Corporate Governance and Integrated Reporting in South Africa. What’s new after the adoption of Corporate Governance Code Draft King III and now the release of King IV?

The purpose of this paper is to analyze in-depth the content of the release of the Corporate Governance Code Draft King IVTM on Corporate Governance for South Africa 2016 (http://www.iodsa.co.za), highlighting the new features compared to the previous Code, i.e. King III which came into effect since 2009. The main objective of the Draft King IV is to promote good corporate governance as a driver for an ethical and effective leadership by the governing body. This aim can be reached through an ethical culture, a sustainable performance, an adequate control by the governing body and protecting trust in organization, its reputation and legitimacy (The Institute of Directors in Southern Africa, 2016). The principles of “good governance” issued by King III - and now by King IV that will be launched in November- can be also evaluated in the view of an innovative model of corporate reporting, i.e. Integrated Reporting (Eccles and Krzus, 2009; 2014; Adams et al., 2011; IIRC, 2013; Busco et al., 2013) that became a mandatory requirement for the South African listed companies since 2011 (Hindley and Buys, 2012; Carels et al., 2013; Rensburg and Botha, 2014; Setia et al., 2015; Doni et al., 2016; Raemaekers et al., 2016). Recently the International Integrated Reporting Council (IIRC, November 2014) pointed out a strong link between the process of integrated thinking/reporting and corporate governance as it is confirmed by the conference organized by the IIRC in partnership with the International Corporate Governance Network (ICGN) (London, December 2016, http://integratedreporting.org/iirclondondec2016/). In this view, the ICGN revised Global Governance Principles including the recommendation that boards should produce integrated reports. There is also growing evidence of benefits boards can obtain from the adoption of Integrated Reporting (Frias-Aceituno et al., 2013; Churet and Eccles, 2014; Stubbs and Higgins, 2014; Dumay and Xi, 2014; Atkins and Maroun, 2015; King, 2015; Nazari et al., 2015; Eccles and Youmans, 2016). This research is focused on the analysis of the Integrated Reports drawn up by a sample of the mining companies listed on the Johannesburg Stock Exchange (JSE), in order to evaluate if the adoption of Integrated Reporting can enhance the corporate governance disclosure and improve the sustainable corporate governance practices. We will analyze a period from 2011 (the first time adoption of Integrated Reporting in South Africa) to 2015 (the early year of the release process of King III). In particular, we would like to compare the first and the last year of the foregoing time frame, in order to check the difference in the level of the corporate governance disclosure and the sustainable governance practices adopted by the mining companies. We will gain several fields about governance factors (percentage of Independent Directors, Board meeting attendance; diversity, duration of Board, CEO duality, etc.) and social and environmental issues linked to corporate governance practices (CSR Committee, ESG linked compensation for Board, Sustainalytics Governance Controversies, etc.) by Bloomberg database (Bloomberg, 2015). The expected results may show an intriguing relationship between the implementation of the governance principles introduced by King III, and after by Draft King IV, especially with reference to board composition and responsibilities, and the adoption of Integrated Reporting. That said, the adoption of Integrated Reporting therefore may represent an important turning point not only in terms of a new corporate reporting model, but also as a “driver” for potential improvements in corporate governance practices.