MASERU — Respected South African businessman Professor Mervyn King on Thursday said recent developments in the global business operations have called for a change in the manner corporate entities are governed.
The business magnate is the chairman of the King Committee on Corporate Governance in South Africa.
He is also a director of several companies that are listed on the Johannesburg Stock Exchange.
King was addressing a seminar for internal auditors organised by the Institute of Internal Auditors Lesotho at Lesotho Sun last Thursday.
He also spoke on the King III code of corporate governance.
“The essential thing in running business today is the quality of governance and not about the quantity of governance,” King said.
King told the seminar that internal auditing had now become risk-based, an aspect which had been included in the King III Report issued in 2009.
“Independent auditors have to change every five years and the biggest change in the King III (report) is that the board must have an internal audit committee that will provide a written assessment of the company’s internal controls including internal financial control,” he said.
The new report has introduced changes on the chairmanship and chief executive positions for private companies.
The report says these critical positions should be held by different individuals to improve corporate governance.
The King’s code of corporate governance provides guidelines for business on the best practices of managing companies to ensure sustainability and good corporate citizenship.
The code of conduct has been adopted globally by businesses and governments in order to improve the operations of corporations and that of communities around them.
King said the recent global financial crisis had been caused by failure by big businesses in the United States to apply good corporate governance.
He said South Africa was spared from the financial crisis largely because it was not exposed to the international derivatives market.
In an interview with the Lesotho Times, the principal secretary in the Ministry of Finance Mosito Khethisa said corporate governance plays a vital role in the general economy of the country.
“Good corporate governance and economic growth are linked and the role of government is to develop a conducive environment for development of a robust private sector,” Khethisa said.
He said accountability and transparency will ensure that the private sector and public sector jointly work together to enhance economic development.
The government of Lesotho recently amended the Companies Act to tighten ways in which local firms deal with, among other things, issues of pollution and the social aspects of business operations.
The measures are meant to encourage local firms to comply with environmental regulations and adopt environmentally friendly ways of doing business.
The King Committee on Corporate Governance was formed in 1993 by the Institute of Directors in Southern Africa to promote better corporate governance within boards of directors in South African companies.
The committee has so far released three reports on corporate governance.