Comparison of King III and King II, and the implications of King III

Muwandi, Tinei (2010-03)

Thesis (MBA)--University of Stellenbosch, 2010.


The introduction of King III has resulted in many changes to corporate governance practices. The changes inevitably have implications and challenges for organisations. If the changes introduced by King III as well as the implications and challenges are not well understood, implementing King III could be a very challenging exercise. This research report outlines the key differences between King III and King II. The research report also highlights the major implications and challenges of implementing the King III principles. In addition, those aspects of King III that are covered in the new Companies Act have also been outlined. In analysing the changes between King II and King III, and the implications and challenges of King III‟s principles and recommendations, the author followed the layout of the chapters in King III, namely ethical leadership and corporate citizenship, boards and directors, audit committees, the governance of risk, the governance of information technology, compliance with laws, codes, rules and standards, internal audit, governing stakeholder relationships and integrated reporting. The differences between King III and King II were analysed through a study and comparison of the King III and King II Reports. The implications and challenges were analysed through reading literature on King III and corporate governance in general. Aspects of King III covered in the Companies Act were analysed through a study of King III and the Companies Act. The author analysed the differences, implications and challenges of both the principles and the recommended practice in the King Reports. No distinction was made between principles and recommended practices. The main changes introduced by King III relate to the composition and role of the board, the board committees and the new topic on IT governance and the need to publish an integrated report. Though discussed in different chapters, King III has emphasised the link and interplay between ethics, corporate social responsibility, governing stakeholder relationships and integrated reporting. In addition to the above, the most contentious change is probably the applicability of King III to all entities regardless of form of incorporation. King III has also attempted to bring about a physiological change in the way companies perceive King III by changing the “comply or explain” concept to the “apply or explain concept”. The direct implications and challenges brought about by King III relate to the time, efforts and costs needed to implement the various King III principles and recommendations. King III could also result in an increase in the size or diversity of the board, and companies are likely to find it challenging to get qualified people to fill directorship posts. Integrated reporting is going to change the way companies view corporate social responsibility and the way they report non-financial information to stakeholders. Despite the challenges, there is no doubt that King III goes a long way to ensure that South Africa‟s corporate governance system is at par with the rest of the world.

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