Corporate Governance | Africa KEY PROVISIONS
SOUTH AFRICA’S KING IV CODE
UK CODE OF CG 2018
‘Apply and Explain’ approach is adopted. Explanation on how the principles were applied to be provided in the annual report and website. The responsibility for applying the code is the board’s.
‘Apply and Explain’ approach is also adopted.
‘Comply or Explain’ approach is used. This refers to the compliance with the principles and providing explanation where they are not complied with.
‘Apply and Explain’ philosophy. This is similar to the Mauritius and King IV codes. This means that principles will be applied and explanation provided as to how specific activities best demonstrate the application or implementation of the code’s principles and practices.
Board Structure & Composition
Board and board committees should contain independently minded directors with an appropriate balance of skills, experience, knowledge and diversity, including gender, to avoid group think. To be of appropriate size and include executive directors, independent directors, non-executive directors.
Similar provisions for the governing body as in the Mauritius Code.
Board appointments should be led by the board’s nominations committee and should promote diversity of gender, social and ethnic backgrounds, cognitive and personal strengths.
Similar to the three other codes. Also provides that organisations are to determine the size and composition of their boards taking into account the scale and complexity of their operations, the need for sufficient members to serve on committees, quorum and diversity.
Transition to Silent on the transition Chairmanship of CEO to the role of Chairperson.
Discourages the transition from CEO to Chairperson. Provides for cooling-off period of three complete years after end of tenure.
Discourages transition from CEO to Chairperson. Requires prior consultations with major shareholders and reasons to be provided in the company’s website.
Similar to the King IV Code, MD/CEOs or EDs require three-year cooling-off period.
INEDs should not serve longer than nine years.
Maximum nine-year tenure for the Chairperson and NEDs.
Introduces maximum of three three-year terms for INEDs and periodic refreshing of NEDs.
Remuneration The board should be transparent, fair and consistent in determining the remuneration policy for directors and senior executives.
The Governing Body should ensure that the organisation remunerates fairly, responsibly and transparently. The governing body should approve the remuneration policy and give effect to its directions on fair, responsible and transparent remuneration.
Remuneration policies and practices should be designed to support strategy and promote long-term sustainable success. Executive remuneration should be aligned to company purpose and values, and be clearly linked to the successful delivery of the company’s long-term strategy.
The company’s remuneration policy should be disclosed in the annual reports, alongside remuneration for all directors.
Governing Body should ensure the evaluation of its performance and that of its committees, its Chairperson and individual members. Evaluation to support continued improvement in performance and effectiveness.
Same as Mauritius Code and King IV. Includes evaluator disclosure.
Same as the other three codes but includes establishing a system for formal and rigorous annual performance evaluation and excludes evaluator disclosure requirement.
No specific provision for tenure of Board members.
a) Encourage boards to undertake formal, regular and rigorous evaluation of their own, their committees’ and individual directors’ performance by independent facilitator. b) Annual development plans to be produced.
Also provides for corporate governance evaluation to be performed annually, which will assess the code implementation.
c) The external evaluator No requirement for should be identified in the disclosure of evaluator. annual report and a statement made about any other connection it has with the company or individual directors. External Auditors
Only reference to external auditors is in Principle 15.40(d) that the governing body should oversee that the combined assurance model covers independent external assurance service providers b) The board should also ensure that the audit partner is such as external auditors. rotated at least every five years. a) The external auditor should be reappointed every year at the annual meeting and the board should consider putting the external audit contract out to tender at least every seven years.
c) A review of the audit process, the effectiveness and performance of the audit team and the output, quality and cost effectiveness of the audit is a valid alternative to the tender approach. www.ethicalboardroom.com
It is no longer sufficient for companies to disclose directors’ remuneration in their annual reports, the remuneration policy should also be disclosed.
Both evaluations are to be externally facilitated by an independent consultant at least once every three years. Silent on specific requirement Similar to the Mauritius for the appointment of external Code. States that external audit firms may be retained auditors and their rotation. for no longer than 10 years The board should establish continuously and may not be formal and transparent considered for reappointment policies and procedures to until after a seven-year ensure the independence cooling-off period. and effectiveness of internal and external audit functions.
For independence, rotation of the audit engagement partner every five years.
External auditors with more than 10 years service should cease to act as auditor at the next AGM following code commencement. Spring 2019 | Ethical Boardroom 91