The King Code of Corporate Governance (“King Code”) is South Africa’s globally respected framework for guiding how organisations should be directed and controlled in the interests of fairness, accountability, responsibility, and transparency. Over the years, successive versions have evolved to reflect changing business realities and international best practices. The new Draft King V Code (“Draft Code”) was released for public comment in February 2025. This version seeks to build on the King IV Code, released in 2016. The new Draft Code has introduced valuable enhancements from its predecessor. In this article, we explore some of the key changes the new Draft Code proposes.

Corporate Governance, in terms of the new Draft Code, is defined as the exercise of ethical and effective leadership by the governing body (also known as the “board of directors” for a company) to achieve an ethical culture, performance, conformance and legitimacy.

While the King Code is not legislation, nor is it mandatory, it is a persuasive standard to which all organisations should strive to abide by. Where the King Code has not been followed and governance issues arise, this may be viewed as poor governance. For companies listed on the Johannesburg Stock Exchange, the adoption of the King Code and demonstration of its practical application is mandatory, making early familiarity with the Draft Code essential. Beyond compliance, the changes brought about by the Draft Code support enhanced credibility, investor confidence, and organisational resilience.

Updates from the King IV Code:

Readability
From a readability perspective, the Draft Code incorporates plain-language drafting, streamlined definitions, and an updated glossary to improve accessibility.  

Fundamental vs supplementary governance practices
The Draft Code distinguishes fundamental governance practices from supplementary ones. Supplementary governance practices have now been moved to separate guidance notes.  

Governance principles consolidated
In terms of content, the King IV Code’s 17 governance principles have now been consolidated to 12 core principles, to create a focus on essential governance areas. The core governance principles entail the following:

1. Ethical and effective leadership – Members of the governing body should embody, amongst others, integrity, competence, responsibility, accountability, fairness, and transparency to exercise ethical leadership and regularly evaluate their own performance to achieve sustainable positive outcomes.

2. Governance of ethics – The governing body must set and oversee the organisation’s ethical direction by establishing and enforcing codes of conduct and ethics policies, embedding them in stakeholder and employee interactions.

3. Strategy and sustainable value creation – The governing body is responsible for setting and approving the organisation’s purpose, strategy, and business model, ensuring integrated thinking and sustainable value creation, overseeing operational plans and performance against targets, and monitoring long-term viability and impacts on resources, relationships, society, and the environment.

4. Reporting – The governing body should direct and oversee external reporting in accordance with the newly introduced disclosure template, alongside integrated, sustainability, annual financial statements and other external reports.

5. Composition of the governing body – The governing body should be composed by ensuring a majority of independent non-executive members alongside key executives, promoting diversity and periodic rotation, implementing formal nomination, election, induction, and development processes, managing conflicts of interest, and appointing an independent chairperson and lead independent director to provide effective, balanced, and accountable leadership.

6. Committees of the governing body – The governing body should determine the delegation of roles and responsibilities to members or committees to provide independent oversight, support governance, and execute delegated duties in alignment with statutory requirements and leading practices.

7. Appointment and delegation to management – The governing body is responsible for appointing, overseeing, and evaluating the CEO, establishing clear delegation of authority and succession planning, and ensuring access to independent corporate governance support through a competent and empowered company secretary or equivalent professional.

8. Risk and compliance governance – The governing body must set the direction for risk and compliance, approving policies, defining risk appetite, overseeing implementation and integration into organisational strategy and culture.

9. Information governance – The governing body is responsible for directing and overseeing information governance, including information technology (“IT”), data, and emerging technologies, by setting policies, ensuring security, compliance, and ethical use, integrating risks into enterprise management, optimising information assets, and safeguarding resilience, responsible disposal, and trustworthy adoption of innovations like artificial intelligence (“AI”).

10. Remuneration governance – The governing body must set and oversee a fair, responsible, and transparent remuneration policy, aligned with strategy, ethics, and sustainability.

11. Assurance – The governing body must direct and oversee combined assurance and internal audits.

12. Stakeholders – The governing body is responsible for setting and overseeing the approach to stakeholders, ensuring fair engagement and communication, managing related risks, protecting rights and interests, and implementing a governance framework that recognises both shared direction and the independence of individual entities. 

Disclosure template
A new uniform disclosure template accompanies the Draft Code, requiring organisations to assume that certain governance principles have been applied, except where explicitly disclosed otherwise. The template also makes provision for a narrative explanation for omitted practices. 

AI Governance
The Draft Code seems to be keeping up with the times and places a new emphasis on governing AI use as part of information and technology governance. The Draft Code positions AI governance as a board-level responsibility, requiring directors to ensure AI is ethical, transparent, human-supervised, and risk-managed. It goes beyond compliance by embedding AI oversight within the broader outcomes of ethical culture. 

The Draft Code marks a positive step in advancing corporate governance in South Africa by making the King Code more user-friendly and aligned with current developments. It emphasises ethics, inclusivity, sustainability, and transparency, moving beyond compliance to ensure organisations create value for both shareholders and society. Importantly, the Draft Code integrates AI, IT governance, and sustainability into modern corporate governance.


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