According to studies conducted in 2014 by Forbes Insights and KPMG, the regulatory environment is regarded as the main issue having the most impact on a company. Even exceeding the impact of the economy. This was based on 400 CEOs surveyed in the US, across all major industries.
The regulatory framework as part of commercial law in South Africa, as enshrined in the Companies Act 61 of 2008, as amended (“Companies Act”), is clear. Directors of a company owe a fiduciary duty and a duty of care and skill to the company.
According to van der Merwe, a failure to act in good faith and with proper care and skill will have consequences. The extent of these consequences will in most instances depend, amongst other things, on the extent to which they paid attention, took diligent steps to become informed and tried to make good decisions in good faith and in what they honestly believed were in the best interest of the organisation.
This is where the King IV code becomes truly relevant. King IV is the “how to” whilst legislation, i.e. the Companies Act, is the “what to” or perhaps, “what not to”.