Johannesburg — A NEW instrument for measuring and reporting on corporate governance was introduced last week by the Institute of Directors in Southern Africa.

The governance assessment instrument is set to become a benchmark for measuring how companies perform against the King 3 report, which together with new companies legislation sets the standard and principles for corporate governance in SA.

"A quick review of a comprehensive governance assessment instrument report gives a concise, punchy overview of the structures, practices and processes that are in place to promote good corporate governance within an organisation," said Ansie Romahlo, director of the Centre for Corporate Governance.

"Although the report does not indicate the quality of governance, it does give stakeholders an idea of how well-positioned an organisation is for good governance - a question of crucial concern in an era of corporate scandals."

The new instrument can be used to evaluate a company's corporate governance within a short period.

"Given the enormous emphasis placed today on a company's reputation, it is of vital importance that companies demonstrate their efforts in ensuring good corporate governance," said Romahlo, referring to a recent McKinsey report that investors were prepared to pay up to a third more for shares in well-governed companies.

With this in mind, the new measurement tool assists companies in running their operations responsibly, a key factor in winning favour with citizens, prospective customers, shareholders, donors and others, she said.

The assessment phase would consist of about 300 questions relating to structures and processes. Each question refers to a principle in the King 3 code and JSE listing rules.

The results are provided in a dashboard format that gives an overview of the state of corporate governance in the company by category and subcategory. The results show the quantitative state of corporate governance and to what extent the company is structured for good governance.