How does King III position the principles of Ethics?

Chapter 1: Ethical leadership and corporate citizenship

The first chapter in the code deals with King III ethics. This is not the only place. Ethics is mentioned in Chapter 2 with respect to Board responsibilities, again in Chapter 6 with respect to integration with compliance and again in Chapter 7 with respect to the behaviour of the Internal Audit function.

Chapter 1 starts out in general terms, indicating what ethical “leaders” should be doing:

- – Leaders who are ethical, it says, would be found leveraging the strategic planing process to ensure that their ethical principles are embedded in the company.

- – The ethical principles discussed are focused on the sustainability of the business, in all respects.

- – The concept of “sustainability” covers the company operating in the world system, not just the financial system, but also the societal and environmental systems.

- – The business is to be guided via the strategy, by an ethical leadership, to ensure sustainability and minimized negative impact on the world system.

- – This ethical leadership is to consider both internal and external stakeholders - internal stakeholders including employees and contractors, and external stakeholders including suppliers, the municipality, as well as clients.

Chapter 1 continues more specifically by indicating what the board should be doing:

- – The Board is to be responsible for ensuring that a sound ethical corporate culture exists - a company is driven by “the tone from the top” - viz. News Corp.

- – More than that, the board must ensure that this tone is permeated through the organisation and maintained to the desired level.

- – King III provides some guidance in this regard, suggesting that the ethical standards should be “clearly articulated“.

- – The company’s Code of Conduct should set out the company’s values and hence include these ethical standards.

- – Remember that it is not only the content of the Code of Conduct, but also communicating, monitoring and managing that the desired behaviour is in fact realised. News Corp had a 56+ page Code of Conduct and still failed to achieve the desired outcome.

News Corp.’s much touted Code of Conduct is absolutely USELESS as News Corp. failed to inform and educate employees about it. Ethisphere Corporation’s Daily GRC Digest

- – The board should also be monitoring and measuring that the company’s policies and “all aspects” of it’s business are carried in the manner described in the Code of Conduct and with the envisaged ethical standards and intent.

- – This is also reinforced in Chapter 2 (one statement) where board duties are described. The board should ensure that the extent of adherence / compliance is reported and disclosed to all stakeholders.

- - Chapter 6, a chapter focused on compliance, also notes that the manner in which the company chooses to operate compliance within the company is to indicate / align with the board’s expectations of ethical standards and behaviour.

- – Likewise with the management of risk, ethical risks and opportunities should be considered.

- – Likewise in Chapter 7, a chapter focused on the Internal Audit function, this function should comply with “the IIA Standards and code of ethics”.

- – Similarly, behaviour towards both internal and external stakeholders should reflect the company’s ethical standards.

Chapter 1 also refers to the 4 values of Good Governance

The board, King III says “should ensure that all deliberations, decisions and actions are based on the four values underpinning good governance;” and more…

- - Responsibility: The Board should assume responsibility for the assets and actions of the company and be willing to take corrective actions to keep the company on its strategic path.

- - Accountability: The board should be able to justify its decisions and actions to shareholders and other stakeholders who require it to do so.

- - Fairness: In its decisions and actions, the board should ensure that it gives fair consideration to the interests of all stakeholders of the company.

- - Transparency: The board should disclose information in a manner that enables stakeholders to make an informed analysis of the company’s performance.

NOTE: The comments in this page are to be read within the context of the candor legal notices which can be found at this web site. The Institute of Directors in Southern Africa’s ownership of the copyright in the publications “King Report on Governance for South Africa 2009” and “King Code of Governance for South Africa 2009” is hereby acknowledged.

Find out more about King III and Ethics