The King’s Secretary
Since King II, the company secretary has been pivotal to corporate governance and is expected to be the central source of guidance for organisations’ governing bodies on the practices and implementation of good corporate governance recommendations.
The custodian of King IV, the Institute of Directors in Southern Africa (IoDSA), emphasises that the company secretary must ensure support in coordinating the functioning of the governing body and its committees in the application of King principles, and, therefore, should ideally be a professional and independent individual.
Independent company secretarial and corporate governance professionals should by now have adjusted to King IV, and although packaged differently with a few new items – such as a recommendation for organisations to have a tax policy – it should not have been a major challenge. “That is if you paid enough attention to the King III principles in the first place,” says Annamarie van der Merwe, CEO of iThemba Governance and Statutory Solutions, one of the 10 task team members of the King Committee that assisted in preparing King IV.
“In effect, the company secretary is the ‘gatekeeper’ of corporate governance,” Van der Merwe says. “King IV recommends that the governing bodies of all entities should appoint a company secretary, or in cases where they are not required to by law, a governance professional that could fulfil the role typically expected from a company secretary.
“This position carries enormous responsibilities and duties in an already complex regulatory and business environment,” continues Van der Merwe, “given that they must ensure an organisation’s compliance with the Companies Act of 2008, lest they face criminal and civil liability.
“Most governing bodies understand they have no option but to comply with the law, but when it comes to corporate governance, they miss the important link between good governance and their statutory duty to act with care, skill and diligence.”
And that’s where the secretary’s role comes in.
Taking it seriously
According to Van der Merwe, the biggest challenge is obtaining the sincere buy-in from governing bodies of the outcomes and principles of King IV, and thereafter “getting boards to understand that they have to apply their own minds to the desired outcomes to assess the health and effectiveness of corporate governance in their organisation”.
“The company secretary needs to guide decision-making to create an ethical culture,” she says.
Chris Wilson, Managing Director of Kilgetty Statutory Services, concurs, adding that the recent failures of some well-known JSE entities has introduced a refreshed interest in King IV including, and especially, unlisted companies that realise the benefit of practices that cultivate good governance outcomes in relation to their ethical culture, performance, effective control and legitimacy.
“Our advice is derived from the outcomes of undertaking King IV gap analyses to determine which recommended practices are lacking,” Wilson says, “and making recommendations on areas that require remediation to our customers.
“Even though King IV has toned down the 75 King III principles to 16, our clients’ main areas of concern relate to new disclosure requirements under each principle, which have to be reported in either the company’s integrated report or in a separate one issued to stakeholders, as per JSE-listing requirements. It is the company secretary’s role to ensure that those are adopted and adhered to.”
While the company secretary has a role to present the best and most flexible King IV agenda for an organisation, ultimately the onus of compliance depends on a changing mindset of the whole board that puts ethics first.