Good corporate governance is an essential for growth and prosperity as sustainable value creation of any organization is achieved through it. As per King IV Report, the ethical culture which enfolds ethical leadership, organizational ethics and responsible corporate citizenship is the key to sound corporate governance. Moreover, integrity, competence, accountability, transparency, fairness and responsibility are the key characteristics of ethics. The Report is not only a refined representation of King III’s philosophical foundation but it is simple, concrete and also focuses on the effective and ethical leadership of each person in charge of governance duties. The term ethics in the report is broader than fraud, dishonesty or relationships within an organization. The way an organization behaves in external environment, understands its social responsibilities and its impacts on society and environment are termed as vital considerations as well.
According to King IV Report, the governing body should be leading effectively and ethically by acting in a way which should be in best interests of the organization. Ethical organizational culture must be deployed and steps must be taken to give proper direction to the organization by settling policies and monitoring implementation. The governing body must be answerable of every step taken through performance evaluation and a stakeholder inclusive approach should be adapted in fulfilling the roles and responsibilities. The actions of the governing body should reflect transparency in every phase and they must be in accordance to the code of conduct defined by the organization. The strategic objectives and value-creation over time could be achieved through effective leadership which is based on the characteristics of ethics.
Information regarding organizational ethics, their monitoring and results should be disclosed to everyone related to the organization. The responsibility of the governing body is to settle an approach which implements organizational ethics by enforcing the code of conduct and ethical policies. These policies should be open to internal and external stakeholders publicly over the website or other such places, included in contracts of suppliers and training programs for employees. Management should be assigned the duty by the governing body for the effective implementation of these ethical policies. While recruiting, performance evaluation and remuneration, management should ensure that these ethical policies and standards are being followed. There should be strict laws in place for those who transgress these standards and an ongoing assessment process for all the stakeholders to assess the implementation of the very standards.
Sustainability and corporate citizenship is an economic as well as ethical essential for an organization to counter external risks and opportunities. Almost, all the organizations have internal and external societies. Stakeholders are the entities which make up internal society. Apart from this, organization behaves as a citizen to larger society known as external society. Organizations need to be dependent upon the society in which they operate in order to ensure its sustainability. Considering themselves as an integral part of the society, thus, behaving like a sensible corporate citizen is the demand of today.
Corporate citizenship defines that how an organization achieves the outputs which are not only in its best interest but in the interest of society and environment as well. This means that organization is not only responsible for its financial outcomes but it also needs to keep a close look at societal and environmental context. For example, the issue of child labour and chemicals in different activities are not polluting the environment etc.. Strategies to attain corporate citizenship must be established and integrated throughout the organization.
According to King IV Report, the governing body is responsible to set the direction, define strategies and to make sure that organizational core values and purpose should address the corporate citizenship. Employee’s safety and development, prevention and detection of fraudulent activities, fair and transparent tax policy, public health and safety, responsibilities towards environment such as pollution and pre as well as post-product waste disposal are the areas taken care of and proper policies for these areas must be developed in coordination with management within the organization. Besides the code of conduct defined by the organization, national and international standards must be followed. There should be an ongoing assessment to check whether the organization is working up to the standards and measures defined.
To acknowledge corporate governance widely, King IV Report has taken every step possible. Ethical leadership is considered vital in settling the ethical tone of an organization. From recruitment to performance evaluation to integrated reporting, ethical practices are adapted which in turn makes organization behave as a responsible corporate citizen internally and externally. Integrated thinking before integrated reporting, framework for risk and opportunity management, social and ethics committee, upgrading the auditing process are few of many features updated in the current report. The report is a contemporary guidance of corporate governance for all the leaders, which empowers the organization and relevant stakeholders. Only time and change in corporate world will reveal the gaps in the report. As for now, it covers each probable aspect of sound corporate governance and its application in any organization regardless of the size.