Apply or explain definition
Apply or explain approach simply means for example that where the Board of directors takes a decision that to follow a recommendation from the Code will not be in the best interest of the company; that such a Board may apply another practice or apply the recommendation differently, provided that the practice being adopted will still achieve the objective of the overarching principles of corporate governance. In addition, the Board will also have to explain the need for such a deviation; detailing how the principles and recommendations were applied and the results. Where this procedure is followed, the company will be deemed to be compliant.
Apply or explain means that King III follows a non-legislated approach allowing for companies to explain if they choose not to apply the principles of King III if they believe that it would be in the best interest of the company.