In the previous blog, I discussed the concept of corporate governance and the important role it plays to ensure the continuity, profitability, and sustainability of a company. In this blog, I talk about the King IV Code on Corporate Governance™ (King IV™) characteristics based on my engagement and experience with directors throughout my career.
According to King IV™, ethical leadership is defined as the exercise of ethical and effective leadership by the governing body (i.e. “the board that has primary accountability for the governance and performance of a company”) towards the achievement of governance outcomes.
It further states that it consists of six essential characteristics that a governing body should individually and collectively cultivate and exhibit in its conduct. These have evolved from the characteristics contained in King III. One of my favourites from King III is courage, and I will add it to the list below. Having worked with numerous excellent chairpersons and directors, I can attest to the fact that there are directors who naturally exhibit these characteristics. I have seen what a positive effect this has had on the governing body. The characteristics as set out in King IV™ is what you would expect from a competent and effective governing body.
For me, integrity is when people stay true to their word and do what they say they will. When a person exhibits integrity, it builds trust in and respect for that person. For a director, that means always acting in good faith, in the best interests of the company, and doing the right thing. For example, where there is a conflict of interest, be proactive and do the right thing by avoiding it. If that cannot be done, bring it to the attention of the governing body at the earliest opportunity.
A competent director takes his or her position, duties, and responsibilities seriously and is proactive in their approach. They will take steps to ensure that they have sufficient working knowledge of the company and its industry, the triple context in which it operates, the capital it uses, and the fundamental laws, rules, codes, and standards that apply. Competence is also acting with due care, skill, and diligence, and taking the necessary steps to become informed about matters for decision and therefore continuously developing competence to lead effectively.
When working with a responsible director, there are no grey areas. The roles, responsibilities, expectations, standard of work, and so forth are all clear, and this makes the governing body as a collective run smoothly. These directors will assume joint responsibility for steering and setting the direction of the company, approving policy and planning, overseeing and monitoring of implementation and execution by management, and ensuring accountability for the company’s performance. In my experience, responsibility also means devoting sufficient time and effort to prepare for and attend meetings, and this plays an important role when it comes to key decision-making.
According to the Business Dictionary, accountability is the obligation of an individual or organisation to account for its activities, accept responsibility for them, and to disclose the results in a transparent manner. It also includes the responsibility for money or other entrusted property. In my experience, a director of the governing body exercises accountability when they are willing to answer for the execution of their responsibilities, even when these were delegated. For me, accountability also means being able to admit shortcomings as a director, despite the perceptions and consequences, and then addressing issues openly and transparently.
According to King IV™, fairness refers to the equitable and reasonable treatment of the sources of value creation. This includes relationship capital as portrayed by the legitimate and reasonable needs, expectations, and interests and expectations of material stakeholders of the company. In my opinion and experience, it starts with each director of a governing body listening and responding in a fair and just manner. This opens the door for cultivating a stakeholder-inclusive approach in the execution of governance roles and responsibilities and directing the company in such a way that it does not adversely affect the natural environment, society, or future generations.
I have seen that transparency builds trust with fellow directors on the governing body and beyond. When looking at the definition in King IV™, transparency comes down to the unambiguous and truthful exercise of accountability so that the decision-making processes and business activities, outputs, and outcomes, whether negative or positive, can be clearly discerned and compared with ethical standards. As a director, be transparent in the way you approach your governance roles and responsibilities.
In my experience, courage is one of the most important yet one of the most difficult characteristics to exhibit. I have been exposed to directors who displayed the courage to take risks associated with directing and controlling a successful and sustainable company. These directors have strong values and are confident enough to ask tough questions, no matter how uncomfortable the situation. They typically stand out because they act with integrity in all the board decisions and activities.
These characteristics are crucial to ensure effective leadership that results in achieving strategic objectives and positive outcomes over time. Okina can assist in developing ethical leadership through its director induction training.
I hope this post has inspired you to cultivate these characteristics and become an ethical leader.