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The JSE this week made the King IV Governance Code mandatory for listed entities by including the code’s provisions in the exchange’s listing conditions.

Companies would also be required to publish a compliance report on their broad-based black economic empowerment (B-BBEE) status, unless an exemption could be provided to the JSE.

Melanie de Nysschen, corporate finance principal at Bravura, an independent investment banking and advisory firm, said that although some of these changes had been expected, their timeous and appropriate implementation would require careful planning and consideration.

De Nysschen said although the application of the corporate governance practices in the King code was generally voluntary, listed companies could not choose to ignore King IV, which had amended the disclosure regime to “apply and explain”. This change would affect annual reports submitted to the JSE on or after October 1.

The revised listing requirements required a company’s annual report to disclose in full its remuneration policy and implementation report. According to King IV, this would require at least:

* The board of directors must approve a remuneration policy that articulates and gives effect to its direction on fair, responsible and transparent remuneration;

* The remuneration policy must set out all elements of remuneration that are offered in the organisation and the mix of these, including base salary (including financial and non-financial benefits); variable remuneration (including short- and long-term incentives and deferrals); payments on termination of employment or office; sign-on, retention and restraint payments; provisions, if any, for pre-vesting and post-vesting forfeiture of remuneration; any commission and allowances; and

* The disclosure of the fees paid to non-executive members of the board, as well as the remuneration of executive management, during the reporting period.

De Nysschen said the listing requirements now provided that the remuneration policy and the implementation report must be tabled every year for separate non-binding advisory votes by shareholders at the annual general meeting.

The remuneration policy must record the measures that the board of directors of a listed entity commits to take in the event that either the remuneration policy or the implementation report, or both, were voted against by 25percent or more of the votes exercised.

If 25percent or more shareholders vote against the resolution, the company would be required to announce this in its results, including an invitation for dissenting shareholders to engage with the company, and the manner and timing of this engagement.

In terms of the B-BBEE regulations, a company’s compliance report on its B-BBEE status must include the scores received by the listed entity in the BEE elements of ownership, management control, skills development, enterprise and supplier development, socio-economic development, and any other sector-specific element.

The report must state whether the company was an empowering supplier and whether it had achieved the priority element thresholds of ownership, skills development, and enterprise and supplier development.

De Nysschen said aligned with a practical approach adopted in King IV, setting out principles for the establishment of a unitary board reflective of an appropriate balance of power, the JSE would require a determination of a director’s independence to be made holistically and on the basis of substance over form in accordance with the indicators provided in the Companies Act and the King code.

In addition to their policy on the promotion of gender diversity at board level, the JSE now required listed entities’ annual reports to include their policy on the promotion of racial diversity at board level, including the nomination and appointment of directors, she said.