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What Is the King Code?

The King Code for South Africa covers a variety of issues related to managing a business.
The flag of the Republic of South Africa.
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  • Written By: Mary McMahon
  • Edited By: Nancy Fann-Im
  • Last Modified Date: 06 August 2014
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The King Code is a set of guidelines for business governance used in South Africa. Officials periodically revise and update it to make sure the information is as applicable and useful as possible. As of 2011, the document was in its third revision; King III was released in September 2009 and is readily available to businesses and members of the public with an interest. Companies use the King Code to guide their activities and must provide explanations when they choose to deviate from the standards set by the code.

Fully titled the King Report on Corporate Governance for South Africa, the document covers a variety of issues related to responsibly and sustainably managing a business. Shareholders are of concern, as they need protection in the form of clear guidelines for financial reporting and disclosures. Members of the general public can also be harmed by poor corporate governance, as this may result in loss of job opportunities, unsustainable environmental practices, and other problems.

In King III, several important measures provide direction and guidance to companies interested in following basic ethical standards in their business operations. One requires companies to disclose the compensation provided to directors, and recommends discussing the remuneration offered to the top three employees. This allows shareholders to see how administrators and company officers use the company's money. Unusually high salaries that stand out in the industry may be a cause for concern, as they can reflect poor practices within the company.

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Another measure requires companies to practice integrated reporting, offering sustainability reports and financial reports in the same documentation. This provides an overview of a company's economic health with a discussion of its role in the community and the environment. In addition to documenting measures taken for environmental protection like increasing the use of recycled products, the integrated report may also include discussions of community wellness programs, like efforts to fight HIV/AIDS.

The King Code provides a number of benchmark standards for companies to meet in their public filings and business practices. Offering an overview of how companies should perform can be beneficial for standardizing industries and making an economy more appealing to foreign investors. A key role of the King Code is the establishment of accountability standards, so all companies operating in South Africa need to meet some basic guidelines for behaving appropriately. In the event a company chooses not to follow a recommendation in the King Code, it can be held to account by shareholders and members of the public.

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Discuss this Article

Glasis
Post 2

Climate change is currently a major issue. It is good to see the King Code touches on that. There are also community benchmarks in this corporate code. Taking the area people do business in into consideration.

It seems they are trying to sculpt their country into a better place by having their financial infrastructure grow to be moral as well as profitable.

Telsyst
Post 1

The idea of having a country take action for the ethics and actions of companies in their country is a great new approach. The King 1 that was issued in 1994 was heralded as a step forward in international practices in corporate governance.

It's good to see that they have updated the report from time to time making it a living document. Things change over time and the needs of a country are bound to change over time.

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