South Africa: How the new King V Report on Corporate Governance will reshape corporate strategy in 2026

The era of corporate governance as a mere compliance exercise is over. New regulatory frameworks, exemplified by the new King V Report on Corporate Governance (King V) - effective 1 January 2026 - are fundamentally transforming how businesses make strategic decisions, allocate capital and manage risk. 

King V moves beyond prescriptive rules, demanding a principles-based, performance-driven approach that integrates environmental, social, and governance (ESG) factors directly into the value creation equation.

The central shift is recognising that responsible stewardship is a competitive necessity, not an administrative burden. The decisions boards make now will be shaped by three core imperatives built into King V.

The three drivers of strategic transformation

1. ESG as a strategic foundation: ESG factors have transitioned from reputational concerns to core drivers of financial performance and stakeholder trust. Investors, clients and regulators now require transparent ESG measures, making sustainability and ethical conduct non-negotiable for long-term value.
2. Governance as a value creator: Stakeholders easily identify "box-ticking". King V focuses on demonstrable outcomes, requiring genuine integration of good governance principles into strategy to drive sustained value, not just satisfy compliance checkboxes.
3. Navigating technological risk: Rapid changes, particularly the proliferation of Artificial Intelligence (AI), introduce new ethical and operational responsibilities. King V explicitly positions technology governance as a core component of board accountability, requiring oversight mechanisms for decisions influenced or made by AI systems.

Capital allocation and strategic decisions

King V requires boards to shift from a purely financial lens to one of integrated thinking. Traditionally, capital investment focused on financial returns and operational feasibility. King V requires that boards must now explicitly assess and disclose the full spectrum of impact on any major investment. For example, an expansion plan must now detail its environmental impact (in the context of climate risk), its effect on workforce development, and how it affects the company's social license to operate within the community.

This is not supplementary analysis; it is integral to risk and value assessment. King V’s Disclosure Framework requires boards to disclose how they applied the principles, making the full cost/benefit visible to all stakeholders.

Similarly, due diligence must expand beyond financial and legal checks to include a comprehensive evaluation of the target's sustainability performance, social track record, and governance quality. Here, a financially strong acquisition with weak environmental compliance or inadequate data governance now represents a significant liability. In the same vein, valuation models are more likely to incorporate these governance factors, making targets with superior governance frameworks inherently more valuable. Boards can no longer justify M&A solely on financial synergies if critical governance gaps exist, as King V's disclosure rules will make these gaps visible and require remediation plans.

Furthermore, annual strategy reviews must explicitly address how environmental trends affect business model viability and how social factors influence community and workforce stability. Strategy can no longer focus exclusively on market positioning but must demonstrate how it ensures long-term resilience and stakeholder trust.

Technology and accountability: The new remit

King V introduces fundamental changes to the approval processes for technology deployment and to board composition. AI governance starts to enjoy priority as boards must now evaluate: What are the ethical and operational risks? How is bias identified and mitigated? What human oversight remains? And how are decisions explained to affected individuals?

Boards must establish frameworks to categorise AI applications by risk level and implement proportionate governance before deployment is approved. This means boards cannot delegate technological deployment decisions without proper oversight. Requirements are broadened beyond cybersecurity to encompass all data leaks and security breaches. Any decision involving data collection, customer analytics, or third-party sharing must comprehensively evaluate security protocols, access controls and the potential impact on stakeholders.

Accountability takes on a different shape as King V tightens independence criteria. For one, a two-year cooling-off period is now required for former executive managers seeking an independent director role while the nine-year service limit on independence classification means proactive director rotation and succession planning are essential.

Remuneration and the competitive edge

King V strengthens accountability by preserving the non-binding advisory shareholder vote on executive remuneration policies and their implementation. If more than 25% of shareholders vote against the policy, the board must engage with dissenters. This requires Remuneration Committees to design structures that demonstrably align leadership incentives with long-term value creation and sustainability commitments, not just with peer practices.

Ultimately, King V is moving governance from a defensive function to a competitive differentiator. Organisations that proactively adopt its principles will build superior decision-making capabilities—investing in board literacy on technology and sustainability, redesigning planning processes, and using disclosure to communicate governance quality. This maturity will attract capital, build resilience, and earn the long-term trust essential for success in an increasingly complex world.

Sihle Bulose and Lebogang Molebale are both Directors in the Corporate and Commercial practice at CMS South Africa, internationally ranked by Legal 500 and Chambers and Partners. Sihle regularly helps multinationals establish a presence in South Africa and the rest of the African continent. Lebogang has immense experience advising on cross-border corporate/M&A transactions, corporate restructurings and general commercial matters across various sectors.