Corporate Governance in Indonesia

Background

Good Corporate Governance in Indonesia was known in 1997 when the economic crisis
hit Indonesia. There are many bad consequences of the crisis, one of them is the number of
companies that go bankrupt. Poor corporate governance is allegedly one of the causes of
Indonesia's political economy crisis that began in 1997 whose effects are still felt today.

Recognizing the situation and conditions, the government through the Ministry of State
Enterprises began to introduce the concept of Good Corporate Governance in SOEs. Through
the Decree of the Minister of SOEs no. Kep-117 / M-MBU / 2002 dated August 1, 2002 on the
Implementation of Good Corporate Governance Practices in State-Owned Enterprises.
Emphasize the obligation for SOEs to apply Good Corporate Governance consistently and
make Good Corporate Governance principles as its operational foundation which basically
aims to improve business success and corporate accountability in order to realize shareholder
value in the long term by still paying attention to the interests of other stakeholders, and based
on legislation and ethical values.

The Government provides a very strong impetus to the implementation of Corporate

Governance in Indonesia. Evidence from the government's concern can be seen from the
making of various regulations governing GCG. Starting from the establishment of the National
Committee on Corporate Governance Policy (KNKCG) through Decree of the Coordinating
Minister of Economy Number: KEP / 31 / M.EKUIN / 08/1999 on the establishment of
KNKCG issuing the GCG Indonesia Guidelines.

Then followed by the establishment of the National Committee on Governance Policy

(KNKG) as a substitute for KNKCG through Decree of the Coordinating Minister for
Economic Affairs Number: KEP / 49 / M.EKON / 11/2004. Consists of the Public Sub-
Committee and the Corporate Sub-Committee. Then also issued SE Chairman of Bapepam
Number Se-03 / PM / 2000 regarding the Audit Committee which contains the appeal of the
need for the Audit Committee to be owned by each Issuer, and Bank Indonesia Regulation
(PBI) no. 8/4 / PBI / 2006 concerning GCG which is amended by PBI no. 8/14 / GCG / 2006.

Principle of Corporate Governance in Indonesia

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There are generally five basic principles of good corporate governance:

1. Transparency

Openness in carrying out the process of decision making and openness in expressing
material and relevant information about the company.

2. Accountability

Clarity of function, structure, system, and accountability of corporate organs so that the
management of the company is done effectively.

3. Responsibility

Suitability in the management of the company against sound corporate principles and
applicable laws and regulations.

4. Independency

A situation in which a company is professionally managed without conflict of interest

and influence from management that is inconsistent with prevailing rules and regulations and
sound corporate principles.

5. Fairness

Fair and equitable treatment in meeting the rights of stakeholders arising under
applicable agreements and laws and regulations. The essence of corporate governance is the
improvement of company performance through supervision or monitoring of management
performance and the existence of management accountability to other stakeholders, based on
the applicable rules and regulation framework.

Examples of company that has applied the principles of corporate governance

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PT. Sarana Multigriya Finansial (Persero)

Applying the principles of good corporate governance can contribute to the

improvement of company performance. This understanding underpins the commitment of PT.
Sarana Multigriya Finansial (Persero) to always uphold the implementation of GCG in every
level of organization and operational activities.

 Application of GCG Principle with Analysis

Implementation of all activities are in accordance with GCG basic principles of transparency,
accountability, responsibility, Independency, Fairness

1. Transparency

The principle of openness is always applied in conducting business through the provision
of material and relevant information and in a manner that is easily accessible and understood
by stakeholders.The widest information is provided to the public and shareholders, taking into
account OJK regulations as well as on their own initiative.

Analysis:

As I see in the company’s website, reports are issued periodically and on time, which
includes Quarterly Financial Statements, Semester Financial Reports, and Annual Financial
Reports audited, as well as Annual Reports. Information is also provided through public
exposure, print and electronic media, as well as investor forums.

2. Accountability and 3. Responsibility

The Company has a corporate management system that supports the clarity of function,
implementation and accountability of organ company performance.

Analysis:

As I see in the company’s website, The principles of accountability are implemented

through the Board of Directors' reporting steps to the Board of Commissioners regarding the
annual budget plan and joint evaluation of the Company's financial performance, the
submission of financial statements to the Annual General Meeting of Shareholders, the
establishment of the Internal Audit and the appointment of external auditors, as well as the
application of the Company's business ethics and Code of Conduct.

4. Independency

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 The Company always ensures that the management of the company is done
independently so that each company's organs do not dominate each other and cannot be
interfered by others.
Analysis:
The Board of Commissioners and the Board of Directors of the Company have
independent opinions in every decision taken, but it is possible to obtain advice from
independent consultants, law, human resources and committees to support the smooth running
of their duties. Currently, the Board of Commissioners consists of 3 (three) members, 1 (one)
President Commissioner and 2 (two) other Commissioners.

5. Fairness
In the Company the interests of shareholders and other stakeholders always receive
special attention.
Analysis:
The Company also always applies equitable treatment to the public, capital market
authorities, capital market communities, as well as stakeholders. Meanwhile, relationships
with employees are maintained with due regard to their rights and obligations fairly and
fairly.

References:

https://www.proxsisgroup.com/articles/good-corporate-governance-gcg-dan-penerapannya-
di-indonesia-part/

https://alamsyahprasetio.wordpress.com/2010/10/28/pelaksanaan-good-corporate-
governance-di-indonesia/

http://www.ecgi.org/codes/documents/indonesia_cg_2006_id.pdf

http://keuanganlsm.com/arti-penting-corporate-governance/

http://ced.petra.ac.id/index.php/man/article/viewFile/16505/16497

http://smf-indonesia.co.id/korporasi/profil-perseroan/kegiatan-usaha/

http://smf-indonesia.co.id/korporasi/tata-kelola-perusahaan-yang-baik/