King IV™ South Africa – A Universal Approach to Corporate Governance

King IV South Africa Corporate Governance: Introduction – Why King IV Matters

Corporate governance codes often reflect the societies in which they are written. The United Kingdom’s Corporate Governance Code mirrors its boardroom traditions and investor-driven markets. The United States, shaped by Enron and WorldCom, relies heavily on Sarbanes–Oxley and securities regulation. Germany emphasizes codetermination and supervisory boards.

In contrast, the Netherlands developed a stakeholder-oriented “polder model.” South Africa chose a different path. With the advent of democracy in 1994, it launched a governance journey that has resonated worldwide: the King Reports on Corporate Governance.

The latest of these, King IV™ (2016), has become not only a national framework but also a global reference point. King IV matters because it moves beyond compliance. It is not a checklist; it is a philosophy of governance: principle-based, outcomes-driven, and focused on ethical leadership, sustainability, and stakeholder inclusivity.

In an era where boards are asked to balance profit with purpose, King IV stands as a universal compass.

King IV matters because it moves beyond compliance. It is not a checklist. It is a philosophy of governance: principle-based, outcomes-driven, and focused on ethical leadership, sustainability, and stakeholder inclusivity. In an era where boards are asked to balance profit with purpose, King IV stands as a universal compass.

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From King I to King IV – A Governance Journey

The King Reports trace South Africa’s evolution from isolation to integration into the global economy:

• King I (1994): Released just as apartheid ended. It emphasized the board’s responsibility to stakeholders, long before ESG became fashionable.
• King II (2002): Expanded into sustainability, risk management, and IT governance.
• King III (2009): Introduced integrated reporting and “apply or explain” accountability. South Africa became the first country to require integrated reports on a stock exchange (JSE).
• King IV (2016): The culmination. It simplified principles, broadened applicability, and introduced “apply and explain.”

Each iteration reflected South Africa’s realities — political transformation, economic challenges, state-owned enterprise reform — while pushing governance debates globally forward.

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The Philosophy of King IV

King IV is built on three interlocking foundations:

• Principle-based approach – 17 concise principles apply to all organizations, not just listed companies.
• Ethical culture
• Good performance
• Effective control
• Legitimacy
• Apply and explain – organizations must apply every principle and explain how.

This closes the door on cosmetic compliance. The genius of King IV is that it integrates values with performance. It insists that governance is not about “box-ticking,” but about building trust, long-term value, and sustainable business.

1. Principle-based approach – 17 concise principles that apply to all organizations, not just listed companies.
2. Outcomes-driven governance – governance is valuable only if it achieves results:
   • Ethical culture
   • Good performance
   • Effective control
   • Legitimacy
3. Apply and explain – organizations must apply every principle and explain how. This closes the door on cosmetic compliance.

The genius of King IV is that it integrates values with performance. It insists that governance is not about “box-ticking,” but about building trust, long-term value, and sustainable business.

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The 17 Principles in Practice – Not a Checklist, but a Compass

King IV avoids heavy-handed lists. Instead, it distills governance into 17 principles that are universally applicable. These are grouped around the responsibilities of the governing body (board) and its committees.

• Leadership and ethics: The board must set the tone for ethical and effective leadership. Without this, other structures collapse.
• Strategy and value creation: Governance must be integrated into how strategy is designed and monitored.
• Risk and opportunity: The board oversees both protection (controls) and innovation (opportunities).
• Technology and information: Explicit recognition of IT and cyber risk as a board issue.
• Remuneration governance: Transparent, fair, responsible pay aligned to performance and stakeholder interests.
• Assurance and reporting: Integrated reporting, combined assurance, and credibility of disclosures.
• Stakeholder inclusivity: Boards must account not only to shareholders but to a broad community of stakeholders.

King IV insists these principles apply not only to listed companies but also to state-owned enterprises, nonprofits, family businesses, pension funds, and SMEs. Application is proportional — a multinational will “explain” differently than a family-run bakery — but the direction of travel is the same.

Read more similar to this in our blog Culture Ethics and ESG: The New Frontiers of Governance.

King IV South Africa Corporate Governance

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Sector Supplements – Governance Tailored

To make its philosophy practical, King IV includes sector supplements. These explain how proportional application works in:

• State-owned entities (SOEs): Addressing political interference, legitimacy, and accountability.
• Nonprofits (NPOs): Emphasizing donor trust and mission integrity.
• Small and medium enterprises (SMEs): Simpler structures, but the same need for ethical leadership.
• Retirement funds: Protecting beneficiaries through effective trustee governance.

This universal reach makes King IV unique. While most governance codes stop at listed companies, King IV applies to any governing body with fiduciary responsibility.

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Governance Outcomes – The Four Pillars

King IV’s effectiveness is judged not by how many boxes are ticked, but by whether four outcomes are visible:

1. Ethical culture – trust in leadership, integrity in decision-making.
2. Good performance – sustainable value creation, not short-term gain.
3. Effective control – strong internal systems, assurance, and oversight.
4. Legitimacy – social license to operate, stakeholder trust.

These outcomes provide the “heartbeat” of governance. If they are not present, compliance means little.

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Case Studies – Lessons from Success and Failure

Eskom – A Governance Collapse

South Africa’s electricity utility, Eskom, illustrates the consequences of ignoring King IV principles. State capture, weak oversight, and corruption eroded both ethical culture and effective control. Eskom’s rolling blackouts became a symbol of governance failure.

Steinhoff – The Accounting Scandal

The Steinhoff collapse (2017) exposed failures in assurance, reporting, and audit committee oversight. Despite South Africa’s advanced governance code, global investors discovered how fraud can bypass systems if boards lack independence.

Positive examples – Nedbank & Sasol

Nedbank integrated sustainability into strategy long before ESG was mainstream. Sasol’s board, facing environmental pressure, adapted its integrated reporting to include climate risk — showing King IV’s flexibility.

These cases highlight that King IV is both a preventive framework and a diagnostic tool.

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Global Comparisons – King IV in Context

• UK Corporate Governance Code: Both codes use principles, but the UK retains “comply or explain.” King IV’s “apply and explain” is stricter. Read more on this code in A British Invention with Global Impact.
• United States (SOX): US law is compliance-heavy, litigation-driven. King IV is softer in law but stronger in ethics. Read more on SOX in this blog – When a Scandal Becomes a Turning Point.
• Germany (DCGK): More formal two-tier structures; King IV emphasizes culture and ethics.
• OECD Principles of Corporate Governance: King IV aligns but goes further on integrated reporting and stakeholder inclusivity. Read more in the OECD Principles in Not the End of the World? Governance Lessons from CSRD and ESG.
• EU CSRD/ESRS: Europe is now moving toward mandatory sustainability disclosures. King IV anticipated this a decade earlier. Read the European Commission message on adopting the European Sustainability Reporting Standards.

This makes King IV a bridge between emerging markets and global governance standards.

1. King IV and Germany’s Codetermination – Different Paths to Stakeholder Voice

One of the most interesting contrasts in global governance is between King IV’s principle-based stakeholder inclusivity and Germany’s legally mandated labor representation.

2. Germany’s Governance

In Germany, codetermination (Mitbestimmung) has been a cornerstone of governance since the 1970s. The rules are set in law:

• Companies with 500–2,000 employees must reserve one-third of supervisory board seats for employee representatives.
• Companies with 2,000+ employees must allocate half of the supervisory board seats to employees and trade union representatives, with the chair (usually from the shareholder side) holding a casting vote.

This means employees and unions have a formal, statutory voice in corporate strategy, investments, and oversight. It embodies the German view that workers are not just stakeholders but co-owners of corporate legitimacy.

3. South Africa’s Governance

By contrast, King IV does not prescribe such structures. It sets out 17 principles that all organizations must “apply and explain,” including the duty to account to all material stakeholders. But it deliberately leaves boards free to decide how to ensure inclusivity.

• A South African company could invite employee or union representatives onto its board.
• Doing so would be fully consistent with King IV, as it could enhance outcomes like legitimacy and ethical culture.
• But unlike Germany, it would be a voluntary choice, not a statutory requirement.

This difference illustrates the two approaches to stakeholder governance:

• Structural (Germany): Hard law creates mandatory representation.
• Principle-based (South Africa): Soft law sets outcomes and trusts boards to design the right structures.

Both approaches aim to integrate employee perspectives, but King IV’s flexibility means it can work in any context, whether or not labor codetermination is culturally or politically embedded.

4. King IV and the EU CSRD – Complementary, Not Substitutes

A recurring question in international governance is whether an EU-based company could adopt King IV™ as its primary framework instead of the Corporate Sustainability Reporting Directive (CSRD) and the associated European Sustainability Reporting Standards (ESRS).

The short answer: no — King IV cannot replace CSRD, but it can complement it.

4.1 King IV as Soft Law

King IV is a voluntary governance code. It sets out 17 principles and four governance outcomes that organizations must “apply and explain.” Its influence lies in ethics, board culture, and stakeholder inclusivity, not in statutory enforcement.

4.2 CSRD as Hard Law

CSRD is binding EU legislation, phased in from 2024 onwards. It requires large EU companies — and non-EU companies with substantial EU activity — to disclose sustainability information in line with ESRS. Compliance is subject to regulatory enforcement, external assurance, and potential liability.

4.3 No Substitution

An EU company cannot satisfy legal obligations under CSRD/ESRS by reporting only against King IV. Regulators, investors, and auditors will require ESRS-compliant disclosures. Using King IV “instead of” CSRD would expose the company to non-compliance risks, including fines and reputational damage.

4.4 Strong Complementarity

However, King IV can add significant value alongside CSRD:

• Governance alignment: King IV’s emphasis on ethical leadership, effective control, and legitimacy underpins the board’s oversight of CSRD disclosures.
• Stakeholder focus: CSRD demands stakeholder engagement and materiality assessments. King IV already embeds stakeholder inclusivity as a principle.
• Integrated thinking: King IV pioneered integrated reporting, which aligns closely with the ESRS requirement to connect financial and non-financial information.
• Trust and assurance: A company applying both frameworks can show that its reporting is not a compliance exercise but the product of a strong governance culture.

5. Practical Implications

For EU companies:

• CSRD/ESRS is mandatory.
• King IV is optional, but applying it may improve the credibility of sustainability strategies, help in board evaluations, and strengthen relationships with global investors.
• The combination signals that sustainability reporting is not just about ticking boxes but about building long-term legitimacy.

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Conclusion:
EU law would have no problem with a company applying King IV — in fact, it may encourage richer governance narratives. But it cannot be used instead of CSRD/ESRS. The two frameworks are best seen as complementary layers: CSRD provides the legal baseline, while King IV offers the governance philosophy that makes disclosure meaningful.

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Integrated Reporting – South Africa’s Gift to the World

Perhaps King IV’s greatest contribution is its embrace of integrated reporting. It requires companies to disclose not just financial results but also social, environmental, and governance performance.

This concept has influenced:

• The International Integrated Reporting Council (IIRC)
• The IFRS Foundation’s sustainability agenda
• The EU’s CSRD and ESRS standards

By linking governance with reporting, King IV made South Africa a laboratory of the future.

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Critiques and Challenges

• Implementation gap: Many organizations “say” they apply principles but lack substance.
• State capture: Political interference in State Owned Enterprises (companies with a dual mandate, commercial: to operate as a business (produce, sell, manage infrastructure, etc.), ideally profitably or at least efficiently and public interest: to serve strategic national needs — such as energy, transport, communications, or development) shows how codes cannot override weak institutions.
• SME burden: Smaller firms may lack resources for full application, though proportionality is intended.
• Global uptake: While admired, King IV remains less known in North America and Asia compared to OECD or UK codes.

Still, its philosophy has stood the test of time.

SOEs in King IV

King IV dedicates a sector supplement specifically to SOEs. It recognizes their unique governance tensions:

• Accountability to two masters: the shareholder (the state/minister) and the broader public.
• Risk of politicization: board appointments or strategy decisions influenced by political agendas rather than governance outcomes.
• Need for legitimacy: SOEs affect millions of citizens directly; governance failures damage not just investors, but society at large.

King IV insists that SOEs must apply the same 17 principles — ethical leadership, effective control, stakeholder inclusivity — but with extra vigilance because of their strategic and political importance.

State Capture and SOEs

The term “state capture” became famous in South Africa through the 2016–2022 Zondo Commission. It describes how private interests, often through corrupt political actors, “captured” SOEs like Eskom, Transnet, and SAA:

• Appointing politically connected but unqualified board members.
• Awarding inflated procurement contracts to cronies.
• Weakening internal controls and oversight.
• Using SOEs as vehicles for patronage instead of national service.

This shows exactly what happens when King IV principles are ignored:

• Ethical culture collapses.
• Effective control is bypassed.
• Legitimacy is destroyed.
• Performance deteriorates — leading to rolling blackouts, failing logistics, and financial bailouts.

In short:

• SOEs are state-owned enterprises, vital to the economy and public service.
• King IV requires them to adopt high governance standards.
• But in practice, political interference has made them the epicenter of South Africa’s state capture crisis.

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Lessons for Global Governance

King IV illustrates that governance is not about form, but about substance. Its integrated approach — ethics, performance, stakeholders, reporting — provides lessons for:

• Emerging markets: Codes can inspire trust without heavy regulation.
• Developed markets: Compliance-heavy regimes can learn from outcome-driven approaches.
• Boards worldwide: Culture and leadership matter as much as structures and committees.

In this sense, King IV is not just a South African code. It is a universal governance model.

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Conclusion – King IV as a Compass for the Future

In 2016, King IV challenged boards to rethink governance. Nearly a decade later, its message is more urgent than ever:

• Ethical leadership is non-negotiable.
• Stakeholders, not just shareholders, define legitimacy.
• Integrated thinking is the path to sustainable value.
• Governance is judged by outcomes, not compliance.

For companies, boards, and regulators worldwide, King IV is both a mirror and a compass: a mirror to diagnose failures, and a compass to chart a sustainable path.

South Africa gave the world Mandela’s reconciliation. In governance, it has given us King IV.

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FAQ on South Africa’s King IV

King IV South Africa Corporate Governance

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