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.