Cadbury Report
It was established in May 1991 by The
Financial Reporting Council, The London Stock Exchange, and the Accountancy
Profession.
The Cadbury Report was oncereferred to as The Report of the Committee on the
Financial Aspect Of
The report was published in December 1992, following the recommendations of the Cadbury
Committee
Itaddresses concerns about The Working of Corporate
Governance System. The committee made it its purpose to address the financial
aspects of corporate governance and out of this produced a best code of best
practice.
REASONS:
ü increasing
lack of confidence of investors in the honesty and accountability of listed
companies
ü financial
collapse of listed corporations
ü auditors
mispresentation of facts
ü lack
of board accountability
Cadbury was the results of several
high profiler companies collapse.it is concerned primarily with protecting weak
and widely dispersed shareholders against self-interested directors and
managers.
According To Cadbury
Report On Corporate Governance Should Be Based On:
good
board practice control
environment transparent
disclosure well
defined shareholders rights board
commitment
STRENGTHS
Creating
confidence among shareholders, customers…… improve
leadership it
triggered successive ways of rethinking
CONCLUSION:
Cadbury
report was followed by 3 more major reports:
Green
Bury(1995) Hamper(1998) Turn
Bull(1999)
King
Report
INTRODUCTION
The King Report on Corporate Governance is a guideline for the governance
structures and operation of companies in South
Africa. It is issued by the King Committee on Corporate Governance. Three
reports were issued in 1994, 2002 and 2009 going by the name King I, King II,
King III successively. A fourth revision was made in 2016 known by King IV. The
Institute of Directors in Southern Africa (IoDSA) owns the copyright of the King
Report on Corporate Governance and the King Code of Corporate Governance.
Companies listed on the Johannesburg Stock Exchange has to adhere to the King
Code of Corporate Governance.The King Report on Corporate Governance has been
cited as "the most effective summary of
the best international practices in corporate governance".
HISTORY AND APPROACH
In July 1993 the Institute
of Directors in South Africa asked retired Supreme Court of South Africa judge
Mervyn E. King to chair a committee on corporate governance. He viewed this as
an opportunity to educate the newly democratic South African public on the
working of a free economy.
The committee's report was to be the first report of its kind in South
Africa.
The king corporate governance code is non-legislative and is based on
principles and practices. It also espouses an apply or explain
approach.
The philosophy of the code consists of the three key elements :
● Leadership
Good governance means effective and ethical leadership.Leaders should
direct the company to achieve sustainable economic, social and environmental
performance.
● Sustainability
It views sustainability as the primary moral and economic
imperative of this century.
● Good Corporate Citizenship.
The
code's view on corporate citizenship flows from a company's standing as a
juristic person under the South African constitution and should operate in a ssustainable
manner.
KING I
In
1994 the first King report on corporate governance (King 1) was
published.
It established recommended standards of conduct for boards
and
directors of listed companies, banks, and certain state-owned
enterprises.
It also involved all stakeholders.
It
was applicable to :
●
All companies listed on the main board of the Johannesburg Stock Exchange.
●
Large public entities as defined by the Public Entities Act of South Africa.
●
Banks, financial and insurance companies as defined by the Financial Services Acts
of South Africa.
●
Large unlisted companies which included companies with shareholder equity over
R50 million.
The key principles from the first King report covered:
● Board of directors makeup and mandate, including the role of non-executive
directors and guidance on the categories of people who should make up the
non-executive directors.
● Appointments to the board and guidance on the maximum term for executive
directors
● Determination and disclosure of executive and non-executive director’s
remuneration
● Board meeting frequency
● Balanced annual reporting
● The requirement for effective auditing
● Affirmative action programs
● The company’s code of ethics
KING II
In 2002, the report was revised (King II) including new sections on sustainability,
the role of the corporate board, and risk management. This revised code of
governance was applicable from March 2002. In addition to those types of
organizations listed in King I, it was applicable
to :
● Departments of State or national, provincial or local government administration
falling under the Local Government abiding to Municipal Finance Management Act.
● Public institution exercising a power or performing a function in
terms of the constitution.
● Public institutions exercising a public power or performing a public
function in terms of any legislation, excluding courts or judicial officers.
The key principles from the second King report covered the following
areas:
● Directors and their responsibility
● Risk management
● Internal audit
● Integrated sustainability reporting
● Accounting and auditing
the
code is not enforced through legislation. But it co-exists with a number of
laws like the Companies Act and JSE Securities Exchange Listings Requirements.
King III
According to King II report , leading companies reported with regard
to sustainability separately from other factors. The 2009 King III report, governance,
strategy and sustainability were integrated.The companies were recommended to create
sustainability reports according to the Global Reporting Initiative's
Sustainability Reporting Guidelines. In contrast to the earlier versions, King
III is applicable to all entities, public, private and non-profit. The code of
governance was applicable from March s2010.
The
report incorporated a number of global emerging governance trends:
●
Alternative dispute resolution
●
Risk-based internal audit
● Shareholder approval of non-executive directors’ remuneration
●
Evaluation of board and directors’ performance It also incorporated a number of
new
principles to address elements not previously included in the King reports:
●
IT governance
●
Business Rescue
●
Fundamental and affected transactions in terms of director’s ffdresponsibilities
during mergers, acquisitions and amalgamations.
King IV
King IV builds on King III . It has been revised to :
● Bring it up to date with international governance codes and best ractice.
● To align it to shifts in the approach to capitalism.
● To take account of specific corporate governance developments in
relation to effective governing bodies.
● Increased compliance requirements.
● To align to the new governance structures (e.g. Social and Ethics Committee)
● To align to the emerging risks and opportunities from new
technologies and new reporting and disclosure requirements.
Key new or enhanced features of King IV relate to:
● Fair, responsible and transparent organisation wide remuneration.
● Responsible and transparent tax strategy and policy.
● Balanced composition of governing bodies and independence of members
of the governing body.
● Delegation to management
● Delegation to committees.
● Corporate governance services to the governing body.
● Performance evaluations of the governing body.
● Audit committee disclosures.
● Risk governance.
● The combined assurance model.
● Social and ethics committees.
● Performance evaluations.
● Responsible institutional investors.
● Technology and information.
King IV was released on 1 November 2016. It is effective for financial
years commencing from 1 April 2017.
Conclusion
Companies have to adhere to King report for good governance as
essentially being effective, ethical leadership. King believes that
leaders
should direct the company to achieve sustainable economic, social and
environmental performance.
