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Fault does lie with King IV

Rebuttal to Professor Skae’s commentary on the value of King IV.
Skae used Tongaat as part of his argument without realising what an absolute embarrassment it is to King IV. Image: Shutterstock

In a Soapbox contribution on August 25, The fault does not lie with King IV, Owen Skae attacks Ann Crotty for levelling some blame against the King report for the state of our corporate governance.


While acknowledging that the King report stands for the achievement of “an ethical culture, good performance, effective control and legitimacy” Skae offers no explanation as to the sad state of affairs or a way forward.

This is extraordinary as SA corporate governance, with King IV as its centrepiece, has sunk to extraordinary lows encompassing not just the likes of Steinhoff, Tongaat and EOH where criminal wrongdoing has occurred, but also the likes of Sasol, PPC, Nampak, Woolworths, RCL Foods and Hulamin – where wrongdoing is not a factor, but where shareholders have been decimated while at the same time insiders have been richly rewarded.


A major part of Skae’s article is spent rambling on about the primacy of the company (as opposed to shareholders) in running its affairs, without even pointing out that disgruntled shareholders have a powerful remedy, which is to replace the directors.

Amazingly, Skae uses Tongaat as part of his argument without realising what an absolute embarrassment it is to King IV. Tongaat has been found guilty of misstating its accounts from 2011 to the extent of some R11 billion, rendering it technically insolvent.

Before the fraud broke Tongaat, in its 2018 corporate governance statement, boasted about its “approach to effective governance”, which was constructed around King IV and specifically mentioned King IV an astonishing 26 times. What’s more is that it was outside shareholders who initially alerted Tongaat to the issues, not King IV-guided insiders.

Skae even states that “Tongaat Hulett is leading the way in taking legal action against its former directors and managers”, blind to it being nine years since the wrongdoing commenced, with all the wrongdoers getting off scot-free and without a cent having been repaid.

Skae needs to wake up to the fact that Crotty is in illustrious company in exposing the flaws of King IV.

Johann Rupert at the recent Remgro AGM highlighted the problems that “King Code 58 or whatever” presented in ensuring good performance. Similarly, Koos Bekker at the recent Naspers AGM stated that while Naspers would love to emulate Amazon’s great policies in respect of non-executive directors’ remuneration, it is prevented from doing so by King.

So where to from here?

Much can be learned from companies delivering on the goals of King without being shackled by its self-defeating precepts.

Take the case of Ball Corp, the largest maker of beverage cans in the world. Apart from being a leader in the global fight against plastics by way of acts like sponsoring the Global Ocean Summit, Ball is an exemplary performer benefiting society at large by the wealth it generates from its owner-managed policies. There are many others, all beyond the domain of Skae’s beloved King IV.

Chris Logan is owner and CIO at Opportune Investments, and sometimes shareholder activist.


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The King reports have been enormously influential on corporate governance in South Africa. After all, King I was published more than a quarter century ago, so the corporate governance that we now have in South Africa is the result of these 26 years of guidance and influence from the four King reports. Not a proud legacy, I would suggest.
I realise of course that the headline above Chris Logan’s rebuttal is just picking up on that of Owen Skae’s soapbox piece ‘The fault does not lie with King IV’. But perhaps the fault doesn’t really lie with King IV, in the same way that it’s not the fault of a screw driver that it’s not particularly effective when it comes to neatly cutting a piece of lumber – it’s just not fit for purpose.
As I’ve already stated, it’s been 26 years, so if we don’t like the result, perhaps it’s time for a change in approach? (We all know the cliched definition of insanity – doing the same thing over and over and expecting a different result . . .

As an investor I use the only tool I have : choose where to buy and where to sell.

In general : founder-managed companies are a safer bet than the ones run by hired help with the inept naive collusion from the analysts and fund managers

Some Founder companies eventually lose the founders but carry on operating very well : example Apple and there are hundreds more especially in German and US mid market size companies (say $1b to $10b cap)

We used to make fun of American GAAP but I am afraid that IFRS has turned listed companies into a management playground. I can take all the transactions in Sasol or ABSA or Naspers and present unrecognizably different sets of results – all IFRS compliant.

Focus on Cashflow people!!

Spot on the cash!

Correct. To add – Look at 3 things ito Cashflow;
1. Debtors payment days,
2. Creditors payment days,
3. Turning stock into cash

Your screwdriver analogy is apt. The best tool in the hands of a bad worker will deliver poor quality.

“King” is an effort to introduce best practice into the corporate world. But when executives pay lip service to it, as the ANC does to anti-corruption, one ends up with the same mess. Procedures and practices are only as good as the people implementing them.

Alas, it seems that in SA directors either had to adopt ANC morality (Steinhoff, Tongaat, …) or adapt and diversify risk (good King policy) overseas where they got burned (Woolworths, Sasol, et al).

Apartheid eventually had national economic consequences.
So, too, does its sequel, Corruptheid.

We have the Companies Act and GAAP and all the King reports and numerous National Treasury regulations and some I dont even know off. Same problem in the government sector. Acts and regulations for everything and a few more I did not even know after more than 25 years in a management position. Totally over regulated to such an extent that compliance becomes a full time job and there is no time left to run the business or the department. I know a municipality where electricity is one of their main revenue sources, but in order to comply with all the governance issues, they have more internal auditors than electricians!

Exactly. After appointment od directors, everyone thinks that they are irreplaceable and the directors evolve a self sense of irreplaceability. Drunk at the wheel.

A bad workman blames his tools; the King Code is but a tool used or abused by humans. Don’t blame the corporate governance tool for the ills of the directors who use it as a smokescreen to hide their unethical and naughty behaviour …

End of comments.





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