Johannesburg exchange amends listing requirements to make King IV code mandatory

South African exchange adopts leading governance provisions

The Johannesburg Securities Exchange (JSE) has amended its listing rules to make the King IV corporate governance code mandatory for companies.

Under the rules, listed firms will have to include a board racial diversity policy, separate the chairman and CEO positions and appoint a social and ethics committee in accordance with the code, which is the latest version of the Code originally developed back in the 1990s by Mervyn King, a former Judge the Supreme Court of South Africa.

King is Chairman of the International Integrated Reporting Council (IIRC), Chairman Emeritus of the Global Reporting Initiative (GRI) and a member of the Private Sector Advisory Group to the World Bank on Corporate Governance. He chaired the United Nations Committee on Governance and Oversight and was President of the Advertising Standards Authority for 15 years.

The code is overseen by the Institute of Directors in Southern Africa (IoDSA).

“The effect of incorporating certain practices from the King Code in Listing Requirements is to make their implementation mandatory,” the JSE said in a bulletin.

Under King, a company’s remuneration policy must record the measures the board commits to take if the remuneration policy or the implementation report, or both, were voted against by 25% of shareholders.If 25% of shareholders vote against the resolution, the company would be required to invite dissenting shareholders to engage with the company.
“The King codes do not have the force of law, but have served as models for best practice in corporate governance and as a benchmark for corporate leadership in South Africa,” said law firm Baker Mckenzie.

It noted how King IV “deliberately steers away” from rule-based enforcement and relies mainly on disclosure to achieve its objectives. “Investor activism and indirect market enforcement are seen as the main means of ensuring adherence to its principles,” it added.

“This is premised on the view that a failure to do so, would be an indication of unsustainable corporate governance practices.”

This month, the IoDSA – which also oversees the Code for Responsible Investing in SA (CRISA) – released guidance to help directors and executives address social inequality, arguing that overcoming social inequality “should be an essential part of an organisation’s strategic review and goal setting”.

“As the King Reports have consistently argued, organisations do not exist in a vacuum, and thus helping to ensure a healthy, stable society is a legitimate business goal,” said Tanya Nassif, Governance and Legal Specialist at the IoDSA.