Richard Wilkinson was the CEO of the IODSA in 1992 and a key roleplayer in commissioning the King Committee. He shared his reflections on the history and significance of corporate governance in South Africa during an interview with business journalist Bruce Whitfield and EY Senior Researcher, Jess Schulschenk, on 23 March 2012. The video interview is included above, and reflections from both this and the longer research interview are given below. These findings were made possible by the Gordon Institute of Business Science (GIBS) and form part of the ongoing Corporate Governance Research Programme with the Albert Luthuli Centre for Responsible Leadership (University of Pretoria) supported by Ernst & Young.
Richard Wilkinson, CEO of the IODSA in 1992, was instrumental in bringing the King Committee to formation. Whilst the British government had commissioned the Cadbury Committee as a result of corporate failures and in a move towards increased financial regulation, the Institute of Directors in Southern Africa (a voluntary industry body) pursued the challenge of developing a set of corporate governance principles for what they felt was in the best interests of the country’s development.
“Our then chairmen, Glynn Herbet, in December 1992 received a copy of the Cadbury committee report. He came into the office to show me as the chief executive director of the IODSA and said ‘Well, what do you think?’. I said I’ll look at it over the weekend, the following week he came back, and I said ‘Yes, I think it's a very interesting document’. Bear in mind this was in January 1993, when everything was in a state of flux in South Africa. The talks had begun and I said ‘Well, if the Institute of Directors wishes to have a meaningful place in the future new South Africa, we should take the lead in developing a code of corporate governance for the new South Africa’. We then took it to the IODSA council in the first week of February 1993 and they said ‘Right, run with it, provided it doesn’t cost us anything’. This was an avid challenge - Glyn Herbert and I went around and looked for sponsors and literally got a couple of thousand rand. We interacted with Cadbury a couple of times and then we started trying to identify people who we thought could make a meaningful contribution and that is how the King Committee came about”
We decided that Mervyn King would be the right person to chair the committee and that we should name the committee after him to ensure that it would seem to be at arm’s length from the IODSA because we were also looking for the support of organisations like the Institute of Chartered Accountants, the Institute of Chartered Secretaries, Business South Africa and a few of the other internationally recognised organisations. We ended up having a committee of 16 members to start and the IOD, through me, provided the entire secretariat for the committee. Exactly the same way as has happened subsequently - everyone offered their services voluntarily and not a soul was offered one cent either in terms of remuneration. We all carried our own expenses as well, it was done on a real shoe string.
Eventually after 18 months of work on the report, King I was produced and with a lot of input during that process - we were getting ideas and inputs from other [thought leaders and] published reports for the workings of committees. When the report was released in 1994, King I, it was hailed not only in South Africa but internationally as the most comprehensive report on corporate governance that had been prepared up to that time. The report was issued 29 November 1994 - the decisions had not been made about which way the new South Africa was going to go, whether it was going to follow the communists, socialist or capitalist route. So we stuck our neck out an awful long way in publishing this report before the decisions were made.”
The Institute of Directors at the time took further steps to build a culture of corporate governance in South Africa beyond issuing the first King Code of Governance Principles. Wilkinson discusses the boldness they took in developing the initial education programmes in house through the Centre of Directorship and Corporate Governance: “We must have run 150 programs in the first 3 years, 1 2 and 3 day programs for bringing in newly appointed and aspirant directors. One of the major objectives of King I was to recognise what the previously disadvantaged could contribute to the new South Africa through business.”
A defining characteristic of King I that has been maintained throughout subsequent King Reports is that it was principles based. Wilkinson shared the thinking behind this approach: “The codes are a set of principles and it's not law or regulation, we have enough of them which are not complied with in the country anyway so we didn’t want the code to be in any way legalised”. Subsequent legislation has resulted in a hybrid system of corporate governance in South Africa and this, as well as the debate behind a principles based approach, will be explored further in following sections.
Where are the gaps in governance? “Well I think the biggest area as far as I’m concerned to a greater extent is the question of ethics and King III has tried to do that, that governance really is focused on a sea of ethics and unfortunately like this country and many others ethics is more applied to in the letter than in the word”
Wilkinson states that the NCA doesn’t undermine the King Reports but rather strengthens good governance by reinforcing some of the key principles through legislation. Whilst there is the concern that it may lead to a compliance mindset (that is already in part being expressed by some companies), Wilkinson maintains that the principles of the King Reports are far broader than the terms in the NCA. He maintains that a principles based approach will always lead the way. There is an interplay between principles and legislation, but the development of governance moves at a faster pace than the revision of legislation. These developments drive legislation and should continue to do so.