From Compliance To Consequence: Decoding King V's New Mandate For Corporate Stewardship

The publication of the King V Code on Corporate Governance for South Africa 2025 (King V) marks a pivotal evolution in South African corporate stewardship. King V, issued by the Institute of Directors in South Africa (IoDSA), supersedes King IV and is effective for the financial year beginning on or after 1 January 2026. For boards and management, understanding this updated framework is essential not merely for compliance, but for ensuring long-term organisational viability.

The most significant shift in King V is its definitive move towards an outcomes-based approach. This is the key angle for consideration by directors and legal advisers.

Under King IV, achieving sound governance was often seen through the lens of implementing recommended practices—a checklist mentality. King V changes this reality. Governance quality is no longer measured solely by procedure. Instead, an organisation's governance is judged primarily on the four consequences, or governance outcomes, it produces:

1. ethical culture;
2. performance and value creation;
3. conformance and prudent control; and
4. legitimacy.

The clear insight for organisations is that simply ticking the box on a recommended practice is insufficient; the board must demonstrably achieve the intended outcome before it can legitimately claim sound governance.

Structural changes and legal implications

King V, which has been streamlined to 13 principles, clarifies and strengthens legal duties across several domains, reflecting updates in the recently amended Companies Act, 71 of 2008 and a more sophisticated understanding of risk.

1. Integrated thinking and strategy

King V asserts that all organisations must contribute to sustainable development and create "systems value" within their economic, social, and environmental context. This philosophical stance is underpinned by the concept of Integrated Thinking, which compels the governing body to consider the connectivity and interdependencies between financial health, strategy (Principle 3), and the socio-ecological systems they operate within, aligning with the Ubuntu-Botho philosophy.

The legal insight here is that this strategy is now formally tied to legal duty. The board must now ensure strategy proactively avoids or mitigates negative impacts on the environment and stakeholders, reinforcing the importance of proper environmental health and safety (EHS), and ethical governance frameworks.

2. Enhanced disclosure: "Apply and Explain"

The disclosure regime remains "apply and explain," but the standard for explanation has been significantly elevated. A new disclosure template accompanies King V, which must be approved by the governing body and published on the organisation's website.

The legal consequence is significant: boards must apply principles universally and provide a substantive, evidence-based rationale for any non-adoption or modification of recommended practices. This process focusses market attention on the quality of the board's rationale, meaning a weak or procedural explanation creates significant vulnerability, potentially eroding the hard-won governance outcome of legitimacy.

King V mandates that the governing body provides a concluding statement on whether the application of King V has, in its opinion, realised value for the organisation in accordance with the four governance outcomes.

Looking Ahead

This overview sets the stage for a profound shift in corporate accountability. The legal and commercial imperative is now to move beyond merely satisfying procedural rules and to provide tangible evidence of achieving ethical, controlled, and legitimate outcomes. In the ensuing articles in this series, we will unpack this mandate through the lens of legal and compliance risk management, focussing on the specific principles where board oversight is most demanding:

• Strategy and Sustainable Value Creation: Governing contextual risk will examine the board's legal duty under Principle 3 to ensure strategy proactively addresses EHS and societal risks.
• Fiduciary Duty Over Machine Learning: Governing artificial intelligence liability and technology risk will detail the mandatory human oversight mechanisms required under Principle 10 to manage legal liability stemming from data and automated decisions.
• Compliance and Corporate Structure: M&A legal diligence in the King V group era addresses Principle 13, showing how legal due diligence in corporate transactions must now verify the integrity of group governance frameworks.
• The Accountability Contract: Malus, clawback, and fair remuneration in King V analyses the high legal standard of 'substantive and procedural fairness' required for enforcing executive pay clawbacks under Principle 11.

This series will serve as a guide for governing bodies translating King V's ambitious mandate into defensible corporate practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.