King IV Commenting Platform · PDF file 2018-04-04 · Broader Society - Corporate...

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Transcript of King IV Commenting Platform · PDF file 2018-04-04 · Broader Society - Corporate...

  • King IV Commenting Platform

    Filled Sunday, May 15, 2016

    Page 1

    Welcome to the official King IV Commenting Platform. After you have

    downloaded and reviewed the draft King IV Report here [if this link does not

    open, please copy and paste the following into your browser:

    https://c.ymcdn.com/sites/iodsa.site-

    ym.com/resource/resmgr/King_IV/King_IV_Report_draft.pdf], you will be able

    to enter your comments using this platform. The public comment process takes

    place in 2 phases, the first of which invites comment on the whole of the King IV

    Report, bar the Sector Supplements. The Sector Supplements are to be

    subjected to public comment during phase 2. This platform will remain open in

    respect of phase 1 for two months from 15 March 2016 to 15 May 2016. Phase

    two of the commentary process, being commentary on the sector supplements,

    will be opened on notice. Commenting terms and conditionsPlease note that

    this process is open and transparent. All comments submitted will be available

    for public view at http://www.iodsa.co.za/page/KingIVCommentLibrary and NO

    anonymous comments are permitted. Comments received are added to the

    library for public viewing weekly together with the identity of the individual or

    organisation on behalf of whom the submission is made. Only comments

    submitted through this platform will be considered for the finalisation of the

    King IV Report.

    Do you agree to the King IV commenting terms and conditions? Yes

  • Page 2

    Personal Details Section:

    *Title: Mr

    *First Name: Ncaba

    *Last Name: Hlophe

    *I am commenting on behalf of: Both

    *Name of organisation: Stakeholder Relationship Assessements

    *Capacity within organisation: Chief Executive Officer

  • Page 3

    PART 1: Introduction and Foundational Concepts

    PART 1: Introduction and Foundational Concepts Add your comments for this part here:

    Variable Response

    PART 1: Introduction and Foundational Concepts | 1. Introduction

    (No response)

    PART 1: Introduction and Foundational Concepts | 2. Objectives of King IV

    Only later did we make the connection that objective (iv) " building and protecting trust in the organisation and its reputation and legitimacy" is in fact the governance outcome for stakeholder relationship thrust of the code. Admittedly, there are different viewpoints on this but there is overwhelming consensus that it is much more useful to view trust as an input- meaning you can do something about it that view it as an outcome. Yes, you can do something to improve trust. Whereas reputation can be fixed by fixing other things so that the outcome becomes a positive reputation. Given that stakeholder relationship is, correctly such as a critical pillar of the code, the outcome should be simplified and reduced to two:1. Reputation2. Value CreationYou, stakeholder relationships are the primary drivers and sources of good reputations. Even if you rely on media to drive parts of reputation, you will need good media relations to leverage mass and other media to peddle that reputation.Legitimacy is generally applied to the "legitimacy" of stakeholders in their relationship with an organisation. There are two types of legitimacy used:1. Derivative legitimacy2. Normative legitimacyThe use of the term legitimacy in this context is problematic hence we at SRA suggest the objectives be expressed in terms of reputation and value creationYou will discover that this thread of reputation ties everything bit of your content quite nicely. Because at the end of the day, its clear that Chapter 5 is also revolving around the use of communications and digital media (reputation) and measurement of relationship quality as an expression of value created

  • for stakeholders

    PART 1: Introduction and Foundational Concepts | 3. King IV definition of corporate governance

    See comments above on (iv) about beneficial governance outcomes

    PART 1: Introduction and Foundational Concepts | 4. The underpinning philosophies of King IV

    To make the point more clearly, lets start in page 8 - section 4.4 - see paragraph on "triple context". Of the many beautiful things introduced by both King III, there is one particular area that King IV should provide final completion and closure. You see, John Elkington in early 1990s introduced triple bottom line and its now over 20 years and the social and environmental agenda in business is now well established. The thing that is new and confronting our generation is no longer corporate citizenship. No at all. Our generation is facing the challenge of re- aligning the "pecking order" of the stakeholders in relation to the organisation. Our understanding is that King IV seeks to lead this drive by putting the organisation at the center to whom the governing body is accountable. Hitherto, the governing body was accountable to the shareholder. If this is the case, then we can no longer be talking about a triple context. It is now time we usher another context. And that is the Quadruple context. This quad context is made up of:1. Financial - Economic2. Environmental3. Social4. RelationalThe first three are well established. It is the last one (relational) that should be properly supported in King IV and that is where application may prove a challenge for users of King IV. Relational is aptly captured in page 5 under paragraph 4.2 - the first sentence says " an organisation has its own societies, made up by its stakeholders. But the organisation is also a sovereign juristic person in the broader in which it operates". Yes, that is exactly the point. The Social part is therefore divided into two:1. Broader Society - Corporate Citizenship2. Narrow Society - Stakeholder RelationshipsStakeholder Relationships is the big thing in King IV as you will notice a "thread" as it were throughout the code about stakeholder inclusivity - as explained in the code, stakeholder inclusivity ties in with inclusive capitalism and provisions on CRISA. It is the idea that the business should be run in the best interests of its material stakeholders. Shareholders/investors are material, so are customers, employees, policy makers,regulators, suppliers, communities/society. Shareholder no longer enjoys a place of pre-eminenceNow go to page 23 under dispute resolution - there is a sentence which says "Business relationships are a form of capital that all organisations rely"Lets qualify that a bit and rather than calling it business relationships, lets use a

  • term consistent with King IV and say Stakeholder Relationships are a form of capital. King IV has already attested to this by acknowledging the 6 Capitals model of the IIRC. Although appearing at the very end - this idea of stakeholder relationships being an asset/capital should be the foundation of the way the code treats the thrust on stakeholder relationships. Currently you have instances where this idea seems not to be strong and compelling enough - for example in page 4 the last sentence talks about how trust affects other intangible assets and lists reputation, intellectual capital and omits relational capitalThis idea of a quad context and stakeholder relationships should also be treated differently under section 4.7 " integrated annual reports" - explaining performance on an organisation should not be limited to economy, society and environment - it should also include value created for stakeholder by showing enhancement or diminution of social and relationship capitals. If understood this way, then it makes sense and lends credence to the IIRC injunction in Section 3C of its December 2013 Framework that the integrated report should provide content on the quality of relationships with material stakeholders. King IV has picked this up and provide clarity by requiring measurement of the quality. This is great. But right at the beginning when dealing with philosophies, its important to establish clearly that the intergrated report should feature content on the quality of relationshipsThe first paragraph on page 14 should not end with environmental context - it should include relational context as well - now we have established the case for broader and narrow society.

    PART 1: Introduction and Foundational Concepts | 5. Local and international developments since King III

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    PART 2: Content Elements and Development

    PART 2: Content Elements and Development Add your comments for this part here:

    Variable Response

    PART 2: Content Elements and Development | 1. Overview of

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  • the nine parts of the King IV Report

    PART 2: Content Elements and Development | 2. King IV Code elements

    It was here that we began to notice that trust, good reputation and legitimacy were governance outcomes of stakeholder relationships.The governance outcomes for stakeholder relationships should be:1. reputation2. sustainable value creation

    PART 2: Content Elements and Development | 3. Sector Supplements

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    PART 2: Content Elements and Development | 4. Content development process

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    PART 2: Content Elements and Development | 5. Drafting convention

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    PART 2: Content Elements and Development | 6. Presentation features of King IV

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    PART 3: Application of King IV

    PART 3: Application of King IV Add your comments