The King V Code, effective from 1 January 2026, supersedes all previous versions of the King Code on Corporate Governance (I-IV). This new framework outlines how corporate governance is no longer about ticking the boxes that make a company compliant; it is a mandatory principles-based, performance-driven approach that integrates environmental, social, and governance (ESG) factors.
Directors Sihle Bulose and Lebogang Molebale from the Corporate and Commercial division at CMS South Africa share their insight.
“New regulatory frameworks are fundamentally transforming how businesses make strategic decisions, allocate capital and manage risk,” the pair notes, pointing to how integrated ESG should be in a business’s decisions and high-level strategy – and you should be able to prove that fact.
“The central shift is with the changes built into the King V Code recognising that responsible stewardship is a competitive necessity, not an administrative burden,” Bulose shares. “The decision made by boards will now shape three core imperatives introduced by the latest version.”
He lists the three drivers of strategic transformation:
- ESG as a strategic foundation: ESG factors have transitioned from reputational concerns to core drivers of financial performance and stakeholder trust. Investors, clients and regulators now require transparent ESG measures, making sustainability and ethical conduct non-negotiable for long-term value.
- Governance as a value creator: Stakeholders easily identify “box-ticking”. King V focuses on demonstrable outcomes, requiring genuine integration of good governance principles into strategy to drive sustained value, not just satisfy compliance checkboxes.
- Navigating technological risk: Rapid changes, particularly the proliferation of Artificial Intelligence (AI), introduce new ethical and operational responsibilities. King V explicitly positions technology governance as a core component of board accountability, requiring oversight mechanisms for decisions influenced or made by AI systems.
Capital Allocation and Strategic Decisions
“King V requires boards to shift from a purely financial lens to one of integrated thinking,” Molebale adds. “Traditionally, capital investment focused on financial returns and operational feasibility. King V requires that boards must now explicitly assess and disclose the full spectrum of impact on any major investment. For example, an expansion plan must now detail its environmental impact (in the context of climate risk), its effect on workforce development, and how it affects the company’s social license to operate within the community.”
According to Molebale, this is not supplementary analysis; it is integral to risk and value assessment. King V’s Disclosure Framework requires boards to disclose how they applied the principles, making the full cost/benefit visible to all stakeholders.
Due Diligence is an Expected Requirement
Furthermore, Molebale and Bulose explain that due diligence must expand beyond financial and legal checks to include a comprehensive evaluation of the target’s sustainability performance, social track record, and governance quality. “Here, a financially strong acquisition with weak environmental compliance or inadequate data governance now represents a significant liability. In the same vein, valuation models are more likely to incorporate these governance factors, making targets with superior governance frameworks inherently more valuable. Boards can no longer justify mergers and acquisitions solely on financial synergies if critical governance gaps exist, as King V’s disclosure rules will make these gaps visible and require remediation plans.”
Additionally, under the updated King Report, the emphasis is on businesses alleging that they meet certain criteria; they now have to be able to verify the impact their dealings have on the environment and society. Beyond business goals, these enterprises must ensure that there is workforce stability, long-term resilience and stakeholder trust.
Technology and Accountability Under King V
Bulose highlights that King V introduces fundamental changes to the approval processes for technology deployment and to board composition. This point is particularly important to respond to recent advancement sin technology, such as the increased use of AI in workspaces. In fact, businesses no longer need to actively seek out AI-tools, but most ordinary work tools, such as productivity apps, already include their own generative AI capabilities. “Boards must now evaluate: What are the ethical and operational risks? How is bias identified and mitigated? What human oversight remains? And how are decisions explained to affected individuals?
“Boards must establish frameworks to categorise AI applications by risk level and implement proportionate governance before deployment is approved. This means boards cannot delegate technological deployment decisions without proper oversight.”
It is further noted that the code’s requirements are broadened beyond cybersecurity to encompass all data leaks and security breaches. “Any decision involving data collection, customer analytics, or third-party sharing must comprehensively evaluate security protocols, access controls and the potential impact on stakeholders,” the directors share. “Accountability takes on a different shape as King V tightens independence criteria. For one, a two-year cooling-off period is now required for former executive managers seeking an independent director role, while the nine-year service limit on independence classification means proactive director rotation and succession planning are essential.”
King V Champions Ethical Remuneration
It’s important to note that the changes that King V and its predecessors have introduced are all aimed towards leadership, because it is a code aimed at the functions within a business that are responsible for governance. The code goes as far as to outline how remuneration needs to be determined among executives to ensure fairness and transparency. “It preserves the non-binding advisory shareholder vote on executive remuneration policies and their implementation. If more than 25% of shareholders vote against the policy, the board must engage with dissenters. This requires Remuneration Committees to design structures that demonstrably align leadership incentives with long-term value creation and sustainability commitments, not just with peer practices,” Bulose states.
“Ultimately, King V is moving governance from a defensive function to a competitive differentiator,” Molebale adds. “Organisations that proactively adopt its principles will build superior decision-making capabilities – investing in board literacy on technology and sustainability, redesigning planning processes, and using disclosure to communicate governance quality. This maturity will attract capital, build resilience, and earn the long-term trust essential for success in an increasingly complex world.”
The updated King code addresses a vital element that consumers and employees are starting to expect from its leadership team. They demand that executives move with the times, ensuring their ethical responses to technology advancement are in touch with the needs of the business, while ensuring that a business is governed in a way that ensures the long-term sustainability of itself, and by extension its workers. Consumers also no longer trust that businesses truly live the values that they proclaim to, but making this a part of their compliance means they are putting their money where their mouths are, so to speak.
The King V Code, effective from 1 January 2026, supersedes all previous versions of the King Code on Corporate Governance (I-IV). This new framework outlines how corporate governance is no Read More
