King: Shareholders not owners of companies

Stellenbosch - Shareholders are not the owners of a company – they are just one of the stakeholders, Prof Mervyn King said on Thursday at the 15th BEN-Africa Conference, which took place in Stellenbosch.

"I realised long ago that the primacy of shareholders could not be the basis in the rainbow nation," said King. The corporate governance theory of shareholder primacy holds that shareholder interests should have first priority relative to all other corporate stakeholders.

He said when he started with his report on corporate governance the issue was that the majority of SA's citizens were not in the mainstream of the economy. His guidelines on corporate governance, therefore, had to be for people who had never been in that mainstream of society.

The King Reports on Corporate Governance are regarded as ground-breaking guidelines for the governance structures and operation of companies in SA. The first was issued in 1994, the second in 2002, the third in 2009 and the fourth revision was released last week.

"I was nurtured on the basis of the primacy of the shareholder, but the general body of shareholders was never defined. That bothered me as it had exclusion in it," King told delegates.

"We came up with the idea that the board must act in the best interest of the company, but take account of the interests of all the stakeholders in company. My model is an inclusive approach to governance and an inclusive stakeholder concept."

He said sustainability reporting tries to communicate the "invisible value" added to a company by what he called "a symphony of harmonisation of sources of value add".

"Business is an ethical enterprise and if business is an ethical enterprise it must be conducted as such. One must have the courage to make decisions in the best interest of the organisation on which you applied your mind," said King.

Nosisa Fubu, a director in KPMG's forensics practice, said King IV comes at an opportune time for SA.

READ: King IV emphasises ‘accessible’ governance

"Incidents hamper our government's ability to progress. We have come across very sad stories of how money is wasted - hence the need for ethics and good governance in SA is very important at this time," said Fubu.

"The days are gone where we can assume government can provide everything. I believe corruption happens when ethics are broken and when good governance is not at the basis. We all should be working on it."

She caused much laughter among delegates by describing King's tireless work on corporate governance as probably being like that of a rock star working on the launch of a new album.