INDONESIA

CORPORATE
GOVERNANCE
MANUAL
Second Edition

IN PARTNERSHIP WITH:

Swiss Confederation
1
 INDONESIA
CORPORATE
GOVERNANCE
MANUAL
Second Edition

Jakarta, June 2018

Disclaimer
© 2018 International Finance Corporation. All rights reserved.
2121 Pennsylvania Avenue, N.W.
Washington, D.C. 20433
Internet: www.ifc.org

The material in this work is copyrighted. Copying and/or transmitting portions or all
of this work without permission may be a violation of applicable law. IFC encourages
dissemination of its work and will normally grant permission to reproduce portions of
the work promptly, and when the reproduction is for educational and non-commercial
purposes, without a fee, subject to such attributions and notices as we may reasonably
require.

IFC does not guarantee the accuracy, reliability or completeness of the content included
in this work, or for the conclusions or judgments described herein, and accepts no
responsibility or liability for any omissions or errors (including, without limitation,
typographical errors and technical errors) in the content whatsoever or for reliance
thereon. The boundaries, colors, denominations, and other information shown on any
map in this work do not imply any judgment on the part of The World Bank concerning
the legal status of any territory or the endorsement or acceptance of such boundaries.
The findings, interpretations, and conclusions expressed in this volume do not necessarily
reflect the views of the Executive Directors of The World Bank or the governments they
represent.

The contents of this work are intended for general informational purposes only and are
not intended to constitute legal, securities, or investment advice, an opinion regarding the
appropriateness of any investment, or a solicitation of any type. IFC or its affiliates may
have an investment in, provide other advice or services to, or otherwise have a financial
interest in, certain of the companies and parties (including named herein).

The Indonesia Corporate Governance Manual second edition provides an overview

of general corporate governance principles applicable to Indonesian limited liability
companies. The Manual also addresses certain corporate governance principles for
Indonesian companies that are active in the financial sector and are supervised by
Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan). Companies in specific
sectors, such as oil and gas, mining, and power, may be subject to different requirements
which are either additional to or variations of those discussed in this publication. The
laws of the Republic of Indonesia are frequently amended, such that legal rules referenced
in this edition may be superseded by new legislation following the publication of this
Manual.

All other queries on rights and licenses, including subsidiary rights, should be addressed
to IFC’s Corporate Relations Department, 2121 Pennsylvania Avenue, N.W., Washington,
D.C. 20433.

International Finance Corporation is an international organization established by Articles

of Agreement among its member countries, and a member of the World Bank Group.
All names, logos and trademarks are the property of IFC and you may not use any of
such materials for any purpose without the express written consent of IFC. Additionally,
“International Finance Corporation” and “IFC” are registered trademarks of IFC and are
protected under international law.
Foreword

5
 Azam Khan
IFC Country Manager
Indonesia, Malaysia, and TimorLeste

It is my pleasure to present the 2nd edition of the Indonesia

Corporate Governance Manual. Commissioned by IFC, this
version updates the first edition of the Manual that was
published in January 2014, incorporating recent corporate
governance changes applicable to public and listed companies in
Indonesia, as well as capturing major developments in the global
landscape. Indonesia’s Financial Services Authority issued the
first “comply or explain” corporate governance guidelines for
public companies in 2015 and since then has adopted additional
regulations to raise governance standards among Indonesian
companies, promote transparency and accountability in the
corporate sector, and enhance public trust and confidence in
Indonesian capital markets.

IFC, a member of the World Bank Group, is the largest global

development institution focused on the private sector in
emerging markets. As an investor, IFC continues to engage
with our clients to influence change and help address various
challenges companies face in emerging markets. A key aspect
of our advisory support is to help IFC clients strengthen their
governance practices. I believe that Indonesian companies will

6
find this publication useful in providing guidance on Indonesia’s
corporate governance regulatory framework and in aligning
their governance with international best practices.

Regards,

Azam Khan
IFC Country Manager for Indonesia, Malaysia, and Timor-Leste

7
 Wimboh Santoso
Chairman
Board of Commissioners
Otoritas Jasa Keuangan

I would like to congratulate IFC on the publication of the

second version of its Indonesia Corporate Governance Manual.
OJK and IFC have maintained a close collaboration in
improving corporate governance practices of listed companies
in Indonesia since the launch of the IFC Corporate Governance
Program for Indonesia in 2012. A key objective of the Program
is to raise awareness on good corporate governance practices
through publications and case studies. This Manual contains
pertinent legal references and practical guidance for local
companies to implement good corporate governance practices.

OJK issued an Indonesia Corporate Governance Roadmap in

2014 to improve the country’s regulatory framework and align
governance practices of local companies with those of their peers
in other ASEAN countries. As part of the implementation of the
Corporate Governance Roadmap, OJK issued Regulation No.
21/POJK.04/2015 and Circular Letter No. 32/SEOJK.04/2015
on the Implementation of Corporate Governance Guidelines
for Public Companies ("OJK CG Guidelines"), which is the
country’s first “comply or explain” guideline. Our objective was
to raise governance standards among public companies while at
the same time providing some flexibility for companies to tailor
governance practices to their specific situations. To continue the
momentum, OJK has issued numerous regulations to govern key
elements that are essential to fostering good governance among
public and listed companies. Together these regulatory changes
are aimed at enhancing accountability and transparency in the
corporate sector in Indonesia.

8
 The second edition of the Indonesia Corporate Governance
Manual takes into account major corporate governance
regulations issued by OJK and other regulatory bodies, in
addition to leading international practices and standards. The
Manual provides Indonesian companies with an indispensable
resource for guidance on corporate governance issues. The
Manual also explains the rationale for adopting higher
governance standards, which could be useful for reform-
minded commissioners and directors to build the business
case for implementing good governance practices across their
organizations. The Manual will also be a valuable reference
to academics, students, researchers, and other stakeholders in
providing insights, sharing best practices, and documenting the
corporate governance regime in Indonesia.

Corporate governance has an important role in promoting

sustainable economic growth by building investor confidence,
reducing the cost of capital, strengthening financial markets,
and creating jobs. OJK hopes that this Manual will inspire
Indonesian companies to adopt and implement good governance
practices, not simply as an exercise in regulatory compliance,
but as a means to create highly competitive, profitable, and well-
governed companies.

Sincerely,

Wimboh Santoso
Chairman of the Board of Commissioners
Otoritas Jasa Keuangan

OJK Disclaimer
OJK does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions
or judgments described herein, and accepts no responsibility or liability for any omissions or errors (including, without
limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon.

9
 Acknowledgement

10
The Indonesia Corporate Governance Manual Second Edition
was produced as part of IFC’s Corporate Governance Program
in Indonesia. The Program has been in operation since 2012 with
generous support from Switzerland’s State Secretariat for Economic
Affairs (SECO). The Indonesia Corporate Governance Manual was
prepared based on other corporate governance manuals published
by IFC’s Corporate Governance Program and adapted to Indonesia’s
corporate governance legal framework and practices.

The preparation and publication of this Manual would not have

been possible without the efforts of a number of highly dedicated
people. The Manual’s text was adapted under the direction of
Mohsin Chaudhry, IFC Corporate Governance Officer, and
Liana Lim Hinch, IFC Consultant. The content was revised with
substantial contributions from Emir Nurmansyah, Partner at
Ali Budiardjo, Nugroho, Reksodiputro, and his team members,
Theodoor Bakker, Senior Foreign Council and Gustaaf Reerink,
Foreign Council.

The team is also grateful for continuous support from the Financial
Services Authority, including OJK’s Chairman Wimboh Santoso,
Nur Sigit Warsidi, Director of Accounting Standards and Corporate
Governance, and their team in the development of this Manual.

11