It is important to note that King III should be considered in its correct context, namely a code which will be based on the new Companies Act, when it is enacted. Even though King III follows the previous King II report, it is not really helpful to merely compare its contents with the previous report, which was published in March 2002.
King III entails significant implications for companies and boards of directors, with regard to, for example, directors duties; integrated sustainability reporting; shareholder remuneration policy; risk-centric internal audit; the role and function of sub-committees; the role of the lead independent director; IT governance and security; alternative dispute solution; internal training assessment of internal control; the duty to act as a responsible corporate citizen; risk management; share options and stakeholder relationships.
The philosophy of the King III Report resolves around leadership, sustainability and corporate citizenship.
Together, the new Companies Act and King III are set to promote more stringent standards of corporate governance and greater director accountability.
The new Companies Act provides for directors personal liability for losses sustained by a Company due to the failure of a director to carry out his duties with reasonable care, skill and diligence. Any failure to comply with King III will, in all likelihood, be strong evidence of a failure by the director to carry out duties with reasonable care. In the end it all boils down to the same thing. If you fail to comply with King III, how can you argue that you complied with your duties as a director?
Although King III may not be law, it will probably end up having the same effect and require compliance as if it were enacted into legislation. It would be a brave board of directors which failed to apply King III, thereby possibly exposing its members to personal liability under the new Companies Act.