Aligned to the below article provide a detailed explanation on the benefits of the King Code on Corporate Governance which could be on a statutory basis, or as a code of principles and practices, or a combination of the two. Read the following article and answer the question that follows Gupta saga shows corporate governance working in SA Cape Town - The positive spin from the Gupta saga is that corporate governance in South Africa is working as it indeed should - and that is worth a great deal for the future. This is according to Rhodes University Professor Matthew Lester, a member of the Davis Tax Committee, who reacted to financial services companies breaking ties with the Gupta- owned Oakbay companies. He said stakeholders of Oakbay are clearly and quite rightly looking at their own reputational risk arising from association with Oakbay and they are turning away. Lester said the remedy available to the directors of Oakbay to restore its reputation is to address the seat of the problem, the connection with the Gupta family. "Quite rightly, in the interests of Oakbay, the Gupta directors have resigned." On Friday Oakbay said the "livelihoods of nearly 1 000 employees would be at immediate risk as a result of the outgoing director's association with the company. It would be in the best interests of the company, its shareholders and employees for them to step down." Lester explains: According to King III: Boards and directors, acting in the best interest of the institution, form the focal point of corporate governance with responsibilities extending to stakeholders: "Companies should be headed by a board that should direct, govern and be in effective control of the company". Chapter 8 of King III established the principle that the board should appreciate that stakeholders' perceptions affect the company's reputation. Oakbay's auditor KPMG, their banks FNB and Absa and their sponsor Sasfin Capital all cut ties with the Guptas in March. He said the application of the new world of corporate governance is clearly reflected in the Oakbay story. The King III report starts off with the observations that stakeholders cannot be ignored. Stakeholders are concerned with: - The quality of the company's product, or service; and - The trust and confidence that stakeholders have in the company. "It is clear that the stakeholders have major concerns with regard to the involvement of Gupta directors. "In the past not much could be done about this. But today stakeholders are concerned that their own reputation can be at risk purely through association with other companies." The flight of corporate service providers comes as the Guptas' alleged business connection with and influence of President Jacob Zuma has resulted in calls for an investigation into the Guptas' business activities. The Guptas own Oakbay Investments, which is a shareholder in a number of private equity investments and joint ventures, such as Sahara Computers, JIC Mining Services, Shiva Uranium, The New Age newspaper, ANN7 TV and Clifftop Lodge. Lester said the challenge for Oakbay is to now attempt to restore its reputation to regain the confidence of all stakeholders. "That is no easy task. But we hope that in the interests of the employees (who are also stakeholders) this will be achieved." According to Lester the saga shows that South Africa's private sector is not just paying lip service to modern corporate governance principles. "Stakeholders are taking action where reputational risk arises. "Yes, corporate governance is working as it indeed should. And that is worth a great deal for the future." According to Lester government organisations could also be bound by the King Code. "King IV is going to suggest that government organisations are also bound by the King Code. That would mean that the government would also have to consider the reputational risk of those they deal with. That could have very interesting implications," said Lester