Abstract
M.Comm.
The previous narrow view that directors are accountable to shareholders only and that
reporting of company affairs should be left to them alone is changing. With the world
moving into an ever-developing era of transparency, a dynamic participating approach is
required in which directors' reports would be directed at all stakeholders and should
consequently address all matters of concern and interest.
In respect to similar expectations overseas, the Treadway Commission in the United States of
America and the Cadbury Committee in the United Kingdom, addressed the financial issues
of corporate governance and made certain recommendations for change. After the
publication of these recommendations, the Institute of Directors verified similar expectations
in South Africa and the King Committee was formed.
The King Report on Corporate Governance published in 1994 (the King Report) has
advocated fundamental changes to current corporate governance practices in South Africa.
The objective of the Report is to improve the system by which companies in South Africa are
directed and controlled and to improve openness and accountability.
The King Report recommendations were drafted to supply the necessary guidelines in the
providing of relevant and comprehensive information to all stakeholders concerned.
The query which arises from a review of the Report's recommendations is whether the
stakeholders, whose only access to relevant information is in most instances the published
interim and annual financial statements, will be able to determine if the King
recommendations were in actual fact implemented. In view of the fact that one of the main
objectives of the King recommendations was to ensure that relevant, timeous and
understandable information is available to users, it is imperative to be able to determine if the
recommendations were in actual fact implemented.
The question which this research report addresses is whether it would be possible to
determine from an examination of the published financial statements of a listed company if
the King recommendations were implemented in practice. To obtain an answer to this
question, a questionnaire was drafted which addresses the specific recommendations. The
questionnaire was then applied to the published annual financial statements of three selected
companies, namely Edgars, Alpha Limited and the Seardel Group.
The finding of the research is that the companies indicated, as required by the Johannesburg
Stock Exchange, that they do comply with the King recommendations, even though certain
instances were found where the Code of Corporate Practices and Conduct were not complied
with. Numerous references were also made to the companies' commitment to the
implementation of the recommendations. There is, however, no indication, or verification, of
the extent to which the recommendations were implemented in practice.
The conclusion from the research is that the King recommendations can only be truly
successful once the actual implementation of the recommendations, the problems experienced
in implementation and the contribution to the enhancement of better corporate governance,
are verified by an independent party and these findings published in an accessible document.