King V Disclosure Framework: Driving consistency and comparability to governance disclosures

By Parmi Natesan, CEO of IoDSA

Possibly the most groundbreaking change in King V is the standalone Disclosure Framework that outlines how and what organisations need to disclose on their application of King V. Any organisation wanting to apply the new Code is required to use this framework and publish their governance disclosures in accordance with its specifications. “The primary intention behind the Disclosure Framework is to assist organisations in providing a meaningful and qualitative account of their implementation of King V,” says Ansie Ramalho, Chair of the King Committee. “By standardising the format and content of governance disclosures, the Framework promotes greater transparency, consistency and comparability across organisations.”

All disclosures should be made in relation to a specified reporting period and be reviewed at least annually, according to Ramalho. The Disclosure Framework should be published on the organisation’s website alongside the other external reports issued by the organisation.

Accessibility

Crucially, the Framework provides a single source for all the recommended practices relating to disclosure on King V. In King IV, these were included under each principle in the Code, while the format and some of the content of disclosure was up to the users. “As a result, the governance reporting often came across as boiler plate and too general ,” says Parmi Natesan, CEO of the Institute of Directors in South Africa (IoDSA). King IV introduced the “apply and explain” requirement that was enhanced in King V, which according to Natesan requires “specific exception reporting on why companies chose not to apply a certain practice, with the rationale for it and also what compensating practices they put in place to still achieve the principle.”

Previously, it was not clearly evident which practices organisations put in place to govern each area, and which ones they chose not to apply. The new Disclosure Framework is expected to bring consistency and comparability into these disclosures. Natesan says, “It will help stakeholders make an informed assessment of whether they are satisfied with how the organisation has applied King V and also make it easier to hold organisations accountable after things have gone wrong.” The Disclosure Framework will furthermore assist users of King V in tracking their application, she says, while also increasing the visibility and, hopefully, the engagement on corporate governance practices between governing bodies and executive management.

Endorsements

Numerous regulatory and oversight bodies have welcomed King V and the Disclosure Framework, which will help with its implementation and monitoring.

Specifically, the Financial Sector Conduct Authority, National Treasury, the Auditor-General SA, the Independent Regulatory Board for Auditors, the Companies and Intellectual Property Commission (CIPC) and the Johannesburg Stock Exchange (JSE) have endorsed the Disclosure Framework.

Rory Voller from the CIPC says, “We have seen the shift on enhanced disclosure worldwide as well as registrars playing a more significant role in shaping a jurisdiction’s governance framework. Therefore, the disclosure framework is not only timely but indeed appreciated.”

Andre Visser, JSE Director of Issuer Regulations, says the Framework brings structure and comparability to what used to be fragmented. “For regulators, it makes monitoring far more effective. For investors, it creates consistency so they can make better decisions. Importantly, it also helps stakeholders play a stronger oversight role, because the information is easier to interpret and benchmark,” he says. “And there’s real value in other regulators, whether in financial services or the public sector, looking at adopting or referencing this approach, so that the benefits extend across the broader economy.”

ENDS

King V is available on the IoDSA website: https://www.iodsa.co.za/king-v 

Other media releases on King V: https://www.iodsa.co.za/news/713677/King-V-released-A-new-governance-Code-to-navigate-an-increasingly-complex-landscape-.htm