Corporate governance in South Africa: the introduction of King III and reporting practices at the JSE alt-x

Abstract

South Africa has experienced a tremendous growth in its economy since its first free elections in 1994. Politicians, however, consider the transformation of the society and more equally distributed wealth as one of their key goals. Thus, companies often find themselves under scrutiny as regards their contribution. A new corporate governance code (King III) will become effective in March 2010. This reworked code now tries to enhance the reporting practices of companies as to their sustainability and corporate social engagement and tries to link international standards of corporate governance with African values. This paper introduces the novelties of King III and examines the current reporting practices of 68 companies listed on the Alt-X segment of the Johannesburg Stock Exchange. The paper discusses issues like risk, board composition and remuneration and provides valuable insights into the structure of small cap companies in South Africa and analyses which parts are used by companies to enhance their legitimacy.