The latest, the King IV Report on Corporate Governance (or ‘King IV’), published on 1 November 2016, points the way to a far more accountable and long-term thinking corporate environment, one in which to simply comply with recommendations is just no longer enough.

“What matters is the quality of governance, as opposed ticking the boxes,” says King. “Company stakeholders are compelled to ask: “How is X company making its money? What has been the impact of this company on society and the environment?” This thinking has evolved over time, gaining momentum at the end of the 20^th century when a global tipping point was reached in terms of population growth and resource deprivation.”

King was speaking at the fifth International Conference on Management, Leadership and Governance (ICMLG) hosted by Wits Business School (WBS) in March. The conference, previously held in New Zealand, Russia, Thailand and the US, brings together academics, practitioners and other stakeholders in the fields of management, leadership and governance, from all over the world.

“It was privilege to have such an opportunity to showcase Wits University and the School to an international audience,” says co-Chair of the conference and WBS academic Dr Zanele Ndbaba. “Our keynote speakers, Deputy Vice Chancellor of Wits University, Professor Kuwane Kupe, and Professor Mervyn King, shared with the delegates invaluable insights on leadership and governance challenges from both an historical and contemporary South African perspective.”

King’s address guided delegates through the evolution of the King I to King IV reports, and started with the question: “Who owns companies: shareholders or no one?” He took a sweeping view of corporate governance practices over the centuries, starting with unlimited liability of company owners in the 19^th century which constrained growth and discouraged wealthy individuals from investing. The Limited Liability Act of 1855, passed by the UK parliament, paved the way for a new way of corporate thinking which elevated profit and shareholder dividends to top of the corporate agenda.

This way of thinking was prevalent, says King, until around 1992, when a more inclusive philosophy started emerging, and it was soon after, when South Africa was undergoing profound political change, that the King Committee was formed.

“At that time the primacy of the shareholder prevailed. A code of corporate governance on that foundation would have been indigestible in a country moving from unequal opportunity into equal opportunity. The emphasis on profits for shareholders would have been unacceptable in the new South Africa,” asserts King. “A new corporate framework was necessary, one which included long-term value creation, taking into account stakeholders’ needs, civil society, human rights – in short, the intangible assets of value creation.”

The King I Report of 1994 was highly innovative in its view of corporate reporting. It compared the concept of value within an organisation from a purely financial point of view to taking account of the legitimate and reasonable needs, interests and expectations of stakeholders in making collective board decisions in the best interests of the company.

In line with the Global Reporting Initiative (GRI) in the late 1990s, the King II report, published in 2002, recommended sustainability reporting as intangible assets had started forming the greater part of listed companies market value and boards needed to account for them.

The need to report on these intangible assets led to endeavours to communicate about them in annual reports by creating enhanced business reporting, ‘triple bottom line’ reporting (social, environmental and financial), balanced scorecards and sustainability reporting.

And thus the genesis of a new era of integrated reporting had begun. “Sustainability issues had become embedded in company strategy, and value was being viewed through a sustainability lens in a resource-deprived world rather than a financial lens,” says King.

“Every company is dependent on relationships and resources, which has necessitated a mind-set change at board and senior management level. The corporate agenda now looks at inputs to outcomes, to create value in a sustainable manner. Success, therefore, depends on internal financial outcomes, and external social, environmental and economic outcomes.”

“Financial reporting is critical, but not sufficient. Likewise, sustainability reporting is critical, but not sufficient. The two are interrelated, and thus should not be seen in silos,” says King.

King referred back to the global adoption of integrated reporting and how it came into being through the International Integrated Reporting Council (IIRC), of which he is chairman, which published its framework for integrated reporting (IR) in 2013.

Fully supporting the IIRC, the International Federation of Accountants (IFAC) released a paper in 2016 stating that “Integrated reporting is the way to achieve a more coherent corporate reporting system, fulfilling the need for a single report that provides a fuller picture of an organization’s ability to create value over time.”

And in King IV, with its emphasis on inputs to outcomes, companies have not only to apply the 16 principles, but to explain how they applied them so that a reasonable inference can be drawn that the company has achieved four pivotal outcomes: an ethical culture and effective leadership; performance and value creation in a sustainable manner; adequate and effective controls; and trust, good reputation and legitimacy.

King concluded his address with the acronym ICRAFT, which stands for: Intellectual honesty, competency, responsibility, accountability, fairness and transparency.

A company, after all, King notes, is an incapacitated and inanimate ‘artificial person’. It is the board, who has a duty to the company, to act with an “unfettered mind”, with skill, care, diligence and good faith.

“The essence of corporate ethics, is to act with intellectual honesty and in the best interests of the incapacitated company of which the director(s) is its heart, mind and soul.”