King IV legislation is impacting businesses across South Africa. Find out everything you need to know about these changes, and how they will impact your fleet.
Corporate governance is increasingly important in South Africa, as the dramatic events of 2017 showed - with major corporations like Steinhoff coming into sharp focus with a series of governance-related scandals.
South Africa’s answer to corporate governance is the King Codes, and most recently King IV which came into effect in 2017 - and believe it or not, this affects your fleet too!
The King Committee was established by the Institute of Directors in Southern Africa (IoDSA) in 1993. The King committee drafted the King Code and King I Report in order to form an inclusive approach to corporate governance.
How will King IV affect fleet management?
Fleet managers will need to familiarise themselves with the updates outlined in the King IV Report, in order to evaluate their current corporate governance structure. Any processes or principles that do not fall in line with the new framework will need to be revised.
The King IV Report includes five sector supplements that give additional, sector-specific guidelines for compliance. The five sectors are:
- Municipalities
- Non-profit organisations (NPOs) and Non-government organisations (NGOs)
- Small and medium enterprises (SMEs)
- State-owned entities
- Pension/retirement funds
Download the full King IV report from IoDSA to find out more about how King IV impacts your fleet (and business in general).
What is King IV?
King IV is the fourth revision of the King Report on Corporate Governance. While King IV took effect on 1 April 2017, it only became mandatory for businesses listed on the Johannesburg Stock Exchange (JSE) to comply with King IV on 1 November 2017 (and remains voluntary to all other businesses).
King IV aims to foster greater transparency in business, holding governing bodies and stakeholders accountable for their decisions.
Unlike King III, which used a traditional tick-boxes approach, King IV presents an outcomes-based approach to corporate governance. King VI came about in response to the digital and social media revolution and is intended to overcome the Millennial generation’s distrust of traditional tick-box frameworks.
Why is corporate governance important?
Corporate governance is designed to keep organisations (both profit and non-profit) honest and free from corruption.
“Corporate governance is of paramount importance to a company and is almost as important as its primary business plan. When executed effectively, it can prevent corporate scandals, fraud and the civil and criminal liability of the company. It also enhances a company's image in the public eye as a self-policing company that is responsible and worthy of shareholder and debtholder capital. It dictates the shared philosophy, practices and culture of an organization and its employees. A corporation without a system of corporate governance is often regarded as a body without a soul or conscience.” - Business Dictionary.
King IV moves from principle to practice. According to Mazars, global auditing and accounting consultancy:
“King IV consolidates King III’s 75 principles into just 16, plus one for institutional investors, with each principle linked to distinct outcomes. It clearly differentiates between principles, practices and governance outcomes. King IV details over 200 practices that would demonstrate the relevant outcomes. The practices are seen as a guide to demonstrating the outcomes and can be tweaked to be more applicable to your company. The new code aims to improve applicability to a wider audience, and hopefully make it easier for smaller companies to apply.”
The King Code and King IV Report aims to achieve the following objectives:
- Ensuring that both profit and non-profit organisations build ethical corporate cultures.
- Ensuring that all organisations add value to their community and society as a whole.
- Establishing a framework of control to ensure ethical leadership and accountability.
- Building trust and legitimacy in order to improve organisations’ reputations.
The King IV Report isn’t the only big change in fleet management this year
The introduction of IFRS 16 (a new international accounting standard) is due to take effect on 1 January 2019. IFRS 16 brings leased vehicles onto your balance sheet - a change that will turn fleet management as we know it on its head. Download our IFRS 16 presentation, to help you get your fleet ready to comply with these changes.
Disclaimer: *EQSTRA Fleet Management is not a financial services provider and the information given in the content is based purely on opinion and should thus be viewed as such. Please consult your financial institution/financial/tax services provider before making any financial or legal decisions that may impact your personal/professional environment. Please also note that with IFRS 16, the new accounting standard, coming into effect January 2019 some elements of this article will have to be amended to comply with the legislation.