defined in accordance with the Companies Act and these practices apply to them. A group governance framework is deemed appropriate for groups operating in multiple jurisdictions and larger groups.

Why does group governance framework need to be incorporated in the MoI?

The wording has been refined to clarify that the group governance framework should not conflict with the MoI.

Practices on groups should include proposals for communication levels, align, meet of goals, sharing of information; the group governance framework should give effect to board-level

Now addressed at high level.


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agreements to contain to contain protection of business and institutional investor principles; it should also contain contractual obligations for directors to comply with the Companies Act and fiduciary duties.


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Responses to the summarised public comment on the King IV Report sector supplements

Introduction

The five sector supplements to the King IV Report and Code (Report) comprised of the following documents:

I. Introduction to the supplements II. State Owned Entities

III. Non-profit Organisations IV. Small and Medium Enterprises V. Municipalities

VI. Retirement Funds VII. Survey questions Overall, comments were considered generally positive, supportive and constructive. However, it became evident that the Report has evolved through a number of iterations i.e. King I, King II and King III over many years whilst the sector supplements have been developed out of a relatively new process and did not have the benefit of a lengthy period of time over which they could evolve and their content mature.

Summary of comments on the sector supplements

Introduction to supplements

Additional detail should be provided in the supplements to give users more detailed guidance on application of the various practices within a specific sector.

Considered and addressed in line with construct and aspirations of the Report.

Specific legislative requirements and certain key standards should be incorporated into the documents were also made.

Considered in relation to premise that the level of detail needs to be balanced to achieve the Report aspirations of simplicity , being less prescriptive with links to suitable best practice benchmark standards for guidance in line with the Report , which is based on


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the construct of 16+1 high level Principles applicable across all the sectors Conversely comments were received on the need to be less prescriptive which supports the notion of the high level principles and applying the spirit of the Report rather than complying with the letter .

Highlighting of BEE related issues. This has been considered and dealt with in the Report.

To consider possible additional supplements specifically Medical Aid Schemes and Higher Education Authorities.

Consideration had to be given to key sectors and a decision taken on an appropriate cut off. Going forward, the possibility of additional supplements will need to be considered by the King 1V Task Team for recommendation to the King Committee.

A supplement should be provided for wholly owned subsidiaries. This has been dealt with in the Report under the Group Company and Proportionality sections.

How should organisations not specifically covered in the sectors be dealt with?

It is not possible to cover all additional types of organisations within a sector and guidance is given in this regard on a best fit basis.

The Proportionality considerations should be better contextualised and explained

This has been addressed in the Report and supplements where required.

Integrated Reporting should be more clearly explained in relation to the various sector.

These suggestions were considered and addressed from both an issuer and user perspective in certain of the supplements where deemed appropriate particularly in relation to the stakeholder dynamics.

There is a need to provide suitable guidance for the application of each of the sector supplements in relation to the Report and its construct. There is a risk where supplements may be read in isolation to the main report

This has been addressed by way of an Implementation Road Map in the introduction to the supplements. In addition the need for the Report, the Introduction to the supplements, as well as the applicable supplement to be read as a whole, has been highlighted.

There is a need to expand on governance of ethics. This has been addressed in the Report.

There is a need to address specific fiduciary roles in different sectors.

This has been addressed where required in the applicable sector supplements and in context thereof.

The combined assurance model and it relevance to the sectors should be clarified further.

This matter was considered and addressed after consideration, in the Report.

The key benefits of good corporate governance for each sector to be spelt out.

Dealt with in each sector code.


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Illustrative examples /case studies should be included in supplements.

This does not align with the overall construct and aspirations of the Report and such examples will need to be dealt with in other subsequent documentation such as a Practice Notes or other best practice guidelines as may be decided by the King committee .

State Owned Enterprises (SOEs)

Highlighting of BEE related issues. Dealt with in Report

To consider possible additional focus on certain public sector structures beyond schedule 2 and 3 category entities should be considered.

Decision had to be taken by the King Committee on certain key focus areas and guidance has been given on how other organisations with similar characteristics should apply the supplement.

Composition and continuity in relation to staggered rotation should be considered.

Addressed in terms of composition and continuity and the sector context.

Funding mechanisms for SOEs particularly in relation to taxpayers and other parties needs highlighting

Considered and addressed.

Further explanation on aspects such as shareholder compact, corporate plan etc. in relation to strategic objectives is required.

Noted and addressed.

Further guidance is required on appointment and composition of audit committees.

This has been addressed at a high level as cannot be prescriptive and same principle applies to clarifying roles of CEO and CFO.

Shared services model aspects require additional clarity and guidance in relation to the sector.

Noted and addressed

Frameworks such as DPSA CGICT as well as certain other protocols require linking and referencing.

Links and references to various frameworks and protocols were considered and addressed as deemed appropriate.

Delivery on mandate was considered important and needed to be positioned.


Composition of governing body and manner of appointment should be clarified and best practice guidance given.

Noted and have been addressed to the extent possible within the relevant legislative framework and have been suitably highlighted.

Uniformity of terms throughout supplements requires reviewing and addressing.


The non-applicability of “”apply and explain”” of principles in certain instances were suggested relevant in this sector.

The King Committee is of the view that the principles have been set at sufficiently high level to cover all sectors and organisations, It is


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the practices that are to be considered for application and explained and the alternative followed where a departure is deemed required. Guidance has been given in Report and further guidance given in the Introduction to the supplements where there is a specific conflict or practices cannot be reconciled with legislation.

The possible stretching boards and or resources requires consideration

Matter has been addressed under the concept of proportionality as well as in the sector context.

The degree of detail and content for additional guidance needed to be considered.

Noted and addressed in line with striking the right level of balance and to align with the construct of the Report as previously outlined.

An implementation Roadmap needs to be considered in order to provide the necessary guidance

Definitively addressed in the Introduction to the supplements as previously highlighted.

Non-profit Organisations

BEE aspects should have been more clearly highlighted. This matter has been considered and suitably addressed in the Report.

Integrated reporting aspects pertinent to this sector need to be better contextualised and explained.

Noted and addressed in context. Some examples and context of potential users and benefits were included.

Proportionality aspects as relevant to this sector should be explained.

Dealt with in introduction to the supplements and Report

Governance structures, functions, roles and resource pressures and specifically delegation and conflicts of interests were considered to need further explanation and guidance.

Specifically noted and addressed. Issues with remuneration, attraction of and retention of skills and attendant issues have been further considered and highlighted. Need to context and highlight the importance of fiduciary duties of governing board members was also noted.

Importance of the sector was considered well-articulated. Notwithstanding the comment, this aspect has been further considered and enhanced to ensure adequate relevance / context.is clearly conveyed.

Importance of the supplement should be clearly understood in context to the Report as well as the anomalies with shareholders and sensitivities with certain stakeholders for organisations within this sector.

Matter considered and addressed and wording revised around same.


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Small Medium Enterprises (SMEs)

BEE issues to be highlighted. Matter has been suitably addressed in the Report.

Scope required to be further explained in respect of all other SMEs which do not fall within definition need to be given guidance on application.

Has been addressed and guidance given where an organisation may not appear top fall within the specific definition

Broadening of scope should be considered to include other types of legal entities.

Scoping principle as outlined earlier considered to prevail.

Proportionality aspects as relevant to this sector. Needed to be clarified and explained

Noted and addressed as outlined earlier.

Issues around family business structures and interests and the particular associated dynamics and challenges needs to be highlighted and suitable guidance on these aspects given.

Noted and considered adequately addressed.

Need to deal further with the aspect of blurring of roles in respect of shareholder director and managers. And the attendant challenges and risks

Noted and addressed

Concern that entrepreneurs maybe hamstrung by a still to prescriptive approach in relation to this sector.

Noted and considered against the construct of the Report which endeavoured to ensure a non-prescriptive and enabling approach for this sector recognising the need for entrepreneurship not to be stifled and for the principles and practices of good governance to be an enabler for these organisations

The supplement needs to highlight and demonstrate the relevance and benefits of good corporate governance (i.e. business case) in this sector.

Noted and definitively addressed.

A suitable implementation roadmap for the supplement should be included to give adequate guidance.

Noted and definitively addressed in introduction to the supplements.

Municipalities

Scope was queried and suggestion made to clarify the definition of the categories of municipalities that had been include current

Noted and addressed. And guidance given where an organisation may not fall within the strict definition

Need for BEE to be highlighted. Matter has been suitably dealt with in Report.

Is there a real need for this specific supplement given it could Given the significant importance of the sector as well as the


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potentially be covered within the SOE? nuances, anomalies and particular challenges it was considered appropriate to deal with same specifically in a dedicated supplement which would adequately allow for same.

Roles, terminology governance structures and functions needed to be further considered, contextualised, explained and guidance given in respect of the particular anomalies and challenges.


Comments around external auditors. Noted and addressed

Objectives, societal role and powers for Municipalities need to be expanded on, contextualised and further explained.

Noted and addressed and necessary links made to the relevant legislation in this regard to ensure adequate context and guidance.

The context and independence from government and impact of the constitution. should be further considered and explained


The aspect of value creation and applicable legislation needed to be suitably linked and explained.


Composition which impacted wording of applicable principle. Considered and dealt with in Report and aligned other comments which impacted wording of key principles which needed to be considered in light of Report, to ensure consistency across all sectors.

Delegation to structures, roles of audit committees needed to be expanded and better contextualised given the specific dynamics and challenges in this sector.


Performance management aspects in relation to regulations. Should be definitively linked and explained


Proportionality should be better explained and contextualised for the sector.

Addressed in the Report, the Introduction to the supplements and in a sector context.

Was there sufficient sector consultation. Noted and considered to have been adequately addressed.

Retirement Funds

Scope aspects regarding “non-defined” funds and medical aids. Considered and addressed.

BEE aspects to be highlighted. Dealt with in the Report.

There is a need to ensure the necessary linkage to Circular PF 130, CRISA and Reg 28 PRI Principles and in certain instances

Noted and addressed in line with overall approach and construct of Report and necessity to maintain suitable balance on the level of


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inclusion of key principles/aspects from same in the supplement. detail. Linkage has been made but sections, provisions or principles from such documents are not duplicated in the supplement. Suggestions for revision of certain of these documents are not within the remit of the king Committee

Clarity sought around definition and of large funds particularly in relation to composition of Boards and professional trustees. Clarity, relevance and application of shared services model required.

Noted and addressed as to challenges in various sizes of Funds as well as the intention of a shared services model and its application

Composition of boards, particularly smaller funds needed additional guidance.

Considered and addressed and challenges for smaller funds specifically highlighted in supplement as mentioned above.

Numerous terminology comments. Considered and addressed.

Value creation investment strategy and stakeholder dynamics need further context in respect of the sector dynamics.


Governance structure and functions, particularly around outsourcing and conflict of interests needed to be clarified and guidance given to assist with the significant challenges in this area.

Considered and addressed as NB.

There was a need for ESG specific guidance and need for inclusion in the supplement.

Noted and addressed in the considerations around CRISA and PRI with suitable to linkage to same.

Fiduciary responsibilities required contextualising for this sector as well as training for board members to be specifically addressed given the dynamics in the retirement industry particularly with smaller finds.

Noted and addressed in sector context as well as highlighting the importance of training in this sector.

Implementation roadmap was required in order to guide users in this sector as to how to implement the principles in the supplement.

Noted and definitively addressed in Introduction to supplements.

Survey questions and summary In summary, the level of guidance, amount of detail to be included, and linkage to the Report, legislation and other guidelines and standards, formed much of the basis of the responses to the “”end questions”” posed. All responses to the survey questions and attendant comments indicated a high level of agreement and support. These responses were further considered particularly in the context of the following key premises:


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The construct and aspirations of the Report including its supplements which are to give adequate guidance whilst not being too prescriptive and driving towards defined aspirational outcomes.

The proposed “”apply and explain “”regime is based on fewer high level principles and practices

Each of the sector supplements, the Introduction to the supplements and Report are to be read holistically and not as standalone documents. Linkage between the documents which has been clarified, should be clearly understood.

The need for the updating of supplements going forward and/ or certain additional supplements for key sectors to be considered going forward.

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