How forward-looking legal and governance frameworks will shape business decisions
As corporate regulation evolves globally, new frameworks are emerging that reconceptualise the relationship between governance, strategy and value creation. These are not merely updated compliance requirements but rather comprehensive reimagining of what responsible corporate stewardship means in an era defined by technological disruption, environmental pressure and unprecedented stakeholder scrutiny.
Image source: rorozoa from Freepik
Evolution of corporate governance
In South Africa, this evolution finds its most comprehensive expression in the King V Report on Corporate Governance (King V), effective from 1 January 2026. As organisations prepare for this transition, the critical question is not simply how to comply but how to understand that these frameworks will fundamentally alter decision-making across every strategic function.
King V, building on three decades of governance evolution since the post-apartheid King I Code in 1994, represents a performance-driven framework that will reshape how boards evaluate opportunities, assess risks and allocate resources.
Three imperatives explain why governance frameworks such as King V will shape business decisions in the years ahead.
Firstly, the concept of environmental, social, and governance (ESG) has shifted from reputational concern to strategic necessity, influencing financial performance, competitive positioning and stakeholder expectations. Investors, clients and regulators now assess organisations through transparent ESG measures, making sustainability and ethics central to long-term value.
Secondly, governance is no longer just a compliance exercise but a driver of value creation. Stakeholders can easily distinguish genuine integration from box-ticking, and King V’s principles-based approach reinforces this by focusing on outcomes rather than prescriptive processes. However, one can expect that the implementation of these principles will vary based on the type of industry or business venture, resulting in different value creation outcomes.
Thirdly, rapid technological change, especially artificial intelligence (AI), has introduced risks and responsibilities that traditional governance models did not anticipate. Decisions made by or influenced through AI carry ethical, operational and strategic implications, requiring board-level oversight. King V recognises this explicitly, positioning technology governance as a core component of organisational accountability.
However, it must be noted that companies for whom King V is not mandatory (for example, non-listed companies under no statutory or contractual obligation to comply), will have greater flexibility in respect of the enforcement of the principles enunciated in King V.
Reshaping capital allocation and strategic decisions
When evaluating a major capital investment or expansion opportunity, boards have traditionally focused primarily on funding mechanisms, financial returns, competitive positioning and operational feasibility. King V transforms this analysis by requiring explicit consideration of how the investment affects all organisational resources.
A board considering manufacturing facility expansion must now assess and disclose: What are the environmental impacts, and how will these be managed within the context of climate risk? How does this decision affect workforce development and employment security in affected communities? What social relationships and stakeholder dynamics will influence license to operate? How do these factors create financial risks or opportunities over the investment horizon?
These are not supplementary considerations to be addressed after economic analysis is complete, but rather they are integral to risk assessment and value creation analysis, and the disclosure template requires boards to explain how these factors influenced the decision.
A board that approves an expansion generating strong financial returns but creating significant environmental liabilities or community opposition will need to explain publicly why it determined this trade-off served long-term value creation. This transparency fundamentally changes decision-making because it makes the full cost of decisions visible to investors, regulators and other stakeholders who can then assess whether the board exercised appropriate judgment.
Mergers and acquisitions will be similarly transformed. Due diligence processes must now extend beyond financial, legal and operational assessments to encompass a comprehensive evaluation of sustainability performance, social impact and governance quality.
A company with strong financial performance but weak environmental compliance, inadequate data governance or problematic labour practices represents integration risks and potential liabilities that King V requires boards to assess and disclose. Valuation models must incorporate these factors because they affect future cash flows, regulatory costs and stakeholder relationships.
While King V broadens the scope for governance oversight and disclosure, it does not mandate that ESG/community/social outcomes override financial or commercial return decisions. What it requires is consideration and disclosure — how materially, and how those results weigh in decisions still depends on the board's judgment.
Strategic planning processes will be fundamentally reshaped by King V's requirement that governing bodies consider the combined context of economy, society and environment. Annual strategy reviews can no longer focus exclusively on market positioning and financial targets but must explicitly address how environmental trends affect business model viability, what social factors influence workforce stability and community relationships, and how governance practices affect reputation and stakeholder trust.
Sihle Bulose, Director, Corporate and Commercial - CMS South Africa
Lebogang Molebale, Director, Corporate and Commercial - CMS South Africa
Transforming technology deployment
Technology deployment decisions, particularly regarding AI, will require fundamentally different approval processes.
A board considering implementation of an AI system for customer service, credit assessment, hiring decisions or operational optimisation must now evaluate:
- What decisions will this system make or influence? What data trains the algorithm, and how is bias identified and mitigated?
- What human oversight mechanisms ensure appropriate judgment remains embedded in critical processes?
- How are decisions explained to affected individuals?
- What happens when AI recommendations conflict with human assessment?
King V requires that these questions be answered before deployment, with oversight mechanisms proportionate to risk. A logistics optimisation algorithm requires different governance from a credit scoring system, which requires different governance from a hiring assessment tool.
Boards must establish frameworks for categorising AI applications by risk level and implementing appropriate oversight for each category. Boards must assess whether adequate governance infrastructure exists to deploy technologies responsibly, and this assessment becomes a gating factor in deployment decisions.
The expansion of information governance requirements beyond cybersecurity to encompass all data leaks and security breaches, regardless of cause, will reshape how organisations approach data handling decisions.
When a board considers a new data collection initiative, customer analytics programme or third-party data sharing arrangement, it must now evaluate comprehensively:
- How will this data be secured?
- Who will have access?
- What training ensures employees understand handling obligations?
- How are third-party recipients assessed and monitored?
These considerations affect fundamental business model decisions. A company considering whether to monetise customer data through third-party arrangements must assess not only revenue potential but also the information governance infrastructure required, the disclosure obligations triggered and the stakeholder trust implications.
Board composition
Board composition decisions will be immediately affected by King V's tightened independence criteria. The two-year cooling-off period for former executive managers seeking independent classification means boards must now plan director succession differently.
A retiring CEO who might previously have transitioned quickly to an independent director role must now wait two years with no significant organisational involvement, before taking up the role of independent director. The nine-year service limit on independence classification means boards must proactively plan for director rotation, identifying and developing new independent directors before current members reach the threshold.
The extension of independence assessment to directors' related persons creates practical due diligence obligations. Nominating committees must now investigate whether prospective directors' spouses, children or close associates have relationships with the organisation that could compromise independence.
Trends
#BizTrends2026 | Herold Gie Attorneys' Jaimé-Lee Jacobs: AI integration in the workplace
Jaimé-Lee Jacobs, Herold Gie Attorneys 14 Jan 2026
Reshaping remuneration and accountability mechanisms
Executive remuneration has long been a focal point for shareholders, regulators and the public, serving as a barometer of how well an organisation aligns leadership incentives with sustainable value creation. In this context, strengthening oversight and accountability mechanisms has become a critical part of good governance.
From 2026 onwards, remuneration decisions will be shaped by the enhanced accountability mechanisms King V preserves and extends. Boards should engage with shareholders and relevant stakeholders on remuneration.
Boards designing executive compensation structures, particularly of companies required by law to appoint a social and ethics committees, should consider periodically submitting, as separate non-binding advisory votes, executive remuneration policies and the statutory remuneration reports.
Boards cannot simply implement compensation structures that management prefers or that peer companies use. They must design structures that align demonstrably with long-term value creation and stakeholder interests, and they must be prepared to explain and defend these choices to shareholders.
Remuneration committees will need to conduct shareholder consultation before finalising policies, incorporate feedback into design and prepare comprehensive disclosure explaining how remuneration structures incentivise behaviour consistent with organisational strategy and sustainability commitments.
The competitive reality of governance quality
Governance quality determines whether organisations can navigate complexity, whether they can maintain stakeholder trust, access capital on favourable terms, and attract and retain talent necessary for sustained success.
King V matters because it makes these connections explicit through the decision making mechanisms described above. It is about ethical leadership that earns legitimacy rather than merely asserting authority. It is about integrated thinking that recognises the interdependence of economic, social and environmental systems.
Organisations that recognise this will approach King V as an opportunity to build superior decision-making capabilities.
They will invest in board development to ensure technological and sustainability literacy that enables informed judgment on AI governance, climate risk and social impact, redesign strategic planning processes to incorporate long-term resilience considerations systematically, strengthen stakeholder engagement mechanisms to gather intelligence that improves decision quality, and view disclosure obligations as opportunities to communicate governance quality that attracts capital and builds trust.
As 2026 progresses, the competitive gap between organisations that develop these capabilities and those that treat governance as an administrative burden will become increasingly visible and increasingly consequential for long-term success. The decisions that shape organisational futures will be shaped, in turn, by the governance frameworks that define what responsible stewardship means in practice.
About the author
Sihle Bulose and Lebogang Molebale are both Directors in the Corporate and Commercial practice at CMS South Africa.