Corporate Governance Perspective

The conceptual dialectical process towards CG, especially for matters relating to the theoretical
framework, is continuing in an effort to find an optimal theoretical model (superior) from various CG
alternatives. In general, current perspectives in CG can be categorized into different paradigms at two
opposite poles, namely shareholding versus stakeholding.

1. The shareholding perspective as a thesis tends to be traditionalist and has the view that the
corporation is the legal instrument of the owner in maximize its interests in the form of profits on
investments made. To accommodate this, three levels of a hierarchical governance structure are
identified in the law on the company with the aim of protecting the interests of the owner, in
accordance with this perspective.
2. The stakeholding perspective has the point of view that the existence of a corporation should refer
to increasing stakeholder prosperity more broadly, compared only to the interests of corporate
owners. In general, this perspective emphasizes the need for stakeholder participation in corporate
decision making, long-term contractual relationships between corporations and stakeholders,
trust-based relationships and the running of business ethics regarding corporate relations with
other parties.

Thus the concept of stakeholding implies that management must consider various stakeholders with
different interests in making various organizational decisions. The consequences of polarizing
perspectives, various approaches and analyzes in understanding the phenomenon of governance are also
based on different points of view. This difference is reflected in the assumptions and presuppositions that
underlie each perspective, resulting in various derivations with different variants. The CG model variant
acts as a rationale and dominates CG ideas, research and practices in various countries with different
environments. The various CG model variants will differ between the two polarizations of shareholding
versus stakeholding perspectives as described previously. Ideologically and theoretically, the perspective
of shareholding is based on the supremacy of individual property rights which are the basis of the
principles of capital entity. At different poles, the perspective of stakeholder has an organizational or
corporate view as a "social entity". This perspective is based on the view that corporations are involved in
various aspects of social life, so that their existence has an impact on society, both in terms of the ability
to improve welfare and the impact it causes. Legally, the perspective of stakeholding is supported by the
principle of corporation as an independent legal person, and in a broader context than individualistic
understanding.
Various CG models constructed theoretically in an Anglo-American cultural and environmental context.
As such, the model is 'not intended' to accommodate all the needs of coporation governance that operates
in different social environments and across countries. Nevertheless, various models significantly represent
the conventional thinking in understanding CG phenomena. Furthermore, the variant of the CG model
acts as a thought base and dominates various CG ideas, research and practices in various countries with
different environments. The various CG model variants (both existing and emerging due to the changing
dynamics of the CG implementation environment) will be between two polarizations of shareholding
perspectives versus stakeholding as described previously. Ideologically and theoretically, the perspective
of shareholding is based on the supremacy of individual-private ownership rights, which are the
foundation of capitalism principles. According to the traditional conception of a Corporate Governance
Perspective the right of private ownership is a natural thing that creates a social balance in order to
support the efficient development of the country's economy. Thus, individualism "becomes characteristic
and CG main reference according to shareholding perspective, so that individualistic ideology is
accommodated in the form of corporate law. In its development until the 20th century, the shareholding
perspective is still dominated by central issues; This question is relevant following the start of the debate
regarding the conception of the modern corporation "with the separation between owners (principals) and
management (agents). The relationship between the two parties concerned will lead to agency problems
(the agency problems) as a result there are differences in interests between shareholders (principals) -who
have but cannot control- with management (agents) -not have but have control-over various assets owned
or investments made by corporations. In the next journey (especially related to the issue of self-interest
human behavior that underlies the principle of individualism) the agency theory "becomes increasingly
developed and dominates the understanding of governance phenomena compared to the perspective of
shareholding". Shareholding tends to assume that the organization (corporation) is a legal person who has
a legal duty to satisfy the interests of their owners. With this basis, Gamble and Kelly (2001) argue that
corporate ownership must be treated as a private association that requires minimal regulation and
interference from the government as a form of respect for privacy. At different poles, the perspective of
stakeholding "has the view of an organization or corporation as a" social entity. "This perspective is based
on the view that corporations are involved in various aspects of social life, so that their existence has an
impact on society, both in terms of the ability to improve well-being and the impact (risk) that they cause.
Consequently, corporations must be aware of their social obligations, especially those relating to aspects
of fairness, social justice, and adequate protection of the interests of workers. In this connection, Allen
(1992, p. 264) argues that corporations are positioned as independent entities with their own purposes,
their own properties and their own duties'. Legally, the point of view of stakeholding is supported by the
principle of corporation as an independent legal person, but in a broader context than individualistic
understanding. From this point of view the corporation is an association of various individuals with nil
personifications, which are accepted by the group in the process of establishing a corporation. As real
personification, corporation is not considered 'as an aggregation of the individuals or individual rights of
the members who make it. Thus, each individual in the corporation carries out its duties and activities as
an organ (part) of the corporate person.
From this point of view the corporation is an association of various individuals with real personifications,
which are accepted by the group in the process of establishing a corporation. There are four models of
Corporate Governance consist of:

1. The American Rule-based Model.

Early models and CG thinking by experts tended to refer to the Anglo-American (Anglo-Saxon)
model characterized by a CG model based on a unitary board system (unitary board model) in
contrast to the Continental European model which was characterized by a two-tier board system
board model). Nevertheless deep recent developments have strong fundamental differences
between the American model and the British and other Commonwealth models, which began
incorporated in the Anglo-Saxon model. The main and fundamental characteristic of the
American CG model is the existence of unitary boards (single-tiered) with a clear dominance of
BOD members who come from outside the company (independent outside directors). For other
features, this model is the same as the British / Commonwealth mode in which the American
capital market authority (SEC states) that each mandatory corporation has an audit committee,
nominating committee, and remunerating committee. In the American model, shareholders have
little and limited influence on BOD membership determination. In this model, shareholders as
company owners can only express their dissatisfaction through the voice mechanism complaint
(voice) or sell their shares (exit) as a form of dissatisfaction. Thus only the choice of voice or exit
strategies can be done by shareholders in articulating their dissatisfaction with management.
While for CG model of the United Kingdom / Commonwealth, shareholders with 10% ownership
of voting rights in public companies can force extraordinary meetings and have the right to vote
on strategic decisions or replace BOD members.
2. The United Kingdom / Commonwealth Principles-based Model.
Although still a matter of debate, history records that the first laws and regulations
accommodating the establishment of shareholders limited liability companies originated in the
UK around 1850. The influence of the British empire ultimately influenced the development of
law in their various colonies known as the Commonwealth ( the commonwealth countries). As
found in the features of the American CG model, the legal traditions in the British /
Commonwealth model are based on common law rooted in legislation developed based on the
 case-law. However, unlike the American CG model, the British / Commonwealth CG model uses
the principles based basis. In the UK model CG principles are regulated through a code of good
corporate governance principle or good practice in determining the form of responsibility of
governance structure elements, not based on the law (not the rule of law). In this concept,
companies must report that they have followed and complied with the CG principles established
in accordance with the CG guidelines, or they must explain the reasons for not obey him. On this
basis, the CG-UK pattern is often referred to as the 'comply or explain' approach to corporate
governance. Conceptually, the CG model of the UK (UK) / Commonwealth is related to self-
regulation as a basic theme. In this condition compliance is a voluntary choice and not
mandatory, with the consequence that sanctions will be imposed by the market based on the
exposure of CG in companies that can lead to delisting status in the capital market. Thus, the
regulator's function in this regard is to ensure that investors and potential investors in the financial
markets obtain accurate information as from these investors in making an assessment of the
decisions they will take. The role of disclosure of important information about corporations is a
necessity for stakeholders to avoid asymmetric information. Although among the various
Commonwealth countries the CG (the code) guidelines for public companies listing on the capital
market have some differences, these differences are relatively insignificant and not detailed.
Throughout the Commonwealth countries the CG pedonists they still require the need; (a)
independent choir executive or outside directors, (b) audit committee, (c) remuneration
committee, nomination committee, and (e) high levels of transparency and accountability.
Another feature that distinguishes the British / Commonwealth CG model from the American
model is that the CG guidelines for countries that embrace the British / Commonwealth CG
model require strict separation between the Chairman of the Board and the Chief Executive
Officer.
3. The Continental European Two-tier Model.
Based on legal tradition and company law in European continental countries e
mainland) has rule based characteristics, in France for example, the huko tradition
rooted to The Napoleonic Law which requires that corporate behavior is determined based on
legal rules of the game and based on legislation or legislation derived from it (not based on case-
based common law as found in America). Characteristic governance in mainland European
countries is characterized by the tendency of small and less liquid financial markets, so the role of
the market for corporate control as part of governance mechanisms is weakened. In various
countries that embrace this model, it is identified that corporate financing through bank loans is
commonly used to fund corporate needs. Furthermore, it was also found that banking institutions
 can have a role in company activities, especially in Germany. Investors in mainland European
countries tend to be concentrated and generally found characteristics of ownership are
concentrated in families as found in Italy and France.
4. The Japanese Business-network Model.
The existence of business network-based corporations is found in the country. The classic model
of keiretsu reflects social cohesion in Japanese social life. The consequences of this pattern in
company practice are characterized by the following:
a. emphasis on unity in all aspects of the organization,
b. family relations,
c. life-long tenure,
d. personal policies for increasing commitment to the organization,
e. the initiation of that company as part of the family,
f. consensus in decision making,
g. cross-functional training,
h. promotion of positions based on loyalty,
i. balanced social life, and
j. the importance of performance.

Models like this are currently under great pressure and are thought to be the cause of the
collapse of various Japanese company global scale because it cannot compete. For example,
the collapse of the Toshiba company at the beginning of the 21st century was considered a
weakness of the company's managing capital Japanese based family.

In general, empirical evidence for the last 20 years for corporations in various developed and developing
countries does not lead to the convergence of the CG system. CG convergence will be more likely and
will occur on a regional scale compared to the global scale. Furthermore, although there will be a
convergence of CG, it is more limited to certain areas such as financial accounting and various disclosure
standards on a global scale. Furthermore, although CG convergence will occur, it is more limited in
certain areas such as financial accounting and various disclosure standards for corporations.