Developments in corporate governance frameworks

The King IV Report on Corporate Governance™ in South Africa1 was published in 2016 and is the current South African applicable corporate governance code. It is recognized by the South African Courts, government structures, and most local organizations. In addition, a number of African Countries also apply the standard.

ISO 37000 was published in September 2021 as an international guidance standard for the governance of organizations. ISO 37000, however, is a guidance standard specifically for governance and is not a certifiable standard.

According to the Institute of Directors of South Africa (“IODSA”) and under King IV, the following is a focus:

Good performance

Good performance is an organization achieving its strategic objectives and positive outcomes as measured against its effects on the capital it uses.

Ethical culture

Ethics is defined as considering what is good and right for oneself and the other. In organizations, ethics refers to ethical values applied to decision-making, conduct and the relationship between the organization, its stakeholders and the broader society.

Culture is defined (from an organizational context) as to how members of an organization relate to each other, their work and the outside world (compared to other organizations). It is generally described as "the way we do things around here, even when no one is watching".

Also, in terms of ISO, the following is a focus:

Effective performance

The organization is true to its purpose; performs as required; generates value for stakeholders; remains in alignment with its policies and relevant stakeholder expectations.

Responsible stewardship

The organization responsibly uses resources; effectively balances positive and negative impacts. It considers global context, ensures its contribution to sustainable development, and engenders the trust and confidence of the communities it operates and beyond.

Ethical behaviour

The organization behaves under accepted principles of right or good conduct in a particular situation. This includes demonstrating an ethical culture, accountability through accurate and timely reporting on its performance and stewardship of resources, fairness in the treatment of and engagement with stakeholders, integrity and transparency in fulfilling its obligations and commitments, and competence.

In terms of leadership under both King IV and ISO 

King IV defines corporate governance as the exercise of ethical and practical leadership by the governing body towards achieving the following governance outcomes: Ethical culture, Good performance, Effective control and Legitimacy.

According to the IODSA, ISO describes "ethical and effective leadership" as being demonstrated when the governing body:

sets expectations for the organization using robust decision-makingbehaves in a manner consistent with the defined organizational valuesensures that the organization is, and is seen to be, following the expectations asset.

ISO 37000 states that "ethical leadership results in an organizational context and culture that:

provides the individuals of an organization with a collective sense of belonging;assists in reconciling strategic dilemmas by creating organizational alignment through the integration of opposites;contributes to the prevention of misconduct;provides competitive differentiation for stakeholders by providing clarity against which evaluators can assess the organizations' behaviour, decisions and activities; andprovides increased certainty, which in turn, creates reputational value.

It is crucial to building a solid framework for leadership, management, and sound governance to ensure that your organization remains relevant. In addition, sound governance is proving an imperitive in most jusidictions around the globe and therefore for South African entrepreneurs to remain competitive on a global stage – we need to observe local and international best practice.

Contact SchoemanLaw for all your corporate legal needs. 

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