The majority of nonexecutive directors should be independent. Appointed to the board as an executive director in february 1999. We have set out below some of the highlights and main changes introduced by king iii. In essence, an independent director is a nonexecutive director who. The ceo of the company should not also fulfil the role of chairman of the board. Some people did not welcome the news that the institute of directors in southern africa had initiated an update of the king report on governance for south africa 2009 king iii. Every year the directors who are classified as independent should have their independence assessed by the board, particularly. The practice notes provide non authoritative guidance and should not be used as a substitute for the practice recommendations of king iii.
King iii consisted of the king iii code, which contained the code principles and recommended practices, and a separate king iii report, which contained the principles and more detail on the practice recommendations. The statutory and common law tests were then applied to determine the classification of nonexecutive directors as independent contractors. Keywords king reports, corporate governance, firm valuation, independent non executive. The appointment of a nonexecutive director should be formalised in an agreement between the company and the director. One of the key principles in king iv is the establishment of a unitary board which reflects a balance of power.
For example, if a company has 3 executive directors on the board being the ceo, cfo and coo, since the board should have a majority of nonexecutive directors, the majority of whom are independent, it would need an additional 4 independent nonexecutive directors to maintain a balance of power i. Should be a minimum of two executive members, namely the ceo and cfo. Is not a representative of a shareholder who has the ability to control or significantly influence management. The board should elect a chairman of the board who is an independent nonexecutive director. King iv is synonymous with the king iv report, a single document consisting of seven parts. King iv independent directors deloitte south africa.
King iii king iv companies act, 2008 audit committee membership should comprise at least three members, all of whom must be independent, nonexecutive. It should be noted upfront that each director regardless of the classification as an executive, nonexecutive or independent nonexecutive director has the duty to always act in the best interests of the company. A non executive director should seek the agreement of the chairman before accepting additional commitments that might impact on the time he or she would be able to devote to the role as a director of the company. Rmh has a unitary board with a non executive director as chairman. Non executive directors are appointed for an initial term of three years. What is an independent non executive director what are the. Based on the collective recommendation of king iii we have. As such, it is intended to provide the reader or hisher entity with general information of interest. It should be noted upfront that all directors, regardless of the classification as an executive, non. Oct 28, 2011 the companies act 61 of 1973 referred to here as the old act distinguished between the rights and duties of executive and nonexecutive directors. Refer to the audit and risk committee report on page 146 of the integrated annual report 2016. No change since the previous financial year ended 30. General guidance note the nonexecutive director agreement or.
King iv practice notes institute of directors in southern. King iii provides an exhaustive set of criteria to be met in order to be classified as an independent nonexecutive director, while king iv focuses on the combined effect of all relevant factors on a substanceoverform basis when. Applied the chairman satisfies the king iii definition of independent non executive director. In order to ensure that no one individual, or group of individuals yield unfettered power on the board, king iv proposes the appointment of independent non executive directors. Retired as an executive director and became a non executive director on 1 april 2010, and qualified to be classified as an independent non executive director with effect from 1 april 20. A unitary governing body consisting of executive and nonexecutive members.
All the committees are comprised exclusively of non executive directors except for the safety, health and sustainable development committee of which the ceo is also a member. Darrigo and kenneth xiaofeng feng, as nonexecutive directors and zhe sun, sze wan patricia lam, peter man kong wong and russell francis banham as independent nonexecutive directors. The timing and subject matter of practice notes are at the discretion of the iodsa and should not be expected and relied upon in respect of all principles and practice recommendations contained in king iii. King iv proposes the appointment of independent nonexecutive directors. King iv further recommends that a lead independent director should always be appointed. The relationship between the company and its executive directors was regulated by their employment or service agreements and by prevailing corporate laws. Employees or independent contractor for tax purposes. The appropriate mix of executive, nonexecutive and independent nonexecutive members. The chairman of this committee is an independent non executive director. An investigation of the concept of independent director with specific reference to the king iii report and how companies listed on the johannesburg securities exchange jse apply the king iii codes. When determining the requisite number of members of the governing body, the following factors should be considered. Keywords king reports, corporate governance, firm valuation, independent nonexecutive. King iii report and code board of directors and board committees board of directors chairman independent non executive director ceo not fulfill the role of chairman ceo will not be an independent non exec the role of chairman should be formalized the chairmans performance should be assessed every year membership comprise a balance of power, with a majority of non executive directors.
King iii report on governance for south africa, 2009. Chiu king ho, chen yau wong, william joseph hornbuckle and grant r. King iii list of principles v6 a leading independent. For them, it simply meant an additional compliance burden. One of the key principles in king iv is the establishment of a unitary board which. Non executive directors remuneration will be fixed for the year and must be approved by. Nonexecutive directors remuneration will be fixed for the year and must be approved by. In order to ensure that no one individual, or group of individuals yield unfettered power on the board, king iv proposes the appointment of independent nonexecutive directors. A lead independent non executive director has also been appointed. The king iv practice notes intend to provide highlevel guidance and clarification on the intention andor interpretation of a specific practice recommendation or niche subject matter contained in king iv, specifically where new approaches have been introduced and in instances where there has been a significant departure from the rationale of previous governance codes. Nonexecutive directors are independent of management on all issues including strategy, performance, sustainability, resources, transformation, diversity, employment. It should be noted upfront that all directors, regardless of the classification as an executive, non executive or independent non executive director, require the.
King iii practice notes institute of directors in southern. The test for the classification of nonexecutive directors as independent is broadened in king iv. The institute of directors in southern africa and the king committee on. South africa, and the king code of governance principles king iii. The revised code of and report on governance principles for south africa king iii were released on 1 september 2009, with an effective date of 1. The chairman of the board is not independent as defined in the king report but the board has appointed a lead independent director, to mitigate any potential conflict of interest. This is considered acceptable in light of the low number of executive directors. The board of directors and committees a comparison. Pdf the king reports, independent nonexecutive directors and. This principle is expanded upon and it is recommended that. Cheng is currently an independent non executive director of evergreen international holdings limited stock code. An independent director also sometimes known as an outside director is a director member of a board of directors who does not have a material or pecuniary relationship with company or related persons, except sitting fees. A nonexecutive director who is not a representa tive of a shareholder, has not been employed by the company in any executive capacity for the preceding three financial years and has no significant contractual relationship or interest in the company or group.
King iii requires boards to be comprised of a majority of nonexecutive directors, of whom the majority should be independent. Six of the 14 non executive directors are independent. The balance of power within the board allows for a positive interaction between the board members and also ensures the diversity of views within the board. In terms of king iii, in the first place, an independent director has to be a non executive director. A nonexecutive director is a member of a companys board of directors who is not part of the executive team. Independent non executive director a non executive director who. Board who is an independent non executive director. King iii requires boards to be comprised of a majority of non executive directors, of whom the majority should be independent.
Cheng was an executive director of kwoon chung bus holdings limited stock code. Some of the highlights and main changes introduced include the chairman of the board should be an independent nonexecutive director ned who is free from conflicts of interest on appointment and is not the ceo. King vi also recommends that the chairperson of the board is an independent non executive director. Stefanutti stocks holdings limited king iii compliance report. Corporate governance king iii compliance analysis of the application as at march 20 by anglogold ashanti limited anglogold ashanti of the 75 corporate governance principles as recommended by the king code of governance for south africa, 2009 king iii. The board should elect a chairman of the board who is an independent non executive director. The committees are all chaired by an independent non executive director and operate in accordance with written terms of reference which have been approved by the board. The ceo of the company should not also fulfill the role of chairman of the board.
King iv independent directors how to assess independence. What is an independent non executive director what are the recommendations of from cset aue2602 at university of south africa. Cheng resigned as an executive director and now is the head of china business. Oct 21, 2015 the king report on corporate governance is a groundbreaking code of corporate governance in south africa issued by the king committee on corporate governance. The ceo of the company should not also fulfil the role of. Ceo of the company should not also fulfill the role of. The king report on corporate governance is a groundbreaking code of corporate governance in south africa issued by the king committee on. Functions allocated to this role includes leading in the absence of the. Corporate king report on for south africa governance. In addition to being nonexecutive, an independent director is a director who. Recommends that at least onethird of non executive. The institute of directors in southern africa iodsa and the king committee released the king iv report on the 1st of november 2016. King iv tm does not define a nonexecutive member of the governing body. Is not a representative of a shareowner who has the ability to.
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