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A
April | May | June 2016
HISTORY OF KING REPORTS
CRITICAL OUTCOMES
OF KING IV
THE KING IV EDITION

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CONTENTS
02 An IoDSA View | Angela Cherrington
1
04 The history of the King Reports | Angela Cherrington & Parmi Natesan
08 King IV: 4 themes and the board's leadership role | Ansie Ramalho
10 Ethical culture: Leadership, ethics and corporate citizenship | Mohamed Adam
12 Performance and value creation: Governance or performance –
is this a choice? | Lindie Engelbrecht
14 Adequate and effective control | Annamarie van der Merwe
16 Trust, good reputation and legitimacy | Richard Foster
18 Steady hands needed at the helm | Venete Klein
20 Why undertake investor relations? | Gillian Findlay
8 40 42
22 King III humanises the Southern African business | Fay Mukaddam
23 The non-executive director and his home office | Engela Crocker
24 From ‘Them’ to ‘Us’ : Making stakeholder engagement work | James Forson
26 Starting early – Implementing good governance as soon as possible | Paul Tanton
28 Serving the business purpose | Hein Pretorius
30 IoDSA FAQs - Director Liability | Parmi Natesan, Tanya Nassif & Vikeshni Vandayar
32 Member profile: Wiseman Nkuhlu
34 Member profile: Dr Prieur du Plessis
36 IoDSA events
38 Book reviews
39 Wine review: How much for an icon? | Jeremy Sampson
40 Road Test: Wild horses | Wynter Murdoch
42 Travel: 4 hours in Reykjavik | Kate Kennedy
44 Getting to King IV
Publisher: Richard Lendrum Editor: Angela Cherrington Managing Editor: Debbie Bassa debbie@thefuture.co.za
Layout: Nadette Voogd Production Manager: Mabel Ramafoko
a Times Media
Company
Directorship is published by Future Publishing (Pty) Ltd.
Opinions expressed in Directorship are not necessarily those of the publishers.
Permission to re-publish any article or image or part thereof must be obtained in writing from the publisher. © Future Publishing

From the IoDSA
2
Launching King IV:
The importance of
corporate governance
Office Bearers
Strong corporate governance is a
cornerstone of doing business these
days. The imminent launch of the King IV
Report is a good time to not only reflect
on the governance landscape that South African
businesses currently find themselves operating
in, but also the advances that have been made
and the areas that need improvement.
King IV will be an important guiding document
for directors, particularly with regard to the
numerous recent developments – both locally
and internationally - that have taken place in
corporate governance since the release of King
III in 2009. The business landscape has changed
dramatically in the intervening years and, as
economic uncertainty has increased, the need
for strong corporate governance is even more
important.
King IV aims to make the implementation
of corporate governance more accessible to
entities across all sectors. Directors will need
to familiarise themselves with the changes in
structure and content.
In order to understand the context of corporate
governance in South Africa and how it has
evolved, we need to consider the history of the
King reports. In this issue Parmi Natesan, IoDSA’s
Executive: Centre for Corporate Governance and
I examine how the legacy of the IoDSA over the
last 60 years is linked to the economy and the
shifts that have taken place in the governance
landscape both in South Africa and globally.
Our King IV Project Lead, Ansie Ramalho provides
invaluable insight into the structural changes
and philosophies that have shaped the drafting
of King IV, with the intention of continually
improving the skills of South Africa’s directors
so as to uphold the primary pillars of fairness,
accountability responsibility and transparency.
Following on, this issue then analyses the four
critical outcomes that King IV sets out to achieve
– as seen by members of the King IV Task Team.
Instilling an ethical culture is a crucial duty of any
director, and never has it been more important
for directors to step up and take a stand than
now. With ongoing allegations of corruption at
all levels of business and society appearing in the
media daily, directors bear the responsibility of
upholding ethics in our organisations. King III
emphasised the importance of ethical leadership
and this underpinning philosophy remains at
the heart of King IV. On this issue, Mohamed
Adam writes about how leadership, ethics and
corporate citizenship have been strengthened in
the latest report.
When it comes to running a business,
performance is the ultimate indicator – but to
what extent does performance and governance
sit on opposite sides of the boardroom table?
Lindie Engelbrecht goes on to evaluate
performance and value creation, and questions
whether governance and performance are
mutually exclusive.
Effective control and compliance are, without
doubt, core concerns for boards and as a result,
Annamarie van der Merwe examines how
adequate attention can be given to these issues.
As directors, one of our overall priorities is
to ensure the long-term sustainability of our
organisations. Richard Foster looks at how we
can best achieve trust, good reputation and
legitimacy for our organisations.
In light of the current gloomy economic outlook
with most attention focused on weathering the
‘now’, the longer-term picture can be less clear.
Strong and decisive leadership is more important
than ever to steer both businesses and the
economy forward. We need to take the helm as
directors, and IoDSA’s chairperson, Venete Klein
examines how the quality of our leadership can
guide our companies successfully through times
of economic uncertainty.
With a combination of improvements in
corporate governance through King IV and
a commitment to meeting our mandates as
responsible directors with the best interests
of our organisations as our motivation, I feel
confident that we can contribute to building
sustainable and resilient businesses. C
Angela Cherrington (Oosthuizen)
Chief Executive Officer
@angelao28
@IoDSA_KingIV
Patron
Basil Hersov
President
Reuel Khoza
First Vice-President
Mervyn King
Vice Presidents
Roy Andersen,
David Brink, Bertram Lubner
Non-Executive Directors
Venete Klein (Chairman),
Prieur du Plessis (Deputy-Chairman),
John Burke, Yolan Friedmann,
Ingrid Goodspeed, Sathie Gounden,
Marichen Mortimer, Pumla Radebe,
Muhammad Seedat.
Executive Directors
Angela Cherrington (Oosthuizen)
(Chief Executive Officer), Daleen
Henning (Executive: Finance
& Operations), Parmi Natesan
(Executive: Centre for Corporate
Governance).
Regional Chairmen
Douglas Ross (KwaZulu-Natal),
George Zacharias (Western Cape)
Offices
National Office
info@iodsa.co.za
(011) 035 3000
www.iodsa.co.za
Western Cape Branch
iodwestcape@iodsa.co.za
(021) 715 3757
KwaZulu-Natal Branch
iodkzn@iodsa.co.za
082 495 9596
Connect with the IoDSA on
social media
Institute of Directors in
Southern Africa
@The_IoDSA
#DirectorshipMag

3

King Reports
4
The history of the King
Reports
Angela Cherrington and Parmi Natesan
The legacy of the Institute of Directors in
Southern Africa (IoDSA) over the past 60 years
is inexorably linked to the economic times and
governance landscape that South Africa and the
world experienced over the years.
Since the IoDSA was established in South Africa in 1960,
it has interacted with business and government, both
locally and internationally, on policy matters affecting
its membership, as well as setting the governance
benchmarks for boards and directors.
The most important contribution that the IoDSA has made
to the governance landscape both locally and worldwide has
undoubtedly been during the past 20 years.
The first King Report on Corporate Governance (1994), was
initiated by the Institute of Directors in Southern Africa as
was King II (2002), King III (2009) and, most recently, the
commencement of work toward King IV (due for formal release
in November 2016). These reports are considered world-class and
ahead of their time.
The original conception of the IoDSA corporate governance
initiative started with talks at the IoD in London. IoDSA also
played a key role in co-authoring the Commonwealth Association
for Corporate Governance’s Principles for Commonwealth
countries. The Commonwealth heads of government endorsed
this Report when they met in Durban at the end of 1999.
The establishment of the King Committee on Corporate Governance in 1992
and the subsequent publication of the first King Report in 1994
The legacy of former CEO, Richard Wilkinson’s 12-year career with
the IoDSA lies first and foremost with our initiative on corporate

5
“
On 26 March 2002, the report was launched
and was hailed as a world-class definitive work, and
subsequently used in both Europe and the United
States as a benchmark document.
“
governance both in terms of the first and second King Reports.
It was on a visit to London at the beginning of 1992 that Richard
Wilkinson met Sir Adrian Cadbury at the IoD in London and
learnt that he was about to publish his committee’s work on the
financial aspects of corporate governance.
From that discussion the King Committee was formed in South
Africa, at the instance of the IoDSA, obtaining support from the
South African Chamber of Business, the Chartered Institute of
Secretaries and Administrators, the South African Institute of
Chartered Accountants, the Johannesburg Stock Exchange, and
the South African Institute of Ethics.
Pioneers in corporate governance in South Africa formed the
King Committee under the leadership of Mervyn King. The King
Committee’s Terms of Reference were much wider than those of
Cadbury as they included other matters investigated by Cadbury
as well as a Code of Ethical Practice for Business Enterprises in
South Africa. The committee was also charged with having to
take into account the special circumstances prevailing in South
Africa at the time, more particularly the emergence of a new
class of entrepreneur, being members of the disadvantaged
communities.
Throughout all the discussions and debate surrounding the first
King Report, the IoDSA acted as the Committee’s Convener and
Secretariat under the then leadership of Richard Wilkinson. This
resulted in the first King Report on Corporate Governance being
released in 1994 (King I).
Konrad Taeuber became Chairman of the IoDSA in 2001 having
served as Deputy Chairman since the middle of 1999. It was under
Taeuber’s leadership that the King Committee was re-convened
at the beginning of 2001 to re-look at corporate governance
practices in South Africa, particularly at a time when so much
legislation had been promulgated since the first King Report,
and also at a time of increasing failures of business, where good
corporate governance practices had been absent, not only locally
but also internationally.
Reconvening of the King Committee to review corporate governance in
South Africa
The terms of reference of review and membership of task teams
in relation to what would become the King Report on Corporate
Governance for South Africa – 2002 dealt with:
• Reviewing the 1994 King Report on Corporate Governance
and assessing its currency against developments locally and
internationally since its publication
• Reviewing and clarifying the earlier proposition in the 1994
Report for an ‘inclusive approach’ for sustainable successive
companies
• Recognising the increasing importance placed on
non-financial issues worldwide and considering and
recommending reporting on issues associated with social
and ethical accounting, auditing and reporting (SEAAR and
safety, health and environment SHE)
• Recommending how compliance with a new code of
corporate governance for South Africa could be measured
and made outcomes-based, i.e. to measure for success of
companies through the ‘balanced score card’ approach for
reporting.
The King Committee that re-convened was again chaired by
Mervyn King and consisted of 21 members. Philip Armstrong, as
Principal Convenor and Editor of the new initiative, headed the
five task teams. The Secretariat for the new King initiative was
again provided by the IoDSA.
A draft document was produced in the middle of 2001 and
circulated widely to business, labour and government. Input
continued into this draft document until the end of 2001,
when the views and opinions of the commenting parties were
encapsulated into the King Report on Corporate Governance for
South Africa – 2002 (King II).
On 26 March 2002, the report was launched and was hailed as
a world-class definitive work, and subsequently used in both
Europe and the United States as a benchmark document.
Under the leadership of Tony Dixon (IoDSA CEO 2004 – 2009)
and the groundwork done on evolving corporate governance
thinking, the third report on Corporate Governance in South
Africa became necessary, primarily due to a new Companies Act,
along with changes in international governance trends since
2002, when the second King Report was published. Since 2004,
Tony Dixon had taken a proactive role on this thinking, together
with Mervyn King and the King Committee.

King Reports
6
“
The main development in the drafting
process of King IV was that it was widely
consultative during the drafting process before
the call of written comments, so that the
resultant product represents a truly inclusive
effort.
“
On Tony Dixon’s decision to retire, it became necessary to
identify a suitable successor who had a deep understanding of
governance issues in view of the involvement of the IoDSA in the
preparation of King III. Tony Dixon continued to be a member of
the King Committee after his retirement, but was succeeded as
Chief Executive by Lindie Engelbrecht, who had worked closely
with Mervyn King for some time and was seen by the IoDSA as
an ideal choice to provide the continued support to the King
Committee and leadership role in the drafting of King III. She
was supported by various technical working groups. The launch
of the King III Report on Corporate Governance took place at
the IoDSA’s annual conference in September 2009. Sir Adrian
Cadbury, the Chairman of the United Kingdom’s Committee on
the Financial Aspects of Corporate Governance, which published
its Report and Code of best practices in 1992, was the keynote
speaker at the Conference.
Since the launch of King III, the King Committee remained a
standing committee, convened by the IoDSA and chaired by
Mervyn King.
King IV in the making
During 2014, a decision was made by the King Committee
and the IoDSA Board to commence the drafting of the fourth
iteration of the King Reports, and Ansie Ramalho (Chief Executive
of the IoDSA at the time) was chosen to lead this process. She
was supported by a task team consisting of selected members of
the King Committee.
of entities across sectors. It was, however, envisaged that the
fundamental philosophy and concepts as espoused in King III
would not change significantly.
Simplification and ease of interpretation and access was
another key tenet of King IV. One of the ways that this was
achieved was by clearly differentiating principles from practice
recommendations, and putting the emphasis on the outcome
envisaged by the principle and allowing for flexibility of
application.
Greater succinctness and streamlining, positions King IV for
accessibility on mobile and tablet devices, and aims to provide
the ability for organisations to disclose their application on King
IV online.
The main development in the drafting process of King IV was that
it was widely consultative during the drafting process before
the call of written comments, so that the resultant product
represents a truly inclusive effort.
The draft of the King IV Report was issued for public comment
on 15 March 2016 and the final version will be launched at a
conference on 1 November 2016, with an anticipated effective
date to be some time during 2017. C
The update would take into account a number of significant
corporate governance and regulatory developments, locally and
internationally, since King III was issued in 2009.
The other consideration to be addressed in the update was that
while listed companies were generally applying King III, nonprofit
organisations, private companies and entities in the public
sector had experienced challenges in interpreting and adapting
King III to their particular circumstances. One of the aims of the
fourth iteration was make King IV more accessible to all types
Parmi Natesan, Executive:
Centre for Corporate
Governance
(@parminatesan) and
Angela Cherrington, CEO,
IoDSA (@angelao28)

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King IV
8
King IV: 4 themes and the
board’s leadership role
Ansie Ramalho, King IV Project Lead
There have been significant corporate governance
and regulatory developments, locally and
internationally, since King III was issued in 2009. The
updates to King IV aim to make implementation more
accessible to all entities across sectors.
The application of practice recommendations should
give effect to the principle and the intended governance
outcome before it can be claimed that sound corporate
governance is in place. Whether and how a recommended
or other practice is applied should be guided by the principle and
intended governance outcome.
When there is an understanding of the benefits of corporate
governance and how it can be harnessed in the interests of
an organisation, it allows for application that contributes to
performance rather than detract from it. The King Committee
wishes to convey this understanding by clearly differentiating the
following content elements in the King IV Code:
• Practices
• Principles, and
• Governance outcomes
Practices
Principles
Governance
outcomes
A major challenge encountered with the implementation of
codes of corporate governance is that practices are mindlessly
adopted as if these were rules, resulting in corporate governance
becoming a mere compliance burden. This inflexibility also
leads to an inability to apply codes of corporate governance
in a mindful way that takes account of the size, resources and
the complexity of strategic objectives and operations of an
organisation.
Practices are recommended at an optimum level of corporate
governance and should be adapted - taking account of the
specific size, resources and the complexity of strategic objectives
and operations of the organisation – so that the principle is
achieved.
The principle under which a practice recommendation is made
in the Code serves as guide to direct organisations on what
they should set out to achieve with implementing the practice.
A primary aim of King IV is to reinforce corporate governance
as a holistic and integrated set of arrangements to realise the
intended governance outcomes and, therefore, the principles,
and build on and reinforce one another.
Governance outcomes are the benefits that could be realised in
the event that the underlying principles are fully achieved. Both

9
“
A primary aim of King IV is to reinforce
corporate governance as a holistic and
integrated set of arrangements…
“
governance outcomes and principles are phrased so that they
hold true across all organisations.
The chapters in the King IV Code are organised so that the
principles and the practices in each support the realisation of the
intended governance outcome for that chapter:
CHAPTER AND CONTENT
CHAPTER 1: LEADERSHIP, ETHICS AND
CORPORATE CITIZENSHIP
Ethical leadership I Organisational
values, ethics and culture I
Responsible corporate citizenship
CHAPTER 2: PERFORMANCE AND REPORTING
Strategy, implementation,
performance I Reports and disclosure
CHAPTER 3: GOVERNING STRUCTURES AND
DELEGATION
GOVERNANCE OUTCOME
ETHICAL CULTURE
PERFORMANCE AND VALUE
CREATION
ADEQUATE AND EFFECTIVE
CONTROL
STRATEGY
Directing the core purpose of the
organisation and setting of its
short- medium- and long-term
direction
POLICY
Giving effect to strategy by
approving policy - rules, structures
and processes that define course
of action and boundaries within
which decisions can be made
OVERSIGHT
Providing oversight of
implementation of strategy and
policy by management
Role of the governing body I
Composition of the governing body
I Committees of the governing
body I Delegation to management I
Performance evaluations
CHAPTER 4: GOVERNANCE FUNCTIONAL
AREAS
Risk and opportunity governance
I Technology and information
governance I Compliance
governance I Remuneration
governance I Assurance
CHAPTER 5: STAKEHOLDER RELATIONSHIPS
Stakeholders I Responsibilities as
shareholder
ADEQUATE AND EFFECTIVE
CONTROL
TRUST, GOOD REPUTATION
AND LEGITIMACY
DISCLOSURE
Disclosing on the organisation’s
performance and sustainable
value creation
Every sub-section in the King IV Code chapters addresses each of
the leadership responsibilities depicted above: strategy, policy,
oversight and disclosure. C
Role and leadership responsibilities of governing body
Another feature of the organisation of the content of the Code is
that the overarching, high-level leadership responsibilities of the
governing body (as represented below) that produces a golden
thread throughout.
Ansie Ramalho,
King IV Project Lead
Twitter: @ansieramalho

King IV Outcomes
10
Ethical culture: Leadership,
ethics and corporate
citizenship
Mohamed Adam, Member of the King IV Task Team
King III emphasized the importance of ethical leadership,
and this underpinning philosophy has not changed
and is strengthened in King IV.
Adefinition of corporate governance is now included which
‘is about the exercise of ethical and effective leadership by the
governing body’.
However, King IV is striving for simplicity and accessibility and
Chapter 1 – Leadership, Ethics and Corporate Citizenship is good
example of this approach – and has allowed the move to a few
key foundational principles. It is supported by the underpinning
philosophies in the introductory chapter (Part 1) but may
nevertheless disappoint some of the philosophers and purists
among us who may desire a more extensive discussion on the
philosophical underpinnings of these concepts.
The guidance starts with the end in mind – the desired outcome:
an Ethical Culture. It then proceeds to provide simple and
understandable principles and practices that can move an
organisation closer to the desired outcome.
In ‘consultant speak’ 1 it starts with leading self (ethical leadership),
leading the organisation (organisation values, ethics and culture)
and leadership in society (responsible corporate citizenship). This
manifests in a few simple but powerful principles and practices
that provides guidance regarding the achievement of the
ultimate objective.
It is about interdependence – it is about Ubuntu.
Ethical Leadership
The first principle is that ‘the governing body should set the tone and
lead ethically and effectively’ (Principle 1.1). As can be seen from the
practices that are set out, setting the tone means leading by
example and demonstrating the qualities of the characteristics
highlighted (for example independence).
More importantly, it also shows the inextricable relationship
between ethics and leadership. Ethical leadership is broader
than just initiatives about corruption and dealing with fraud and
dishonesty. It is about all those qualities of effective leadership
that we should strive to achieve. These include, for example,
independence, inclusivity and courage.
Independence: Independence in this context is different from
structural or institutional independence that may determine
whether one is regarded as an ‘independent’ or ‘non-executive’
director. All directors need to act with an unfettered discretion
and apply their independent thought to matters before the
governing body with diligence and intellectual honesty.
Inclusivity: An organisation should have an ethical relationship
with its stakeholders. It can only achieve this through effective
engagement with stakeholders and ensuring that their
legitimate interests are considered when taking decisions.
Courage: Courage is a crucial component of ethical leadership and
its importance is not always understood. It is not enough for
directors to have a different view, or believe a particular course
of action is inappropriate. They need to act in accordance with
these beliefs – even if only in the minority. This is what makes

11
“…it is about ensuring an ethical relationship
with society: respecting the rights of others,
using resources efficiently and considering
integrated solutions that allow for sustainable
outcomes rather than short-term gain and
benefit only for the organisation itself.
“
this so difficult and it is always easier not to rock the boat. The
‘dissenting view’ is critical for achieving good governance and
better decision-making. We have all seen the consequences of
good people not acting in accordance with their conscience
– at a country level and at an organisational level. The lack of
courage also lends itself to groupthink and could nullify the
benefit of having a diverse governing body and, in the context of
a company, a mix of independent and non-executive directors.
Organisation values, ethics and culture
Having considered its own conduct as a governing body, ‘the
governing body should ensure that the organisation’s ethics is
managed effectively’ (Principle 1.2).
At the heart of this principle is the need for the governing body
to lead in a manner that is consistent with the ethical culture it
seeks to create. The governing body needs to be consistent in its
application of this principle and the performance, and rewards of
the organisation need to be aligned with the achievement of an
ethical culture. Adherence to appropriate principles, practices and
conduct cannot be discarded because there is an easier way to
do something, especially when the achievement of performance
targets are threatened. More importantly, the incentive scheme
should not reward or encourage conduct that is not line with an
organisation’s stated ethical objectives and values.
The practices again set out useful and simple guidance regarding
what needs to be done. It is necessary that the governing body
take steps to ensure that there is clear leadership and direction
regarding the commitment to organisational ethics. If it is
seen as important to the governing body, it will be regarded as
important for the organisation. The organisation should also
have mechanisms and process that assist – in terms of codes of
conduct, policies and structures. It should permeate everything
in the organisation – becoming the way things are done.
outcome envisaged in King IV is much broader than this. It
includes ethical leadership considerations that go beyond these
focus areas and even beyond the organisation itself, taking into
account the impact of the organisation as a citizen of the society
in which it operates.
It is within this context that ‘the governing body should ensure that
the organisation is a responsible corporate citizen’ (Principles 1.3).
In essence, it is about ensuring an ethical relationship with
society: respecting the rights of others, using resources
efficiently and considering integrated solutions that allow for
sustainable outcomes rather than short-term gain and benefit
only for the organisation itself. The organisation should be able
to influence and respond appropriately to the economic, social
and environmental outcomes of its activities. This balance is
extremely difficult to achieve - that is why it needs effective
leaders who can apply their judgement in a responsible, fair and
transparent manner.
Most importantly, it needs leaders who are willing to account for
the performance of the organisation within this context through
integrated, transparent, and effective disclosure and reporting.
Conclusion
What is influencing how we lead organisations today has as
much to do with everything happening in the organisation,
as with that happening outside of it. Leaders who strive to
achieve an ethical culture will lead in a way that recognises this
interconnectedness – and will be able to lead in an integrated
and inclusive manner, thereby building sustainable and ethical
organisations. C
1
There are numerous consultants who refer to this perspective and I am not
sure who to acknowledge. Suffice to say that it is not my own.
It is also important for the governing body to determine what it
will monitor and report on and do so in an effective manner. In
this way the progress of the organization, in achieving its desired
outcome, can be monitored and measured.
Corporate Citizenship
When referring to an ethical culture or ethics generally, it is not
unusual for one to assume that the focus is on honesty, fraud
and corruption. As explained in Chapter 1, the ethical culture
Mohamed Adam,
Member of the King IV Task Team

King IV Outcomes
12
Performance and value
creation: Governance or
performance – is this a
choice?
Lindie Engelbrecht, Member of the King IV Task Team
‘Governance is great but we still have a
business to run’
Governance Performance
How often have you either said or heard this in a
boardroom? In many instances, governance is equated
to conformance. Applying a set of rules ensuring an
organisation conforms to laws and addresses risks. Many
believe that applying the principles of good governance will result
in those charged with governance taking the proverbial ‘eye off
the ball’.
One of the key governance outcomes addressed in King IV
is sustainable performance and value-creation. Governance
should actively promote and drive sustainable performance and
value. The governing body plays an important leadership role
by providing strategic direction and ensuring that it enhances
the long-term positive outcomes for the business, society and
the environment. A key challenge for leadership is to make
sustainable performance and value a mainstream priority.
Sustainable performance and value
‘Long-range planning does not deal with the future decisions, but with
the future of present decisions’ - Peter Drucker.
Modern societies are facing significant social and environmental
challenges such as biodiversity loss, resource depletion
globalisation and social justice. These concepts are often
described as sustainability issues and are considered the primary
moral and economic imperatives of the twenty-first century. The
survival and success of the modern company is interconnected
with the health of the natural environment, the social and
political system and the global economy.
The concepts of sustainable performance and value is
underpinned by stakeholder inclusivity. King III first addressed the
move away from the ‘enlightened shareholder’ concept to that

13
“
Value is the outcome of the effective
use of resources and good relationships with
stakeholders.
“
of stakeholder inclusivity. Practically, the stakeholder-inclusive
model considers the legitimate interests and expectations of
stakeholders in deciding the best interests of an organisation. The
best interests of the organisation should be interpreted within the
parameters of the organisation as a sustainable enterprise and as
a responsible corporate citizen.
This is a dynamic process requiring a holistic approach when
making trade-offs, and is dependent on the situation. Each of the
forms of capitals used or affected by the organisation will impact
upon, and be of interest to different stakeholders. A stakeholderinclusive
approach will support sustainable performance and
value. Value is the outcome of the effective use of resources and
good relationships with stakeholders.
Stakeholder inclusivity is further enhanced in King IV by
addressing the accountability of organisation in the broader
context within which is operates. A clear link is made to ethical
behaviour, as organisations should not expect current and future
stakeholders to carry the economic, social and environmental
costs and burden of its operations.
Integrated thinking
Principle 2.1 requires the governing body to appreciate that
strategy, risk and opportunity, performance and sustainable
development are inseparable elements.
The key driver in King IV to achieve the sustainable performance
and value outcome is integrated thinking: ‘The active
consideration by an organisation of the relationships between
its various operating and functional units and the capitals that
the organisation uses of affects ’1 . King IV focuses on integrated
thinking which is more than just the elimination of silos within an
organisation.
Integrated thinking considers the interconnectivity of the:
• Risks and opportunities posed by the operating environment,
• Utilisation and reliance on resources
• Legitimate needs, interests and expectation of stakeholders
• Ability to support the strategy through the resources, structures
and processes
• Potential effects of operations on resources and relationships.
Value created by the organisation for itself is inextricably
linked to creating value for stakeholders. However, value is
not always a financial gain. Value should manifest in increases
or transformations of the capitals linked to the organisation’s
activities including financial, manufactured, human, intellectual,
social and relational, and natural.
Integrated reporting
Principle 2.2 requires the governing body to ensure that reports
and other disclosures enable stakeholders to make an informed
assessment of the performance of the organisation and its ability
to create value in a sustainable manner.
As was the case with King III, integrated reporting is a focal
point of sustainable performance and value: ‘Explaining the
value the organisation has created through the enrichment or
impoverishment of each of the different forms of capital’.1
Greater awareness of sustainability issues and the impact on
people and planet has resulted in a greater desire for public
accountability and the impact that entities have on broader
society. Stakeholders are demanding more information and
accountability from organisations.
Stakeholders expect organisations to demonstrate how
strategy links to financial aspects and how this strategy impacts
upon performance and corporate value, reaching a long-term
vision through the use of financial, non-financial, social and
environmental resources. The ease with which the integrated
report can be generated is an indication of how integrated the
strategy, business activities and operations truly are.
The integrated report is positioned in King IV as a reference for
stakeholders to understand how the organisation creates value
and achieves sustainable performance. King IV addresses the
interconnected paradigm shifts in corporate thinking, resulting
in sustainable performance and the delivery of value. Successful
organisations will move from financial capitalism to inclusive
capitalism, will move from short-term capital markets to longterm
sustainable capital markets, and from silo reporting to
integrated reporting.
Governance and performance – there is no choice. C
1. The International Framework
Lindie Engelbrecht,
Member of the King IV Task Team

King IV Outcomes
14
Adequate and effective
control
Annamarie van der Merwe, Member of the King IV Task Team
There can be no doubt that effective control and
compliance are both boardroom issues, that must
be given adequate attention.
The regular boardroom comment concerning the impact of
ever-increasing regulation on business and ‘entrepreneurial
flair’ is not only a local phenomenon. In a survey conducted
in 2014 by Forbes Insights and KPMG 1 it was found that the
regulatory environment was regarded as the top issue that could
have the most impact on a company, even more so than the
economy! This was according to the 400 CEOs surveyed in the
US across all major industries. Like it or not, regulation and more
regulation and more regulation, and with it the ever-increasing
need to comply, is a reality that can’t be ignored or wished
away. It is part and parcel today of managing any business or
organisation and the buck stops here…in the boardroom.
The law is clear: members of governing bodies have fiduciary
duties (in the case of directors of companies also statutory
duties) to act in good faith, for a proper purpose and with due
care and skill and diligence. These standards of conduct as
required by law are of relevance in the manner in which the affairs
of the organisation, under the direct control of its governing
body, are managed. Failure will have consequences, the extent of
which for members of the governing body will in most instances
depend, amongst other things, on the extent to which they paid
attention, took diligent steps to become informed and tried to
make good decisions in good faith and in what they honestly
believed were in the best interest of the organisation.

15
“
The draft King IV Code furthermore
highlights the importance of not only looking
at compliance from an obligation point of view,
but also taking into consideration the rights
and protections that these could afford the
organisation.
“
It is, therefore, not surprising that the draft King IV Report, similar
to its predecessor, brings the issue of compliance onto the board
agenda. It is not only the principles of good governance - such
as accountability and responsibility - that warrant such a step,
the law itself with its often draconian consequences for noncompliance,
should convince any member of a governing body
that the ‘ostrich head in the sand’ approach is probably not the
way to go. The question today in South Africa should not be if
a major stakeholder or group of stakeholders is going to drag a
board of directors off to court on behalf of a company to institute
a claim for damages suffered by the company as a result of hefty
regulatory fines being imposed for non-compliance to the laws of
the country, but the question is when! Add to this the fact that a
number of our laws make provision for personal liability of board
members, including our corporate laws, tax laws, environmental
laws and health and safety laws. Do we really need any more
convincing that compliance should be a boardroom issue?
So what do board members do?
Run off and become lawyers? Start walking around with a
clipboard to audit every aspect of compliance in the organisation?
No, says the draft King IV Code, but rather:
• As part of setting strategy, provide direction on the objectives,
approach and philosophy with regards to compliance with
applicable laws and non-binding rules, codes and standards;
• As part of policy making, ensure that the above is articulated
and documented in a formal policy that also provides for the
adoption of the appropriate standards, framework, processes
and procedures;
• As part of oversight, delegate via the CEO to management
the responsibility for implementing the compliance policy and
embedding it into the day-to-day decision-making, culture
and activities of the organisation (and then regularly monitor
performance as delegation can never mean abdication); and
• As part of disclosure, report on the objectives, approach
and philosophy with regards to compliance, the standards,
framework, processes and procedures implemented to achieve
these objectives and - the bottom line - the actual outcome
and result of these endeavours.
The draft King IV Code furthermore highlights the importance of
not only looking at compliance from an obligation point of view,
but also taking into consideration the rights and protections
that these could afford the organisation. In executing on
its compliance responsibilities, strategic relationships with
regulators in order to understand the environment and trends,
while at the same time creating the ability to influence, need to
be on the board radar screen. From this angle, compliance is as
much part of the strategic discussions as any other aspect of the
business.
In short, therefore….
• Have a good understanding what the regulatory and
compliance environment within which the organisation
operates consists of;
• Clearly articulate the expectations from management as far as
compliance is concerned;
• Monitor the extent to which these expectations are being
met through mechanisms such as management reports to
the board, audits, appropriate assurance and the like; and
thereafter
• Report in an honest, transparent and responsible manner
on your effectiveness in ensuring that the culture in the
organisation is one of being a law-abiding corporate citizen of
this country.
Do all of this and the ‘compliance buck’ is welcome to stop in the
boardroom anytime. C
1. Setting the Course for Growth: CEO Perspectives, Forbes Insights & KPMG,
July 2014
Annamarie van der Merwe,
Member of the King IV Task Team

King IV Outcomes
16
Trust, good reputation
and legitimacy
Richard Foster, Member of the King IV Task Team
The basis of this outcome is around the long-term
sustainability of an organisation, which is directly
linked to a solid foundation of ethics and integrity.
It is generally accepted that Trust is the building of relations
between parties and the belief in each other. Reputation in
an ordinary sense can mean the perceptions or beliefs that
are held about a particular organisation. Legitimacy in respect
of an organisation can be said to describe the acceptance
of it as being genuine and/or lawful and ultimately having
a ‘license to operate’ in the context of society. It is apparent
in reading the Draft King IV Report and Code on Corporate
Governance, recently released for public comment, that
these concepts, taken together constitute one of the stated
‘intended governance outcomes’ contributing to good corporate
governance and benefits to be derived if the attendant practices
and principles underpinning these outcomes are implemented
and such outcomes achieved.
Running any business in today’s modern world has become
increasingly complex and challenging for both boards and
management alike given inter alia, the quantum change to
a stakeholder inclusive approach and particularly the access
to and desire for information by such stakeholders either by
formal reporting ,such as in an integrated or other formal
report, as well as by means of the various digital mediums,
i.e. social media, which pervades our current environment
as enablers or potential disablers for an organisation. The
goalposts have undoubtedly shifted in terms of the governance
and management response required from an organisation in
order to maintain the overall performance and value creation
by it on a sustainable basis. Boards should recognise that the
sustainability of an enterprise is based to a great extent on a
solid foundation of ethics and integrity, and the value of these
linked to long-term trust and reputation.
Reference is still sometimes made to the ‘triple bottom line’ as
first espoused in the King II Report on Corporate Governance
and, subsequently, to the further development of the triple
context and the inseparable link of an organisation to the future
of the economy society and natural environment within which
it operates. We currently have the fully inclusive stakeholder
approach that is required to be adopted by organisations if they
are to survive and thrive and be seen to be responsible citizens.
This concept has been further supported by the acceptance
that an organisation uses six capitals, namely: financial,
manufactured, human, natural, intellectual and social, including
the relationships with the organisation’s key stakeholders, which
by means of integrated reporting, informs and gives a framework
as to how an organisation should report on the financial as well
as the various non-financial aspects of its business.
In order to effectively achieve this, it is critical that strong
meaningful and transparent relationships are built up with the
various key stakeholders, as an organisation’s reputation and its
attendant brand will be hugely sensitive to such relationships.
It has been seen that while these are often built up over a long
period of time, they can conversely be destroyed overnight,
leading to the possible demise of a once long-standing and
significant organisation. A pertinent example of this was the
case of ‘Arthur Anderson’ during the Enron corporate governance

17
“
Boards should recognise that the
sustainability of an enterprise is based to a
great extent on a solid foundation of ethics and
integrity, and the value of these linked to longterm
trust and reputation.
“
scandal, which was one of the then big five global accounting
and auditing firms that could not withstand the reputational
and brand damage due to its complicity in the Enron issue and,
consequently, has ceased to exist. A positive example of this was
Johnson & Johnson in the US that turned around what could
have been a very serious reputational issue around their Tylenol
product through proactive action, notwithstanding the cost.
Trust supports resilience for an organisation, which was clearly
demonstrated in this instance, and ensured Johnson & Johnson’s
excellent reputation not only survived the shock at the very least
but, in fact, was enhanced.
The days of focusing of relationship building with shareholders
only as the primary stakeholder are a thing of the past. The
interests of other shareholders or any other stakeholder should
be given precedence based on what is considered to be in the
best interests of an organisation at any point in time, depending
on the specific situation, circumstances and attendant facts.
As part of the overall strategy of an organisation, clear direction
should be given by the board on, inter alia, the relationships and
attendant strategy with its stakeholders. An approved policy
should provide the necessary framework to achieve this, and
management be tasked to implement a suitable stakeholder
management plan in this regard.
Reputation from a group perspective should also not be ignored,
notwithstanding the separate legal personalities and protection
afforded in law. Stakeholders will invariably look through such
structures, and groups must ensure that their value systems
are inculcated throughout the entire group wherever they may
be operating, as well as in the value chains with suppliers and
customers alike.
The risk management and oversight around reputation is critical
to ensure that these risks which are inextricably linked to many
of the other risks in an organisation, are identified, suitably
mitigated and/or escalated, and the necessary controls around
those risks put in place and suitably monitored.
In order for trust to be built up with stakeholders, transparency
becomes vital, and companies must ensure adequate
disclosure through proper communication channels with
all key stakeholders as part of a stakeholder strategy and
communication plan. Given the technology platforms available,
an ill-informed or inappropriate comment could have a
severe negative effect on a company’s reputation, resulting in
management and/or the board being unnecessarily tied up in
trying to implement damage control to protect and / or restore
the company’s reputation.
Boards are becoming increasingly aware that compliance with
only the letter of the law is no longer enough, but the moral and
ethical considerations also need to be taken into account. We
have seen with recent tax issues where major multinationals
have legally shifted profits from their base jurisdiction to
jurisdictions with more favourable rates, e.g. Starbucks and
Google. Another example of this is where businesses do only
enough to meet the bare minimum requirements in terms of
either health and safety or environmental legislation, which
can result in severe reputational damage should something go
wrong, e.g. the environmental damage caused by the BP oil spill.
We live in a world of shareholder and other stakeholder activism
which should be welcomed and encouraged. Such activism is an
important and necessary element of good corporate governance
dynamics if undertaken in a responsible manner, which
serves not only to enhance engagement, transparency and
understanding between the relevant parties, but to strengthen
the relationships contributing to a stronger balance sheet
overall, but particularly in the areas of human and social capital.
It is suggested that trust, good reputation and legitimacy should
be considered essential to any organisation in today’s highly
competitive and connected environment. Organisations should
strive to ensure that these are suitably built up and proactively
managed with all key stakeholders to adequately optimise the
possible advantages and mitigate the potential downside and
attendant risks. It is suggested that following the recommended
King IV practices will assist with this.
It should always be remembered that good corporate
governance is not only about systems structures and processes,
but is also about the value that can be added to an enterprise for
all its stakeholders alike. C
Richard Foster,
Member of the King IV Task Team

Leadership
18
Steady hands needed
at the helm
Venete Klein, Chairman, IoDSA
In times of economic uncertainty, the quality of
the leadership that directors offer is more critical
than ever.
E
conomic
uncertainty is a major concern for all South
Africans, but for company directors it poses specific
challenges. In order to overcome them, it is first necessary
to understand what they are.
Nobody would question that we face a set of tough economic
challenges at present. The IoDSA’s Directors’ Sentiment Index
confirms that economic uncertainty is the main concern of
directors. More specific issues include the weak exchange rate
and the resultant higher cost of doing business in South Africa.
One thing we need to recognise more overtly is that our economic
uncertainty is being exacerbated by political turmoil. At the time
of writing, it is impossible to predict the outcome of the political
battles underway, but their effect on the economy is clearly longterm
and devastating. One point is clear: directors cannot see the
economy in isolation, and must take political developments into
account when making decisions on behalf of shareholders.
There is obviously a very fine line to walk here. No company
wants to become embroiled in political controversy but, at
the very least, directors need to be alive to the implications
of political developments for the economy — and to offer
courageous and principled leadership by speaking out when
it is required. While directors might be wary of making public
comments about what seem to be exclusively political matters,
they also need to be aware of how deeply politics affects
business, both directly and indirectly.
Thus, to cite only the most obvious example, it was the political
machinations around the Minister of Finance that led directly to
the calamitous drop in the exchange and bond rates, noted above
as one of the key worries for directors. But one could also argue
that this sorry episode was the culmination of a long decline in
governance practices to which corporate leaders have failed to
respond adequately.
But, I repeat, it is never going to be easy for directors to strike the
right balance between responding to non-economic factors that
affect the business environment, and sticking firmly to their core
focus of organisational sustainability.
Back to the economy
Economic uncertainty is clearly very topical at present, but we
should remember that this country has experienced economic

19
“
...directors cannot see the economy in
isolation, and must take political developments
into account when making decisions on behalf of
shareholders.
“
and political turmoil of similar or even greater severity before.
In such times, directors will need to continue doing what they
always do, but with a heightened awareness of the implications
both for the company and the way the board itself operates.
For example, it is clear that investors are pessimistic about the
country’s growth, now projected to be under one percent. No
surprise, then, that South African corporates are sitting on cash
or investing it outside of South Africa, rather than building local
capacity. In parallel, inflation is expected to rise even higher than
the current 6.8%, which has already prompted an increase in the
repo rate twice this year. If South Africa’s investment status is
downgraded, this will further affect the country’s attractiveness
as a place to do business.
It’s not just big corporates that will be wary of investing in South
Africa — the impact of the current economic uncertainty will
hit the small- to medium-sized enterprise (SME) sector very
hard. This is very negative for the economy, and the country as a
whole, because SMEs are supposed to be the engines of growth
and job creation. Consumer confidence and spending power will
decline — and the social unrest that large-scale and sustained
joblessness creates could rise.
The director’s role in troubled times
In such a scenario, directors will find themselves constantly
having to make decisions based on downward projections. It can
become a wearying and draining exercise. Above all, they need to
remember that their sentiment will inevitably filter down to the
rest of the company.
uncertain, and this provides a perfect opportunity for a business
to consolidate — and enhance — its strengths.
Directors also should heighten their observation of both the local
and other economies in order to identify new challenges, or to
learn from how others are coping. Their skills in anticipating the
implications of local and global developments for the company
are never more valuable than now.
It goes without saying that they should also be looking with
more than usual eagerness for the opportunities that uncertainty
inevitably does create.
At a more general level, I think it is fair to say that boards need
to become much more agile in order to respond to business
concerns as they arise. This will also mean improving the board’s
networks within the company to take its pulse better, and
identify issues early on.
A more flexible approach to the board agenda should also be
used to create space to tap into the collective wisdom — and
sometimes brilliance — that is around the table. When business
unusual is the order of the day, then it makes sense to allow
directors to think more laterally.
Despite everything, though, directors should not lose heart.
South Africa continues to have strong financial markets, an
independent judiciary, excellent corporate governance and a
vibrant civil society. Now is the time for directors, like all South
Africans, to build on our considerable strengths — and have the
courage to speak out if necessary. C
Once again, directors will need to tread a fine line between
a realistic acceptance of the facts and the need to rally the
company behind a positive action plan. It’s easy to lead a
company that is being swept along by a buoyant market, but we
are all tested when the opposite is the case.
In such times, it is critical that the board demonstrates an ability
to make constructive and valuable contributions to the longterm
sustainability of the company. Operational excellence — or
sticking to the knitting, one might say — is one of the surest ways
to weather a storm. It’s natural to look inwards when things are
Venete Klein,
Chairman, IoDSA

Opinion piece
20
Why undertake investor
relations?
Gillian Findlay, MD, Cambial Communications
In a world where confidence in the corporate sector has
been eroded by dramatic failures there is clearly the need
to create an understanding of a company’s affairs by
investors.
A
lthough communicating with all stakeholders is
enshrined in Chapter 8 of the King III Code of Corporate
Governance (and Chapter 5 in the upcoming King IV),
there has been some spectacular bungling by companies
of their communication with the investment community.
In 2003 Nedcor’s reputation suffered an enormous dent and a
plummeting share price. After touching giddy highs of R150.00 in
2002, Nedcor shares tumbled to the R60 level in 2004. A bonus
scheme focusing on short-term performance saw bonuses of
R18m paid to directors in 2002, in respect of the 2001 financial
year – a year in which the group earned net profits of only R13m. A
press exposé saw heads roll. Rob Rose summed it up in Business
Day (9 Dec 2003): “New CEO Tom Boardman will take over the
reins today and attempt to restore the bank to prosperity after
a traumatic year, in which its share price dropped 40% amid a
slump in its earnings and reputation.”
When BP’s Deepwater Horizon oil rig exploded in Gulf of Mexico
on 20 April 2010 causing an oil spill, BP's share price was 648.20p
(GB). At first, CEO Tony Hayward tried to downplay the impact of
the disaster on both the company and the environment, stating
that the impact will be ‘very, very modest’.

21
“
Executives that have been with one company
for a long time, may be surprised at how the
employment landscape has changed.
“
By 30 May, Hayward had reached a nadir in his media
engagement stating: “I’d like my life back.” From this point,
there would be no going back for him. By 29 June, the price had
collapsed to 298p. Throughout the crisis, Hayward seemed overly
defensive and revealed little. It came as no surprise when his
resignation was announced on 27 July, in spite of the leak being
successfully capped earlier in July. The share price never really rose
above 500p after the incident, in spite of the then booming oil
price, and a subsequent collapse in oil has seen the share price
slide to below 350p.
And who can forget the rout that Pinnacle Holdings experienced
in March 2014? After peaking at over R26.00 in August 2013, the
share price drifted to around R23.00 towards the end of February
2014. The arrest of an executive director for alleged bribery in
March 2014, saw the share close at R13.90 on 30 March 2014
and by mid-August, the share was trading below R10.00. In the
two days after the announcement, Pinnacle’s market cap fell to
R1.95bn, from R3.4bn — a total loss of R1.5bn.
But the issue was not so much the arrest – the charges were
subsequently dropped – as the communication vacuum in
which it took place. It took Pinnacle 20 days to announce the
arrest, during which time several directors sold Pinnacle shares
equivalent to about 1% of the company. And even once the
announcement was made, management seemed reluctant
to have much interaction with the media. In spite of an uptick
following the charges being dropping, Pinnacle’s share price
continues to languish in the R11.00 to R14.00 range.
By contrast, the handling of the Pick n Pay poison scare in 2003
resulted in a relatively small impact on both the share price
and company sales, in spite of a decision to keep silent on the
matter for seven weeks. Once the company went public, CEO
Sean Summers handled media attention with aplomb: always
available, always proving information and keeping the public
informed. Shareholders rewarded the strategy with a share
price that held its own, only dipping 3.6% in the week after the
announcement, after reaching an all-time high the previous
week. Not only that, but some customers were actually going
out of their way to shop at Pick n Pay as a means to support
the group: in a survey at the time, 87% of all respondents polled
indicated that they would support Pick n Pay and would make a
point of shopping there.
them well informed and able to base investment decisions
on facts rather than speculation and it behoves a company to
undertake sound investor relations.
It is in a company’s interests to maintain a share price that is
consistent with an accurate view of its performance as well as its
future prospects: too low, and the company is an easy target for
a takeover while making fund-raising expensive and inhibiting
its ability to purchase other entities; too high, and the risk of
shorting and lack of appeal for new share options hamper the
company.
Engaging with shareholders may be a JSE listing requirement
and important from a governance perspective, but it is equally
important for keeping shareholders well informed and in the best
position possible to make investment decisions. C
With over 30 years’ experience in the financial and investment field,
initially as an investment analyst with stockbrokers and subsequently
in institutional investment marketing, Gillian Findlay left the corporate
world to start Cambial Communications. She offers investor relations,
corporate communications and reputation management services. She
is a member of the Investment Analysts’ Society of SA, the Economic
Society of SA, the Institute of Directors Southern Africa and is accredited
in PR by PRISA.
Value gained through IoDSA membership: In communications, there may be
a temptation to flout ethics and this can be particularly relevant
when it comes to investments. There are many opportunities to break
confidences and to bend the truth. However, I am passionate about
ethical behaviour and governance and the IoDSA is the gold standard of
both.
Twitter: @gillian_findlay; @cambial
What is clear from these case studies is that investor sentiment
plays an enormous role in determining share prices. An open
channel of communication with investors is essential to keep

Opinion piece
22
King III humanises the
Southern African business
Fay Mukaddam
King III’s aim is to create responsible corporate citizens
through encouraging a triple bottom-line corporate goal.
on the table. Stakeholders receive an insight into the integrity
of a company, thus upholding a business’s reputation, and we
have seen that a business’s reputation is closely linked to its profit
margin. This is a perfect showcase of how the heart, pocket and
environment is depicted and intertwined. King III has helped to
ensure that all three aspects are navigated and joined to create
socially responsible corporate citizens.
In short: planet, people and profit are inextricably intertwined
within the King III code. After seven years, seeing the code
in application, policy-makers are able to analyse the impact
of this code, study the positive outcomes of King III principles,
and examine how business practices have developed since
implementation.
Principle analysis: Boards and Directors
In the King III code, the board and directors should act as the
focal point and catalyst of ethical leadership and corporate
governance. The outcome of this guideline is that once the
core of business is seen as moral, this ethical sense of doing
business runs naturally down the hierarchy of an organisation,
making day-to-day operations honourable. If the heart of an
organisation is ethical, this pumps throughout the body of
your organisation, right down to the smallest vein of business.
Secondly, the requirement for the board to meet a minimum of
four times a year, ensures that responsibility is taken towards
aspects such as strategy, and that accountability is embedded in
the mindset of the board. Boards are also encouraged to have a
wide demographic which is quintessential in the South African
market. Variety has shown to increase a business’s effectiveness,
with diverse skillsets, backgrounds, viewpoints and experiences
providing a diverse philosophy.
Principle analysis: integrated reporting and disclosure
A financial report is necessary for investors, but an integrated
report is how South African business exposes its heart through a
qualitative analysis to its shareholders. It gives stakeholders the
confidence in a company, as the organisation is laying open cards
How business practices have developed due to King III
King III has influenced the business processes of an organisation.
Through the principles of accountability and transparency,
companies have now taken on environmental, community and
social responsibilities. Organisations have reached out into their
community, uplifting it in order to fulfil their triple bottom line.
In conjunction, the environmental impacts that may have been
caused through the organisation’s practices have since been
minimised in an effort to present a positive and responsible
image to their stakeholders. In the event that an issue has
arisen in the community due to the organisation practices, the
organisation has since felt mandated with the task of providing a
solution to this issue.
A good system of corporate governance is essential for the
proper functioning of the entity. The key challenge to companies
is to find an appropriate balance between performance
and conformance with the governing principles. Through
transparency, accountability, responsibility and fairness
principles, South Africa has risen to be one of the leading states in
field of corporate governance. C
Fay Mukaddam is an advocate of the High Court of South Africa. Fay
has been at the forefront of advice to numerous local and international
entities on several transactions, including some of the most prestigious
published and covered empowerment transactions in South Africa. A
previous President of the Johannesburg of Chamber of Commerce and
Industry (JCCI), she now serves as the CEO of 4AX Stock Exchange.
Value gained through IoDSA membership: All members
of the IoDSA have access to the Director
Lifestyle Programme. The range of value-added
benefits and discounts in this programme are
phenomenal.
Twitter: @FayMukaddam

Opinion piece
23
The non-executive director
and his home office
Engela Crocker, Senior Tax Manager, RSM South Africa
If you are appointed on a board of directors as a nonexecutive
director, it pays to think twice before you claim
any expenses you believe are incurred in the production of
your income.
meeting, and these expenses incurred can be claimed under the
general deduction formula of section 11(a).
However, you should be extremely careful that the expenditure is
truly incurred at the home office – that you are not preparing for
a board meeting at the company’s premises in an office provided
by them.
In addition, if we refer to section 23(b) of the Income Tax Act, it
does list a prohibition against the deduction of domestic or private
expenses, including rent or cost of repairs or expenses in connection
with any premises not occupied for the purposes of trade or of any
dwelling-house or domestic premises, except in respect of such part
as may be occupied for the purposes of your trade.
The question that should be asked is regarding the true
nature of your appointment. Are you independent or are
you seen as an employee of the company? If the company
is a listed company, you would possibly be seen as an
independent contractor. However, if the company is a private
company, SARS could argue that you are a holder of an office and
therefore subject you to the limitations imposed by section 23(m)
of the Income Tax Act. They could, therefore, disallow all the
expenses claimed against the director’s remuneration.
It is important to determine if you are carrying on a trade. The
definition of a trade is very broad. It states the following:
‘Trade’ includes every profession, trade, business, employment, calling,
occupation or venture…
It is contended that the acceptance of a non-executive
directorship could meet the definition of a trade. A non-executive
director is in essence by the requirements of the appointment,
independent to the company and should not be seen as an
employee of the company. It should also be stated that the
non-executive director would not be subject to any control and
supervision of anybody in the conduct of his trade. As a result, any
necessary expenses incurred in the production of the income from
that trade can be claimed in terms of section 11(a) of the Income
Tax Act.
It is not uncommon that a non-executive director may incur
home office expenses, for example, to prepare for a board
However, the proviso to section 23(b) states that:
(a) Such part shall not be deemed to have been occupied for the
purposes of trade unless such part is specifically equipped for
purposes of the taxpayer’s trade and regularly and exclusively
used for such purposes; and
(b) No deduction shall in any event be granted where the
taxpayer’s trade constitutes any employment or office unless -
i. His income from such employment of office is derived
mainly from commission or other variable payments which
are based on the taxpayer’s work performance, and his
duties are mainly performed otherwise than in an office
which is provided to him by his employer; or
ii. His duties are mainly performed in such part.
It is therefore important that the home office could not have, for
example, a bed or toy storage containers in it as it would then not
be seen to be used exclusively for your trade.
Another matter that is not addressed in this article is whether
or not a non-executive director’s trade meets the definition of an
enterprise and should they register as a VAT vendor.
In closing, if SARS has disallowed any expenses claimed against
non-executive director’s remuneration, we advise that you
contact your tax practitioner as it is not necessarily an easy
argument to put forward to SARS. C

Opinion piece
24
From ‘Them’ to ‘Us’: Making
stakeholder engagement
work
James Forson, Forson Consulting
In this time of global economic volatility, governments are
scrambling to balance the socio-economic imbalances of
the country.
One wrong move from an organisation may result in the fall
of its reputational value – a concept which is intangible
and difficult to quantify, but whose value is evidenced in
its fruit – or business results which it bears in the form
of a licence to operate (LTO). The peculiarity about an LTO is that
it is very difficult to accumulate, but very easy to lose. And once
lost, it is a slow and expensive process to regain the position of
trust. Any organisation has ‘Value’. This value is usually expressed
in economic terms, but there is also a social and environmental
context to this appreciation of ‘Value’. The organisation’s ‘Value’ is
contingent on its Licence to Operate.
The LTO is dependent on the view that important stakeholders
have of the organisation because they are affected by that
organisation’s activities, products or services and associated
performance.
Consequently, a LTO obliges an organisation to involve stakeholders
in identifying, understanding and responding to social, economic
and environmental sustainability issues and concerns. These
range from Rhodes Must Fall to outsourcing to labour brokers, to
public confidence in products and services. These organisations
have to report, explain and be answerable to stakeholders
for decisions, actions and performance. It includes the way in
which an organisation governs itself, sets strategy and manages
performance. It lies at the heart of the ‘Licence to Operate’.
Chapter Eight of King III spells out the governance requirements
for stakeholder engagement. If we take King III seriously, as we
should, this means accountable organisations will:
• Establish a strategy based on a comprehensive and balanced
understanding of and response to material issues and
stakeholder issues and concerns;
• Establish goals and standards against which the strategy and
associated activities can be measured;
• Ensure that performance is managed and judged, and disclose
credible information about strategy, goals, standards and

25
“
Engaging with the individuals, groups or
organisations affected can have a positive impact
on an organisation’s activities, and by responding
to these concerns helps organisations to perform
better overall.
“
performance to those who base their actions and decisions on
this information.
Engaging with the individuals, groups or organisations affected
can have a positive impact on an organisation’s activities, and
by responding to these concerns helps organisations to perform
better overall. It increases their knowledge and contributes to
their license to operate. Now, more than ever, we need quality
stakeholder engagement because, undertaken sensitively, it can:
• Lead to more equitable and sustainable social development by
giving those who have a right to be heard the opportunity to
be considered in decision-making processes;
• Enable better management of risk and reputation;
• Allow for the pooling of resources to solve problems and reach
objectives that cannot be reached by single organisations;
• Enable understanding of the complex operating
environments, including transformation, market
development and cultural dynamics;
• Enable learning from stakeholders, resulting in product and
process improvements;
• Inform, educate and influence stakeholders to improve
their decisions and actions that will have an impact on the
organisation and on society; and
• Contribute to the development of trust-based and
transparent stakeholder relationships
A consistent Stakeholder Engagement approach for any
organisation can protect and enhance the organisations value for
all stakeholders, and sustain the organisation’s social, political,
commercial and environmental Licences to Operate.
Government Relations: The specific set of engagement activities that
are required to meet the performance requirement relating to
Government Relations. It is probably the second most significant
aspect of Stakeholder Engagement in South Africa.
Supply Chain: The specific set of engagement activities required to
meet the performance requirement relating to Supply Chain. This
has implications for Quality of Product (Service) and Continuity of
Supply (Financial Sustainability).
Customers: The specific set of engagement activities that are
required to meet the performance requirement relating
to Customers. Requirements such as Licence to Operate,
Reputation, and Product Trust are key requirements here.
Now, more than ever, South African organisations, in both the
public and private sector need to protect their licence to operate.
They should take King III to heart and pay special attention to
setting up the disciplines and processes for sustainable effective
stakeholder engagement. C
James Forson is a management consultant, writer and Fellow of
the IoDSA. He is a former Associate Director of Account Ability, the
international organisation maintaining the AA1000SES Stakeholder
Engagement Standard. He works extensively with clients to improve
their stakeholder engagement strategies.
Value gained through IoDSA membership: Corporate governance is an integral
part of my work as a management consultant. The IoDSA, through
studies, publications and events, provides me with a current, condensed
overview of important corporate governance issues.
Twitter: @JamesFor
http://forsonconsulting.yolasite.com,
http://jamesforsonwriter.wordpress.com
Cell: 083 625 38 62 Email: james.forson@mweb.co.za
Typical dimensions of Stakeholder Engagement extend to:
Community Relations: This component is highly significant in context
of the Licence to Operate. It is probably the most significant
aspect of Stakeholder Engagement in South Africa. The specific
set of engagement activities that are required to meet the
performance requirement relating to Community Relations.
This has powerful and positive implications for reputation
enhancement and brand building.

Opinion piece
26
Starting early –
Implementing good
governance as soon as
possible
Paul Tanton
In order to create a culture of good corporate governance
practices, we need to introduce the concepts of
accountability and governance early; even at school level,
if as possible.

27
“
If we want a country where we grow from
strength to strength, in my humble opinion
good governance is a clear imperative across the
board, and a concept which needs to be raised to
be top of mind, even as early as high school.
“
South Africa, as many of us know, is a land of contrasts -
those who have, and those who don’t. This extends past
money to skills, and knowledge; access to funding; the
Internet and education. Amid the contrasts we see corrupt
officials and poor governance leading to unsustainable State-
Owned Entities on the one end and SMEs and battling to survive
on the other. If we want a country where we grow from strength
to strength, in my humble opinion good governance is a clear
imperative across the board, and a concept which needs to be
raised to be top of mind, even as early as high school.
It would appear that which is ‘clear to me’ is not always ‘clear
to everyone’. I learnt this lesson back in 2012 where I presented
a course on Governance and Ethics at a Business School in
Johannesburg. We were debating various scenarios. After the
class I was challenged on a personal level as to why it was
necessary to teach something which to me was obvious and,
due to my upbringing, was ‘the way I did things anyway’. Some of
the attendees – off the record they hastened to add – had clearly
been approached to facilitate a task or adjust the priority of a
project in exchange for a small taken of appreciation. Chapter 1
of King III is clear on the role of ethical leadership and corporate
citizenship, and by entertaining practices as mentioned above
shows cracks in their roles as a responsible corporate citizen.
As the owner of a registered company I opted to appoint two
directors in addition to myself. The practices I implemented when
founding my own company were based on the experience I had
gained having served on a number of boards. That experience
opened up my mind to the importance of Good Governance. My
company is an SME, and compliance is not legislated. However,
I took my directors through each section of King III just after my
inaugural board meeting. This was done as a heads-up more for
the directors than for me, due to the responsibilities carried by
Directors in the new company’s act. My company is small, not
listed on the JSE and thus I don’t have shareholders breathing
down my neck, and reviewing certain aspects and the decisions
I take. I do, however, have stakeholders who look to me and
need to know that the company is being run on a sustainable
basis making use of the guidance around governance provided in
King III. I can at least publicly say we are doing the right thing. In
return, I demand a level of good governance from my suppliers as
should all companies.
The company may be small today. However, we will grow and
the habits and behaviours we implement in the early years will
stand us in good stead later. The education efforts need to be
expanded to as many of the registered companies as possible,
no matter how small. This role is currently being facilitated by
the Institute of Directors of Southern Africa (IoDSA), though
I think membership of organisations like the IoDSA is the
exception rather than the rule.
At the last board meeting I was thanked by the directors for
exposing them to many of the aspects in King III which they
were unaware of, even though both of them operate at a senior
level in a corporate environment. This is where I think we
need to do more for Directors serving on Non-Profit and SME
companies in terms of awareness and training. I would go as
far to extend it to Entrepreneurship programmes in schools. For
use to reduce the contrasts present in South Africa we need to
address the education and experiences of our SMEs and in that
way we contribute to creating not only sustainable companies
but a sustainable country. When King IV comes out later this
year I will once again brief my Directors and empower them,
and so help me and my company and, possibly, even South
Africa. C
Paul Tanton owns a company focusing on Leadership. He joined the
IoDSA in 2007 and teaches Governance and Ethics at an MBA level. He
has served as Executive and Non-Executive Director on four boards.
Value gained through IoDSA membership: I have gained a wealth of knowledge
in terms of training, research and exposure to other directors and
opportunities to serve South Africa.
Twitter: @Paul_tanton

Opinion piece
28
Serving the business
purpose
Hein Pretorius, CEO, Onpro Consulting
Governance, compliance and bureaucracy are very
important to the success of a business, but they should
ultimately serve the business purpose, not undermine it.
When did it happen that bureaucracy started dictating
to business instead of serving business? Governance
and bureaucracy are very important but they should
serve the Business Purpose, not dictate it. I am of the
firm belief that bureaucrats implement systems to ensure they
do not get blamed for fraud or other governance-related failures.
Innovation is needed to enable bureaucratic and governance
control systems to achieve their purpose while adding value to
the business purpose and enhancing the company’s competitive
positioning. Not enough effort is expended to ensure that
bureaucratic governance serves the business purpose.
Compliance has become a scapegoat for inefficiencies and lack
of ownership of the problem. Ineffective middle management
hides behind compliance whenever they are either too lazy or not
empowered to take action. Maybe it is because management is

29
“
When did it happen that bureaucracy
became more important than serving your
customer with a high quality, cost-effective
service or product?
“
simply not measured on bureaucratic effectiveness; perhaps they
are merely measured on whether they followed the process. It
cannot take three months to produce a contract and purchase
order. This is 2016, and integrated business process automation
and workflow systems are commonplace. Everybody is simply
too scared to approve a transaction. The burden of proof that it is
a legitimate transaction is completely over the top, and often the
number of approvals required because of delegation of authority
is astounding.
Governance and compliance is killing small business. A recent
example in my business: I received a phonecall from a client
on a Thursday evening saying – “Our customer facing system
is completely broken, please be on site first thing tomorrow to
help us sort it out.” We are promised that paperwork will follow.
We put the client’s business need first. So, we work, we sort
the problem out and the client smiles. Now, we invoice for our
services only to be told that we started without a purchase
order or contract and we need to invoice via the software
vendor because the client wants to hold the software vendor
accountable for the solution. The software vendor tells us that
we started before a contract or purchase order, and this is a
problem. They will need to do a special motivation to their
global bureaucracy custodian and he is on leave. The client line
managers had a burning need and the services vendor had the
skills and capacity to solve the problem. In this instance, four
months later, we do not have a purchase order yet. Even in the
normal run of business it often takes as much as three months
to get a contract and purchase order completed. What is wrong
with this picture? Why can we not be more agile within the
boundaries of acceptable governance?
Even with all this bureaucracy and governance, corruption is
still front-page news almost on a daily basis. Think of a global
sports control organisation as a start. It is obviously not working
– but I am sure someone else will be blamed. The knee-jerk
approach is to add more governance and put more controls in
place. Middle-management drive to work and spend half their
day on compliance, and their fear of being blamed for failure
is exacerbated. Contracts between client organisations and
vendors become more complex; blame-shifting, accountability,
limitations of liability become the key negotiating components
of contracts. Lawyers become the decision-makers and the real
business purpose takes a back seat.
When did it happen that bureaucracy became more important
than serving your customer with a high quality, cost-effective
service or product? When did fear of being blamed for failure
start driving our daily routines? When did that fear start driving
our thinking? When did bureaucracy start driving and dictating
purchasing decisions? When did the business purpose start
taking a back seat? When did the sue-ability of a vendor start to
become more important than business agility, passion, team and
solution quality? When did we stop caring about our business
purpose, our competitiveness, about serving our customers, our
industry and our country?
Governance and compliance are very important for organisations
BUT those who design governance and compliance systems
must apply their minds and they must expend much more
effort in innovating these controls while empowering those in
the business who directly add value to their end customer. This
is, after all, the reason the organisations exists – the business
purpose. C
Hein Pretorius is the founder of the Onpro Group of companies. His goal
is to guide decision makers to ensure that ERP and enterprise software
projects move away from mere software implementations towards
essentially improving the competitiveness of clients and their value
chain. He has been serving the ERP and Enterprise software industry for
the best part of the last 25 years.
Value of IoDSA membership: The IoDSA has a very important role to play in
ensuring that the Onpro Group is known and respected for the quality
decisions that are made at board level.
Twitter: @HeinPretorius

IoDSA FAQs
30
Director Liability
Parmi Natesan, Executive: Centre for Corporate Governance
Tanya Nassif, Governance & Legal Specialist
Vikeshni Vandayar, Governance & Legal Specialist
Addressing the various legislation under
which a director can be held liable.
The primary legislation governing directors and their
conduct is the Companies Act No.71 of 2008 (the Act).
Section 77 of the Act is the principal section that deals with
the liability of directors. This section extends the definition
of director to include an alternative director, prescribed officers
and members of a committee of the board.
Director liability may also arise from other legislation and
common law. Other legislation will specify instances whereby
a director or the board may be held liable for certain acts
performed, or the failure to perform certain acts.
Can a director be held civilly or criminally liable?
A director may be held civilly or criminally liable or both. The
extent of liability is dependent on the nature of the offence and if:
• The penalty allows for civil liability arising out of a delictual,
contractual or statutory offence; or
• The penalty results in potential criminal liability; or
• The instance where both criminal and civil liability arises.
Not all contraventions of the Act may be criminalised offences
with the penalty of a fine or imprisonment. In fact, many are
linked to civil action, and compensation for damages may be
claimed by the aggrieved person or company.
Which sections of the Act allow for personal liability for a director?
Below are some of the sections within the Act where director
liability may arise. This list is not exhaustive and there are further
sections within the Act whereby a director may be held liable:
• Section 20(6) – allows a shareholder to claim damages
from a person, including a director, who fraudulently,
recklessly or due to gross negligence causes the company
to act inconsistently with the Act or its Memorandum of
Incorporation (MOI);
• Section 20(9) – in the event of unconscionable abuse of the
juristic personality of the company, a director may be held
liable to an interested party in respect of any right, obligation
or liability of the company should the court declare that the
company is to be deemed not to be a juristic person as a result
of such abuse;

31
“
Only a court may declare a director
delinquent or place a director under probation
once it has found the director guilty in terms of
the potential grounds set out in the Act.
“
• Section 75 read together with section 77 - if a director fails to
disclose a personal financial interest;
• Section 76 read together with section 77 - if a director fails
to meet the prescribed standard of conduct required of a
director;
• Sections 77(2) – if a director breaches any directors’ fiduciary
duties (both common law and codified in the Act);
• Section 77(3)(a) - if a director acts outside the scope of his/her
authority;
• Section 77(3)(b) read together with section 22(1) - if a director
knowingly continues to carry on the business recklessly (i.e.
for example if the business is trading while it is not liquid),
with gross negligence, with intent to defraud any person or
for any fraudulent purposes;
• Section 77(3)(c) – if a director directly or indirectly tries to
defraud the company creditors, employees or shareholders;
• Section 77(3)(d) read together with sections 95 and 101 – if a
director signs, consents to or authorises the publication of
false or misleading information, knowing or with reckless
disregard that same is false, misleading or untrue;
• Section 77(3)(e) – if a director fails to vote against a decision
by the board, which decision is stated in sections 77(3)(e)
(i) to (viii)(inclusive). Directors should ensure that his/her
votes against a decision are recorded in the Board minutes/
resolution – so as to provide evidence that he/she did not
approve such decision and thus did not act in contravention of
the Act;
• Section 165 – the derivative action – a person serves a demand
on the company to commence legal proceedings to protect
the legal interests of the company and the directors may
become potentially liable;
• Sections 99 and 214(4) – both civil and criminal liability may
arise in this instance for any person, including a director, who
offers the public any securities of any other person who is not
a company and the offer is not accompanied by a registered
prospectus;
• Sections 213(1) and 216(a) – both civil and criminal liability may
arise due to a breach of confidence - it is an offence to disclose
confidential information concerning the affairs of any person
obtained in carrying out any function in terms of this Act.
Such criminal liability may be a fine or imprisonment for a
period not exceeding 10 years or to both;
• Section 214(1) and 216(a) – both civil and criminal liability may
arise for a person, including a director, if they are guilty of
an offence due to false statements, reckless conduct and
non-compliance. Such criminal liability may be a fine or
imprisonment for a period not exceeding 10 years or to both;
and
• Section 218(2) – any person, including directors, who
contravenes any provision of the Act is liable to any other
person for any loss and damage suffered by that person as a
result of that contravention.
In terms of Section 216(b) of the Act a person convicted of an
offence in terms of the Act is liable in any other case to a fine or
imprisonment not exceeding 12 months or both (which excludes
section 213(1) or 214(1).
What are the available defences for directors?
• Section 20(2) of the Act allows the shareholders, by way of
special resolution, to ratify any action by the company or the
directors that is inconsistent/contravenes the company’s
MOI. However, such ratification is not available for actions in
direct contravention of the Act.
• Section 76(4) and (5) allows the director to raise the defence of
the Business Judgement Rule 1 .
What other risks are there in being a director?
In terms of the Act, a director runs the further risk of being
declared a delinquent director or placed under probation in
terms of section 162 of the Act due to his/her conduct and
some contravening the Act. Only a court may declare a director
delinquent or place a director under probation once it has found
the director guilty in terms of the potential grounds set out in the
Act.
Furthermore a director may become disqualified from being
a director in terms of Section 69 of the Act. In such instance
a vacancy immediately opens up of the board. Section 69(3)
provides that if the company knowingly allows a disqualified
director to sit on its board, it contravenes the Act.
Director liability is a very real risk for any director who sits on a
board and he/she should be fully aware of the risks of being a
director, and fully understand the required courage it takes to sit
on a board before accepting such appointment. C
1
IoDSA’s Corporate Governance Network Form has a paper dealing with the
Business Judgement Rule which can be viewed on http://c.ymcdn.com/
sites/www.iodsa.co.za/resource/collection/05E93ACB-10BE-4507-9601-
307A66F34BD8/IoD_Business_JudgementEmail.pdf

Member profile
32
A career of distinction
Wiseman Nkuhlu
Chairman of the
Chartered Director (SA)
Governing Body
As the first black South African to qualify as a chartered
accountant, Wiseman Nkuhlu was destined to make his
mark on the country. It is not surprising then that he has
achieved a long and distinguished career, during which
he has played a pivotal role in South Africa’s socio-economic
development. At all times, Nkuhlu’s career choices have been
driven by his three deepest interests: accounting, education
and development. Newly appointed as the Chairman of the
Chartered Director (South Africa) governing body, he has a
wealth of knowledge to share.
In every role he has taken, Nkuhlu has brought with him a
passion for sound leadership and governance. He believes that
that despite the job description, a strict code of conduct and a
professional orientation is the most important component of
success.
Nkuhlu’s own approach to leadership is one based on the
understanding and appreciation of the significance of the
position of trust one holds as a leader or director. “As the leader at
the helm of any organisation, you are entrusted with every asset
the organisation holds, which is a major responsibility,” he insists.
“As such, one must ensure at all times that you put the interests
of the organisation before your own, treating each stakeholder
as fairly as possible,” he continues, admitting that this is an
idea he grappled with for many years. “The ability to ensure
that you do not let your interests interfere with what is best for
the organisation calls for a great deal of honesty, integrity and
independence of mind.”
Nkuhlu sets great store by the principles of King III, and states
that to the values of care, skill and diligence outlined in the
report he would add one of his own: courage. He believes

33
“
There are great advantages to
having an open mind, to reading and
understanding the experiences that other
countries have had, what factors have
contributed to their successes and
failures, and learning from them.
“
that decisiveness is a fundamental aspect of good leadership;
however, decisiveness requires courage – the courage to put a
stake in the ground and make a decision, even if that decision is
an unpopular one.
While leadership is always a question of personal style, a good
leader, for Nkuhlu displays certain undeniable characteristics.
“Humility, the ability to listen and be collegial are traits that
every leader should possess. No matter how high your position
within an organisation may be, no person can possibly know
it all, and there is much to be learned from others. Taking
other people seriously, as well as being open to their ideas is
important, as is the capacity to be transparent,” he insists. That
said, a consultative approach should never lead to paralysis – a
good leader must also be strong enough to make that ultimate
decision.
While it is a challenging time in South Africa’s economic and
political climate, Nkuhlu stresses that the country’s leaders
should not become dogmatic or blinkered in their thinking.
“There are great advantages to having an open mind, to reading
and understanding the experiences that other countries have
had, what factors have contributed to their successes and
failures, and learning from them.” He believes that no situation
a leader finds himself in is ever an entirely new experience – one
can always read up, expand one’s knowledge and be guided
by the experiences of others in similar situations. “Problems
arise when polices crafted by the organisation become the only
framework from which to inform thinking. It means that when
the organisation finds itself in unfamiliar waters, it will simply
not be able to navigate its way out.”
Pragmatism is an essential element of leadership, and pragmatic
leaders are able to adapt to the circumstances in which they
find themselves. Rigidity, as well as the belief that things must
be done in a certain way, simply because they have always been
done in that way, is, for Nkuhlu a fatal mistake.
South Africa’s current situation, he believes, is largely due to
indecisiveness around policy. He points out that South Africans
are feeling uncertain and this is because there has been an
inability to make choices, or to clearly articulate the choices that
have been made.
Nkuhlu’s objective in his own leadership positions has always
been to drive the advancement of black South Africans in
the country’s economy. Throughout his career, he has been
instrumental in engaging government on the issues around
employment equity. He believes that in South Africa today, the
country is doing a job when it comes to diversity on boards.
However, he cautions against complacency and believes that
the search for ways in which to improve diversity should be an
ongoing one.
In his role as Chair of the IoDSA’s governing body, Nkuhlu plans
to champion the Chartered Directorship designation as well
as market it within the business world. He believes that the
designation has come at the right time and that it will provide
directors at all levels with a clearly defined code of conduct as
well as various ways in which to assess and achieve competency
within their roles.
He concludes by saying that there is a need to equip the country’s
chartered directors to perform at a higher level in terms of
knowledge, competencies, experience, and ethical standards.
To this end, he plans also to arrange forums during which the
latest thinking and developments are shared in order for those
in a directorship position to remain at the cutting edge, and to
ensure that those in leadership roles are able to play their part in
enhancing corporate governance in South Africa. C

Member profile
34
Tackling directorship
head-on
Dr Prieur du Plessis
Chairman, Plexus Holdings Ltd,
Grindrod Asset Management.
Deputy Chairman of IoDSA
Board
With wide-ranging experience as a business leader in
the investment sector and in roles not least of which
include chairman and non-executive director, Dr
Prieur du Plessis is no stranger to the boardroom or
the intricacies of a directorship and driving sound corporate
governance at an organisational level.
“Directors’ responsibilities have escalated in recent years as
a result of onerous new regulations requiring increased time
and attention,” Du Plessis reports. “For instance, non-executive
directors now need to be earnestly involved in the business,
well-informed, and can no longer just attend meetings a few
times a year. Individuals with very busy schedules are often
ineffective non-executive directors, and one should ensure one
can commit the required time.”
A particularly important area for non-executive directors to
take into account, he says, is the information gap – a director
spending less than 200 hours a year on company affairs cannot
have the same amount of information as an executive working
more than 3 000 hours per year. The responsibility, therefore,
lies with the non-executive director to go beyond using the

35
“...non-executive directors now need to be
earnestly involved in the business, well-informed,
and can no longer just attend meetings a few
times a year. Individuals with very busy schedules
are often ineffective non-executive directors, and
one should ensure one can commit the required
time.”
“
board pack as the primary source of information, choosing
instead to obtain as much business information as possible
to assist him or her in making rational decisions that add
stakeholder value.
Essentially, therefore, it is vital for a non-executive director
to possess certain qualities in order to be effective: business
leadership competency, life experience, industry knowledge,
sound knowledge of governance principles, a solid moral
compass, strong interpersonal skills, the ability to focus on the
bigger picture, sound judgement and the courage to take risks
but also to disagree when necessary.
While being appointed as a non-executive director can be a
daunting prospect if not equipped adequately for the role, a
proper understanding of the duties, requirements and qualities
of a director will enable the development of the necessary skills.
As the deputy chairman of the Institute of Directors in Southern
Africa (IoDSA), Du Plessis realises the importance of possessing
the relevant competencies necessary to step in as acting
chairman when required. His role, he explains, primarily involves
acting as an ordinary board member and as a sounding board to
the chairman and CEO.
He is also chairman of IoDSA’s Investment Committee, which
requires a deep understanding of global investment markets.
“Although investment markets are certainly not easy to navigate
at this juncture, the task is simplified by the fact that the funds
are invested with a medium- to long-term time horizon, as
opposed to the risky approach of attempting to time the shortterm
movements of volatile markets,” he says.
make decisions that are best for the business. Taking cognisance
of the role of corporate governance is particularly important in
this regard.
Corporate governance, he says, should be a work in progress.
Some of the major trends he predicts unfolding over the next
few years include a move to director independence to be
balanced with industry knowledge and expertise, better board
composition and diversity, greater shareholder accountability,
board agendas being revised to focus to a larger degree on
strategy and value creation, stronger emphasis on remuneration
governance, risk governance and information technology/digital
– including cyber security – governance.
Technology in particular, is an area that directors need to
address and focus on to equip themselves with the requisite
skills. “Technological innovation has skyrocketed over the past
few years, but most boards are not IT literate, and corporate
governance therefore fails to include proper oversight of
technology,” he confirms. Moving forward, directors need to
become IT literate. “Setting a solid IT culture should start at the
top.
The following are some steps boards can take to enhance
oversight: hire a tech-savvy director; seek advice from outside
advisers; ask tough questions about technology expenditure;
educate the board to understand cyber security, social media
and other relevant innovation trends; establish a board
committee to deal with innovation and technology, and do
scenario planning regarding technological changes and business
model innovation,” he concludes. C
Operating in a challenging business environment is a reality for
all directors, but they need to look beyond obstacles such as
subdued economic growth, rising inflation, high debt levels, a
fragile currency and looming credit rating downgrade in order to

IoDSA events
36
Schools governance guide launch 12 February 2016
The IoDSA recently assisted FEDSAS in drafting a school governance guide which was launched in February 2016.
Members’ Networking Cocktail function, 3 March 2016

IoDSA events
37

Lifestyle
38
Books
Doing Business 2016
Measuring Regulatory Quality and
Efficiency
World Bank Group
World Bank, 2015
Which countries’ regulatory regimes
are the most – and least – conducive
to business growth? The 13th edition
of the World Bank’s sovereign review
provides the answers in a highly
detailed qualitative analysis of 189
nations’ regulatory infrastructures.
Useful for the solo entrepreneur and the
multinational corporation alike, this report delivers a numerical
ranking of each nation’s efficiency and quality of regulation
compared with its international peer group. The analysis clearly
indicates that countries with the most transparent and effective
regulations – not those with the least amount of rules – have
the most thriving commercial environments. getAbstract
recommends that any business owner or executive looking to
expand operations should delve into this thorough examination
of business regulations around the world.
Winning Moves in the Age of Shareholder
Activism
Jody Foldesy, Gerry Hansell, Daniel
Friedman, Joel Janda, Jeff Kotzen and
Tawfik Hammoud
Boston Consulting Group, 2015
Shareholder activists, once considered
a fringe element, have become a loud,
powerful voice with which leaders
of companies both large and small
must reckon. Activists target bigger
firms than before, and they wield
their influence over businesses more
forcefully than in the past. While corporations may view them as
a headache, shareholder activists can push firms toward more
rational portfolios, better-honed strategies and higher share
values. getAbstract recommends this authoritative report from
Boston Consulting Group professionals to senior managers and
boards of directors, who should take its smart advice seriously,
before activists pounce.
Stretch
How to Future Proof Yourself for
Tomorrow’s Workplace
Karie Willyerd and Barbara Mistick
Wiley, 2016
According to career experts Karie
Willyerd and Barbara Mistick, everyone
has a ‘sell-by date’. They show you
how to avoid becoming obsolete and
unemployed as current and future
trends change the world of work.
While earlier generations remained at
the same companies for years, today’s
employees tend to job-hop out of necessity. They are more likely
to be part-time, freelance or contract workers juggling varied
assignments. The authors identify three major themes that
can help you maintain and develop your career: take personal
responsibility for your advancement, create new options for
professional growth, and heed the dreams that motivate
you. They advise building a diverse network, cultivating new
experiences and persevering in the face of setbacks. Sidebars
ending each chapter address how organisations and managers
can help their employees. This practical manual confirms that
today’s workers must remain self-motivated and resilient.
Willyerd and Mistick don’t cover lots of new ground, but they
offer solid, sensible advice. getAbstract recommends their
practical guidance to employees, freelancers and managers.
Leading Across New Borders
How to Succeed as the Center Shifts
Ernest Gundling, Christie Caldwell and
Karen Cvitkovich
Wiley, 2015
International management consultants
Ernest Gundling, Christie Caldwell and
Karen Cvitkovich explain changes they
foresee in the global economy. They find
that economic power is shifting from the
Northern and Western portions of the
globe to the East and South, which will
skyrocket. In this report, they explore
how leaders must prepare multinational
firms for this emerging economic reality. The document’s layout,
charts, lists, examples and easy-to-read format make it nicely
accessible. getAbstract recommends this informative manual to
executives leading multinationals in a changing global business
environment.
The IoDSA partners with getAbstract
getAbstract is a service that summarises the most influential business books published
throughout the world and is included as part of the IoDSA membership.
Essential business reading brought to you by the
IoDSA from getAbstract.
To access your account, follow these steps:
Log on at: www.getabstract.com/re/iod
Username: Please use your email address provided to the IoDSA
Password: Please use your IoDSA membership number

39
WINE: How much for an icon?
Have you ever bought or sold a brand? Have you ever thought to
yourself – if only!
Around the corporate world the mergers and acquisitions (M&A)
market remains frantic. Once a deal is concluded, invariably the
chattering classes of the investment community will oppine that
too much was paid. That raises the subject of price versus value,
which I have touched on in earlier columns.
Consider a company that had a market capitalisation of
R37 billion at the end of 1995 with enough brands to be counted
on two hands – and towards the end of last year, now owning
well over 200 brands – that was bought- I should add, at the
fourth attempt – for R1.6 trillion. You can tell the buyer was
desperate to own the company. I am of course referring to SAB,
SABMiller and now ABInBevSABMiller. The majority of value in
many companies today rests in the so called ‘intangibles’ – surely
a term that needs to be retired – and much of that in brands.
Putting a value on brands is not that difficult now. I was involved
when SAB first went through the exercise in 1996. If you were
to ask me today the value of the top brands in the world just by
looking at the annual rankings of Brand Finance, BrandZ and
Interbrand, you would have a good idea. But ask which is the most
valuable wine brand, and this will cause a lively debate. Googling
‘most expensive wines bought and sold’ globally and locally is
interesting and gives some clues, but not the answer.
When the majority of a company’s value rests in its brands, carrying
out thorough due diligence involving both legal and brand experts
is absolutely vital. Sometimes seemingly innocent questions can
cause consternation, such as: how many trademarks are in place;
are there any trademark disputes and where are the trademarks
housed? Further questions: how many brands do you own, do you
run a P&L on each brand, can be met with bemusement. And there
are many more questions I could pose.
South African wine has improved in quality in leaps and bounds
since democratisation in 1994. The vinous scene today bears little
relation to that of twenty or so years ago. If anything, change
seems to be accelerating with the emergence of many young
guns, greater international influence, new cultivars and, with
global warming, new geographies. Yet, sadly, the perception
internationally of South African wine is largely cheap and
cheerful. Only the other week the Financial Times global wine
authority, Jancis Robinson, said: “When I’m asked for a blanket
recommendation of underpriced whites, I always cite South Africa
– and that was before the recent depreciation of the rand.” She
goes onto say the reds are becoming increasingly refined. In her
wide-ranging article she makes the point that it’s not difficult to
think of over-priced wines, yet there are many bargains when you
know what you are looking for.
A good starting point locally would be Ultra Liquors and their
house brand range Secret Cellar, sometimes starting at under R30
and often providing astonishing value. Otherwise, in my area of
Johannesburg, pop into Riverside, Wine List, Makro and, of course,
Norman Goodfellows, and get someone to talk you through their
range and price points. And don’t forget second labels.
But as wine guru Neil Pendock puts it, ‘there is a curious disconnect
between price and quality’, while wine retailer Wade Bales remarks
on the growing market and demand for local wines over R1, 000
a bottle. One has to ask which South African wines have achieved
iconic status, as with Penfold’s in Australia and DRC, Petrus,
Yquem, Haut Brion… ultimate French luxury brands. Many French
luxury brand-owning companies own top chateaux, which makes
me wonder why Richemont and Johan Rupert, while owning lots
of wine brands, has nothing approaching luxury status. The thing
about any strong brand is that it must be consistent, always deliver
on its promise and expectations and over a period of time. A good
starting point for me would be Kanonkop and Hamilton Russell,
although the former did make me wonder when a lady in their
tasting room told me every vintage was a good one.
This brings me to a recent launch I was privileged to be invited
to – Capensis, a chardonnay, retailing at R999.99, deliberately
positioned as South Africa’s most expensive white wine. I had
vaguely heard of it, and was intrigued to be invited to the launch,
the brainchild of Graham Weerts, the South African winemaker
who is now chief winemaker for the California-based Jackson
Family wine business, which today has a presence in most major
wine-producing countries. The launch positioned Capensis
in conjunction with a 2011 Louis Latour Batard Montrachet.
Incidentally this grand cru Burgundian gem retails around three
times the price of Capensis. We were spoilt.
Summing up what wine champion Michael Fridjhon said: “Superb
Cape chardonnay still under the radar.”
It is quality wines like this with the potential to become iconic that
will change the perception on South African wines for the better.
Jeremy Sampson
jdrsampson@gmail.com

Road test
40
Wild horses
Ford has sold more than nine million Mustangs globally
since the nameplate’s launch in 1964 – making it one of
the most successful vehicles in sports car history. And the
model’s appeal doesn’t appear to have been diminished
by time. Wynter Murdoch reports.
For over five decades, Ford has successfully reinvented its iconic
Mustang. The latest iteration – the first to be manufactured
as a right-hand-drive model and available in Fastback or
Convertible guise – sees the introduction of a turbocharged,
four-cylinder, Ecoboost engine to complement the line-up’s
accustomed V8.
Though styling retains enough classic cues to make each derivative
in the range instantly recognisable as a Mustang – long bonnet,
low roof, wide stance and short rear deck, highlighted by signature
trapezoidal grille, shark-bite front fascia and tri-bar tail lamps – the
interpretation is sleekly modern.
For the first time, underpinnings include independent rear
suspension in place of a solid axle, while a sub-frame has been
added at the front with a view to strengthening chassis integrity
and improving nose-end dynamics. Interiors are comfortable with
a premium class, retro feel and an attractive array of enticing, hightech
features.
Whichever engine powers the car, drive is to the rear wheels via
a choice of six-speed manual or six-speed auto gearboxes. While
the 2,3-litre Ecoboost plant lacks the V8’s distinctive growl – not
to mention slam-in-the-back punch – it remains a promising
performer, producing an impressive 233kW for a power to weight
ratio of about 141kW/ton. Translated to the road, that equates to
a 0 to 100km/h time of 5,8 seconds – just a second off the V8 GT’s
benchmark.
Not surprisingly, the force-fed unit is far more fuel efficient than
its bigger, normally-aspirated counterpart. According to Ford’s
figures, the engine is capable of achieving 8,0 litres/100km in
the combined cycle compared with the V8’s 13,5 litres/100km.
Also, because the plant is relatively light, models to which it is
fitted tend to feel nimbler on the road than their more powerful
– but heavier – equivalents, helping to off-set some perceived
performance drawbacks.
On the subject of weight, convertibles – which preserve the
nameplate’s trademark cloth top – find themselves hefting an
extra 70kg or so thanks to modifications designed to reinforce
the cabin’s structure as well as to accommodate the electrically
powered mechanism that raises or lowers the roof.
In this respect, boot volume of topless versions is smaller than
that of hardtops by 60 litres. That said, even in truncated form the
luggage area remains large by most sports car standards – it offers
322 litres of space – and, according to Ford’s spokesmen, is capable
of swallowing two sets of golf clubs.

41
Equally, the cabin – ostensibly designed for four passengers – is
spacious at the front but less so at the rear, with headroom
in Fastback versions compromised by the pronounced sweep
towards the tail of the already low superstructure. Also, with a
long-legged driver behind the steering wheel, foot room at the
back is in short supply.
Still, the cabin’s high quality ambiance is enticing. Plush leather
sheathes heated and cooled sports seats – which can be power
adjusted every which way – wraps the steering wheel and
embellishes the top and bottom of the gear selector.
Paying homage to previous generation Mustangs, switchgear
on the centre fascia is underlined by a row of metal-look toggle
switches and, while instrumentation is state of the art, it is
housed in a dual-cowl panel ahead of the driver – another nod to
the past.
Features include a TFT colour screen that incorporates a trip
computer; an infotainment centre based on Ford’s Synch2
communications system which includes a touchscreen,
Bluetooth and voice control; a Track Apps system which feeds
back information relevant to race track applications – such as
acceleration timer and brake performance indicator – a ninespeaker
audio system; facilities for an auxiliary input, an SD card
and two USB ports; a rear-view camera; smart keyless entry; and
illuminated Mustang badged scuff plates on the door sills.
Similarly, Launch Control – incorporated only in V8 powered
manual transmission versions – is designed to hold the engine
at an optimum number of revs on a start line until the clutch
is released, with torque delivery controlled for maximum
acceleration.
In her address to journalists at the launch of the Mustang in Cape
Town, Tracey Delate, Ford’s marketing manager for the company’s
Sub-Saharan region, described the car as “the one we’ve all been
waiting for!”
“We’re delighted to finally be able to offer the new Mustang to
local buyers who flooded Ford dealers with queries and orders
when we announced that it would be coming to South Africa. It’s
been a long wait, but it has certainly been worth it!” she said.
To my mind, the model deserves plenty of sales success on our
shores… It’s a convivial, fulsome and enormously welcoming car
to drive. C
Safety features include dual front driver and passenger
airbags, side airbags and, in hard-top versions, curtain airbags;
Ford’s MyKey system; anti-lock brakes; an electronic stability
programme (ESP) with traction control; hill launch assist; a
Thatcham alarm and engine immobiliser; daytime running lights
and ISOFIX child seat anchors.
On the road, the Mustang in any form reveals itself to be wellbehaved.
Tyre and wind noise are modest, making for a serene
cabin at cruising speeds. On the downside, the ride can get
slightly harsh on bumpy tarmac thanks to firm suspension
settings. Using selectable drive modes, however, drivers are able
to adjust throttle response, automatic gear-shift patterns and
steering to match normal, sport+, track or wet settings.
In keeping with the Mustang’s sports car heritage, Ford has
included many lightweight materials in the vehicle’s design,
including aluminium for the bonnet, front wings, suspension,
transmission and brakes. Also, specially developed aluminium
rear knuckles help to reduce unsprung mass. High-strength
steels, laser welding and hydro-forming techniques contribute
to a stiffer body, though the convertible still suffers a little from
scuttle shake.
All models sold in South Africa incorporate what Ford describes
as a Performance Pack – an option in markets such as North
America – that include 19-inch wheels and a high-performance
brake package that, on GT versions, incorporates six-piston
Brembo calipers.
Additionally, the Performance Pack features a K-brace under the
bonnet to secure the suspension strut towers to the bulkhead
for improved stability, a larger radiator, upsized sway bar on the
Fastback, plus heavy-duty front springs.
A feature worthy of note on V8 powered models is Line Lock – and
electronic system that applies the front brakes when the vehicle is
stationary, enabling drivers to warm the rear tyres while, say, on a
starting grid during a track day.

Lifestyle
42
Travel - Four hours in Casablanca
TRAVEL – 4 hours in Reykjavik
Kate Kennedy
Reykjavík is the most northerly capital on the
planet. Its unique location and long history
make it a very interesting city to explore.
If you should find yourself there with a few
hours to kill, here are some things you might
like to see.
Hallgrímskirkja church
Likely one of the first things you’ll
notice in Reykjavík is the tower of the
Hallgrímskirkja church, the city’s main
landmark, which can be seen from
almost everywhere in the city. Designed by the late
Guðjón Samuel in 1937, construction of the church
began in 1945 and was completed in a little over
40 years, although the tower was finished long
before the rest of the building. Among its notable
features is an enormous pipe organ, designed
and constructed by the German organ builder
Johannes Klais of Bonn, standing 15 metres tall and
weighing 25 tons. A statue of Leifur Eriksson – the
first European to discover America – stands in front
of the church. Records suggest that Eriksson, son
of Erik the Red, landed on the shores of the new
world 500 years before Christopher Columbus.
The statue, which was designed by Alexander
Stirling Calder, was a gift from the United States
in honour of the 1930 Alþingi Millennial Festival,
commemorating the 1,000th anniversary of the
establishment of Iceland's parliament at Þingvellir
in 930 AD.
www.hallgrimskirkja.is
Imagine Peace Tower
Yoko Ono was the force behind the Imagine Peace Tower, an
artwork regarded as a beacon to world peace. The artwork
was dedicated to the memory of John Lennon on what would
have been his 67th birthday. The wishing well, with the words
‘Imagine Peace’ inscribed in 24 different languages, anchors a powerful
tower of light beams that shine annually from 9 October to 8 December.
It is also lit during the winter solstice for one week, on New Year's Eve and
for a week during the spring equinox. Iceland has been ranked as the most
peaceful country in the world seven years in a row, according to the annual
Global Peace Index compiled by the Institute for Economics and Peace.
www.videy.com
Solfar Sun Voyager
Much of Reykjavík’s western border touches the Atlantic Ocean,
with waterfront paths stretching around the entire peninsular.
The Sculpture and Shore Walk offers shopping and scenery,
and is popular with joggers and cyclists. Along the walkway,
in Sæbraut, you’ll find the Sun Voyager – a massive steel sculpture by Jon
Gunnar Arnason. Given the country’s Nordic history, you may well think the
artwork resembles a Viking ship, but it is in fact a dream boat and ode to
the sun. The sculpture is a result of a competition held in 1986, funded by
the district association of the west part of the city, to commemorate the
city’s 200th anniversary. The Sun Voyager was unveiled on the birthday of
the city of Reykjavík, 18 August, 1990, and has become a favourite photo
opportunity for visitors.

43
Höfði House
If you’re looking a bit of history in the city, you should visit Höfði House. It was built in 1909, and is considered to be one of
the most beautiful and historically significant buildings in the area. It was the location of the 1986 summit meeting between
presidents Ronald Reagan and Mikhail Gorbatsjov, a meeting that effectively marked the end of the Cold War. The house
was originally home to the French consulate and still bears many signs of its original purpose. Höfði is now owned by the
City of Reykjavík and is currently used for official receptions and meetings. You won’t be able to see the inside of the house, as not open
to the public, but feel free to explore the house from the outside. The sculpture in front of the house depicts pillars from the chieftain’s
seat of the first Norwegian settler in Reykjavík.
Uno
If you‘re a foodie, make sure not to miss UNO, a
trendy bistro, known for its original appetisers
and cozy atmosphere. Located in Falcon House
on Ingólfstorg square, the restaurant has made
a name for itself by giving a modern spin on traditional
favourites, ranging from vegetarian to steak and seafood.
If you need a place to rest your tired feet in the afternoon,
stop by for a drink or coffee. It is open every day from 11h30
to 23h00, and until midnight on Fridays and Saturdays.
www.uno.is
Reykjavík City Hall
Reykjavík City Hall sits on the northern shore of the Lake Tjörnin and was
designed to attract birdlife to the centre of town. And thanks to a little
geothermal heating, the ducks, swans and geese that spend the summer
months being fed bread by locals don’t migrate south for the winter.
Opened in 1992, the large building houses the Mayor and other executive officials of
Reykjavík as well being host to a steady stream of art exhibitions, including a huge
relief map of Iceland.
www.visitreykjavik.is
Viking Restaurant
Take a step back in time
and experience a taste of
the Viking era at the Viking
Restaurant Fjorugardurinn.
Everything from the decor to the
food will transport you to a forgotten
age. A true Viking feast is offered
with traditional meals served in oldfashioned
Viking-style trays. The feasts
are loud, joyous affairs, and the guests
can expect treats and surprises from
singing Valkyries and Vikings. Open for
dinner guests from 18h00 to 22h00
every day and for dancing on Fridays and
Saturdays until 03h00 to live music.
Also open for lunch for groups.
www.fjorukrain.is

Endnote
44
Getting to King IV
King IV will incorporate local and international developments on the governance front. In addition you can expect the
following:
A
Accessibility: Style and format changes are planned to make King IV more
accessible to all types of entities and organisations
B
Better not more: The aim is to have more succinct content and fewer principles
for easier interpretation and implementation.
C Co-creation: The drafting process has been designed to be inclusive right from the start
so that King IV be a truly co-created product.

45
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