Home Articles ANALYSIS: King IV and Remuneration Disclosure

ANALYSIS: King IV and Remuneration Disclosure


The King Committee published the King IV Report on Corporate Governance for South Africa 2016 (King IV) on 1 November 2016. King IV is effective in respect of financial years commencing on or after 1 April 2017 and replaces King III in its entirety

King IV’s boldness is evident in the clear focus on transparency and targeted disclosures in all areas, specifically in the introduction of far more extensive executive remuneration disclosure than ever seen before. These are in line with global developments and perhaps more relevant than ever before in a country with a high income differential.

Remuneration policy and structuring

King IV recommends that remuneration be used as a tool to ensure the business creates value in a sustainable manner within the company’s economic, social and environmental context. A remuneration committee, established by the board, should recommend a fair and responsible company-wide remuneration policy that promotes sustainable value creation. The policy should address:

  • Base salary, 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
  • The provisions, if any, for pre-vesting forfeiture (malus) and post-vesting forfeiture (clawback) of remuneration
  • Any commissions and allowances, and
  • The fees of non-executive members of the governing body

King IV acknowledges that fair and responsible remuneration reflects on a company’s corporate citizenship and should be considered in the context of overall employee remuneration.

King IV recommends that the board oversees implementation so that the organisation is able:

  • To attract, motivate, reward and retain human capital
  • To promote the achievement of strategic objectives within the organisation’s risk appetite
  • To promote positive outcomes
  • To promote an ethical culture and responsible corporate citizenship

These intended results align with King III recommendations. However, King IV now recommends detailed and specific disclosure on the policy and its implementation. In order to properly draft the remuneration policy, the board, in conjunction with the remuneration committee, will need to clearly articulate the link between strategy, sustainable value creation, performance and remuneration.


In addition, the code recommends that shareholders be provided with the opportunity to pass separate non-binding advisory votes on the remuneration policy and the implementation report. The remuneration policy should set out the measures that the board will take in the event that shareholders exercising at least 25% of voting rights decide against either the remuneration policy or the implementation report, or both. Such measures should provide pro-active engagement with shareholders to address their concerns.

The code opted for an advisory vote that is likely to be mandated by the Johannesburg Stock Exchange Listing rule.


King IV has a renewed focus on transparency and accountability regarding the disclosure of directors’ and prescribed officers’ remuneration. It requires a three-part disclosure for remuneration, including the remuneration background statement, policy and implementation.

The background statement provides the context for remuneration considerations and decisions. King IV proposes that the background statement should make specific reference to the six areas detailed below:

  • Internal and external factors that influenced remuneration
  • The most recent results of voting on the remuneration policy and the implementation report and the measures taken in response thereto
  • Key areas of focus and key decisions taken by the remuneration committee during the reporting period, including any substantial changes to the remuneration policy
  • Whether remuneration consultants have been used, and whether the remuneration committee is satisfied that they were independent and objective
  • The view of the remuneration committee on whether the remuneration policy achieved its stated objectives, and
  • Future areas of focus of the board/remuneration committee.

The disclosure should further include a brief overview of the remuneration policy and should include, among others, the remuneration elements and design principles informing the remuneration arrangements for executive management and, at a high level, for other employees; a description of the framework and performance measures used to assess the achievement of strategic objectives and positive outcomes, including the relative weighting of each performance measure and the period of time over which it is measured; and an explanation of how the policy addresses fair and responsible remuneration for executive management, in the context of overall employee remuneration.

Remuneration implementation disclosure must be aligned to the disclosure requirements set out in the Companies Act. It should include remuneration for each member of executive management, including separate tables for total remuneration received for the reporting period, as well as all the elements that make up this total, declared at fair value.

Variable remuneration requires specific disclosure and explanation in the implementation report. Details of all awards made under variable remuneration incentive schemes in the current and prior years which have not yet vested, including the number of awards, the values at the date of granting, their award, vesting and expiry dates, and their fair value at the end of the reporting period should be included. The cash value of all awards made under such a scheme settled during the year should be disclosed. Performance measures and their relative weighting for remuneration calculations should be explained, including targets set and the corresponding value, and how the organisation and individual executives performed against each target.

If payments were made on termination of employment or office, these should be separately disclosed and reasons given.

The board should include a statement regarding the extent of compliance with, and any deviations from, the remuneration policy. Importantly, the board should explain how the remuneration policy results in executive remuneration that is fair and responsible in light of overall employee remuneration. The latter statement is clearly aimed at addressing the pay gap.

In order to meet the above disclosure requirements, it is crucial that the board has an intimate understanding of how value creation, performance and reward are linked in the business.

While King III and the Companies Act ask the ‘what’ in respect of remuneration disclosure, King IV goes beyond the numbers and also examines the ‘why’. In other words, disclosure should not only include the numbers but also a clear justification for the amounts awarded. This closely aligns to international trends where transparency is at the forefront of the governance agenda and strengthens the disclosure principle enabling stakeholders to make an informed assessment of company performance and its ability to create sustainable value.

Author: Dr Johan Erasmus is a director at Deloitte. He is a regulatory analyst with a special focus on the Companies Act, King III and King IV, integrated reporting, governance, and consumer protection