08 February 2018: The eyes of the world are again fixed on South Africa, as the country finds itself at a turning point in its democratic history.
From state capture to large-scale corporate wrongdoing, 2018 will hopefully see the South African business society experience an age of ethical enlightenment, or run the risk of potentially alienating entire generation millennials (also known as Generation Y) and replacing the millennials, Generation Z.
While taking part in a King IV panel discussion hosted by Mazars in Johannesburg, Michael Judin, a notable South African attorney and member of the King Committee, stated that he believes millennials and Generation Z can play an integral role in ensuring local corporates apply a more ethical approach to corporate governance and comply with the King IV report. Judin was a member of the Task Team that wrote King IV released on November 1, 2016.
“The coming of age of millennials and Generation Z together with the rise of social media, have changed the global corporate environment. Businesses vehemently protect their image, by ensuring they adhere to strict ethical standards. When they are seen as having acted in an unethical manner, or have associated themselves with individuals or entities that are perceived to be unethical, more often than not, millennials Generation Z will demonstrate their disapproval,” he explains.
Judin uses the incident between Nestle and Greenpeace as a prime example of how public opinion can change a business. In 2010, the environmental organisation started a campaign against the world’s leading nutrition, health and wellness company for its use of suppliers that were responsible for causing deforestation in the Indonesian rainforest.
“The campaign, commonly known as the Kit-Kat campaign, was so powerful that the food giant had no choice but to change its ways. This proves that corporates can no longer avoid embracing good governance while still expecting an unblemished image,” he says.
King IV – No longer a tick-box approach
“The King IV report on corporate governance has moved away from the previous ‘tick-box’ approach and towards an outcome-based method, which means corporates actually need to enforce King IV and prove that they have done so. This is exactly what millennials and Generation Z are looking for,” he says.
Millennials and Generation Z have evolved into a generations that want to associate themselves with brands and organisations that are ethical and environmentally friendly. “Corporates spend millions each year to ensure that they change their business to be more environmentally friendly, in order to attract millennial and Generation Z clients,” says Judin.
King IV has also simplified and reduced the amount of governing principles to just 17, from the previous 75, enabling millennials and Generation Z (and those not falling within those categories) to easily understand what good governance entails.
“The King Committee has gone to great lengths to simplify the Code in King IV. Not only is it easier to understand, but it fits onto ‘one page’, which will cater for the ease of use millennials and Generation Z are always striving for,” explains Judin.
King IV must be part of corporate DNA
He stresses that the only way South African corporates will experience an age of ethical enlightenment, is for businesses to make King IV a part of their DNA.
“Every single employee must have ethics at the heart of everything they do. It doesn’t matter what industry you are in, ethics and good governance should be the basis. Not only will it create an ethical environment in our country, it will also empower employees to stand up if they start seeing something that doesn’t completely adhere to King IV,” says Judin.
The King principles have always been at the heart of Mazars and products it creates for its clients, says Frank Burgers, Director at Mazars Berenschot Africa in Johannesburg.
“We have a special relationship with the King Report, it has inspired us to further develop our services related to Good Governance. Like King IV, we didn’t develop a tick-box tool, but rather a guideline for a tailor-made approach for a client to assess their compliance with the King IV principles and outcomes. We start off by doing research (documents, media, interviews, etc) to understand the current status and then have interactions with the Governing Body to further check potential gaps and opportunities. It is very much a journey on which we embark with our clients,” says Burgers.
He adds that the perception in the corporate world is that King IV is just “another” requirement they must follow.
“Organisations should rather see it as an opportunity to improve their businesses. Our journey with our clients benefits them in three ways, firstly, they get a better understanding of the King principles and outcomes. Secondly, they can gauge their progress with regards to complying with the principles and outcomes. Lastly, and most importantly, they get more insight into how they can improve their businesses,” he explains.
Burgers is confident that 2018 should see a more ethical approach from corporates. “The media has done a great job in highlighting unethical behaviour in the industry and that is set to continue. This, in conjunction with the information available online, will see many more South Africans asking questions about doing business with unethical companies. Soon organisations will have no choice but to take an ethical approach in everything they do.”
Mazars is leading by example and is currently conducting its own King IV “audit” on itself.