The Transition to King V: Assessing its Impact on Director Accountability and ESG Integration under the Companies Act 71 of 2008

Introduction

King V was established to promote corporate accountability and ethical leadership in South Africa’s democratic era. Good corporate governance is essential for building trust in businesses and the economy. South Africa took another important step in this direction when the King V Report on Corporate Governance took effect on 1 January 2026.¹ Replacing King IV, the new Code seeks to simplify governance rules while placing greater emphasis on sustainability and ethical leadership. This short article examines how King V affects the responsibilities of company directors and the growing importance of Environmental, Social and Governance (ESG) issues. It also considers the relationship between King V and the Companies Act 71 of 2008. Overall, I argue that King V is a positive development, but whether it brings real change will depend on whether companies actually apply it properly, rather than merely following it on paper.

Background to Corporate Governance in South Africa

South Africa has been developing its corporate governance standards for many years through the King Reports. The process began with King I in 1994, and later versions—King II, III and IV—gradually placed greater emphasis on transparency and on considering the interests of different stakeholders.² The Companies Act 71 of 2008 forms the legal foundation for company operations in the country and, among other things, clearly sets out the duties of directors.³ King V builds on this foundation by reducing the number of principles and introducing the “apply and explain” approach. This means companies must not only state which governance practices they follow, but also explain how these practices work in practice.⁴

Director Accountability under King V and the Companies Act

One of the most important sections in the Companies Act is section 76, which outlines the general duties of directors. Directors must act honestly, in the best interests of the company, and with reasonable care and skill.⁵

King V supports these legal duties by describing the board as the centre of good governance. It encourages regular assessment of board performance and promotes ethical decision-making.⁶ The Code also recognises the business judgement rule, which gives directors some protection when they make honest decisions.

That said, directors in South Africa often work under pressure to deliver quick financial results. King V tries to shift the focus towards longer-term thinking. If directors ignore important risks such as climate change or social issues, they could still face personal liability under section 77. In this way, King V appears to raise the bar for director accountability.

ESG Integration: Progress and Challenges

A major highlight of King V is its stronger push for ESG considerations. The Code urges companies to treat environmental, social and governance matters as key parts of their overall strategy, rather than as an afterthought.⁷

This approach connects well with section 72 of the Companies Act, which requires certain companies to have a Social and Ethics Committee.⁸ King V gives more practical guidance on how boards should monitor and report on ESG performance.

However, implementing these ideas is not always easy. Many smaller companies do not have enough resources or expertise to properly measure ESG factors. There is also the ongoing problem of greenwashing, where companies make themselves look better than they really are. The “apply and explain” method in King V may help reduce this, since companies must give proper explanations for their actions.⁹

Critical Analysis and Recommendations

King V has clear advantages. It is shorter and easier to follow than King IV, and it addresses current issues such as climate change and technology. It also takes into account South Africa’s specific economic and social challenges.

At the same time, King V remains a voluntary code. While JSE-listed companies must apply it, many other businesses may not take it seriously enough.¹⁰ This creates a gap between large and small companies.

To make King V more effective, I recommend the following:

1. Organise regular training workshops for directors through the IoDSA and CIPC.
2. Create simpler guidelines specifically for small and medium enterprises.
3. Consider incorporating some important King V principles into future updates to the Companies Act.
4. Strengthen monitoring by regulatory bodies.

Conclusion

King V represents another step forward for corporate governance in South Africa. It pushes directors to be more accountable and encourages companies to take ESG issues seriously. However, its real impact will only be felt if boards and management move beyond box-ticking and truly embrace the spirit of the Code. If this happens, it could contribute positively to building a more responsible and sustainable business environment in the country.

Reference(S):

1. Institute of Directors in Southern Africa (IoDSA), King V Report on Corporate Governance for South Africa (2025).
2. Institute of Directors in Southern Africa (IoDSA), King IV Report on Corporate Governance for South Africa (2016).
3. Companies Act 71 of 2008.
4. IoDSA, King V Report (n 1).
5. Companies Act 71 of 2008, s 76(3).
6. IoDSA, King V Report (n 1) Principle 1.
7. IoDSA, King V Report (n 1).
8. Companies Act 71 of 2008, s 72.
9. IoDSA, King V Report (n 1).
10. Chambers & Partners, Corporate M&A 2026 – South Africa (2026).