The King Reports are non-legislated corporate governance reports that are applicable to all corporate entities that are resident or incorporated in South Africa, this includes the retirement funds industry. Compliance with the report is voluntary and there are no mandatory "watch dogs". But compliance is increasingly being monitored by investors and in the case of retirement funds, the members, participating employers, potential members and beneficiaries.

The King IV Report ("King IV") has become necessary due to various local and international developments. It is expected to become effective on the 1st November 2016. The aspiration of King IV is to move away from the 'box ticking' approach of compliance and aims towards value-added compliance. One of the notable features is that King IV creates several sector supplements, which are industry specific. The supplements are specifically customised to provide recommended practices that are sector-specific.

The draft report provides for a supplement in the retirement funds industry, which provides terminology and references that are to be interchanged when applying the principles and practices of the report. Although the supplement has been customised to each sector, it should not be read in isolation but is to be read in conjunction with King IV. The supplement is also applicable to service providers of retirement funds and although they are encouraged to act in accordance with these recommendations, King IV specifically points out that is the board of trustees that can be held accountable for the actions of its service providers. Therefore, it is the responsibility of the fund to ensure that its service providers have solid corporate governance frameworks and that the fund has given clear and detailed mandates to its service providers.
The retirement fund supplement is aimed at providing guidance to the industry, however, a few of these recommendations may not add as much value as they do create hurdles for some retirement funds, for example:

• King IV recommends that large funds should have more independent trustees on its board as this would balance objective decision making that would essentially be in the best interest of the fund. It goes further to recommend that at least half of the board of trustees should be independent and should be appointed from a pool of professional trustees.

Although this principle seeks to achieve objectivity, it might pose practical difficulties from a costs perspective and the fact that independent trustees do not have insight into the intricacies or the day-to-day running of the fund. In adopting this recommendation, in the absence of a change to the law that requires at least half of the board of a fund to be elected by the members, it leaves little or no place for employer elected trustees, which may not be ideal for employer sponsored funds.

• King IV suggests continuous development of trustees so to ensure that they are kept appraised of new developments in corporate governance, which would allow them to discharge their duties effectively.

Development of trustees is certainly beneficial to funds, however regard should be had to the time required and cost implications of development programmes and training that may prove to be onerous having regard to the frequency of training (having considered the different levels of understanding of each trustee) and the fact that trustees often vacate their position on the board after the expiry of their term which would mean those skills would be lost to the fund.

So while retirement funds have two months before King IV is effective, it is important that during this time trustees prepare to assess the principles set out in the draft, the practicality and implications of applying these principles (having regard to the size and complexity of the fund) and the costs that are associated with it. After all, the buck stops at the board of trustees.