BUSINESS ETHICS

Corporate Governance
Shinta Dewi Sugiharti Tikson, S.E., M.Mgt.
Corporate Governance

The structure by which corporations

are managed, directed, and controlled
toward the objectives of fairness,
accountability, and transparency.
Corporate governance essentially
involves balancing the interests of
a company's many stakeholders,
such as shareholders, management,
customers, suppliers, financiers,
government and the community.
 Stakeholders
Primary stakeholders are those
A stakeholder is a party that whose continued association is
has an interest in a company absolutely necessary for a firm's
and can either affect or be survival. These include employees,
affected by the business. customers, investors, and
shareholders, as well as the
governments and communities that
provide necessary infrastructure.

Secondary stakeholders do not

typically engage in transactions
with a company and are therefore
not essential to its survival. These
include the media, trade
associations, and special interest
groups.
The Purpose of Corporate Governance

To facilitate effective, entrepreneurial and

prudent management that can deliver the
long-term success of the company. 

Follow Good
Act
ethical business
ethically
rules reputation
Why is Corporate Governance Important?

Corporate governance is intended to

increase the accountability of a company
and to avoid massive disasters before
they occur.
10/14/2020 Shinta Tikson 9
 Gatekeepers
Some professions, such as accountant,
that act as “watchdogs” in that their
role is to ensure that those who enter
into the marketplace are playing by
the rules and conforming to the
conditions that ensure the market
functions as it is supposed to function.
 Conflict of Interest
A conflict of interest exists where a
person holds a position of trust that
requires that she or he exercise
judgment on behalf of others, but
where her or his personal interests
and/or obligations conflict with those
of others.
 Internal Control
A process, effected by an entity's board of
directors, management, and other personnel,
designed to provide reasonable assurance
regarding the achievement of objectives in the
following categories: effectiveness and efficiency
of operations, reliability of financial reporting,
and compliance with applicable laws and
regulations.
 Legal Duties of Board Members
Duty of Care Duty of Good Faith Duty of Loyalty
Involves the exercise of Requires obedience, Requires
reasonable care by a compelling board faithfulness; a board
board member to members to be member must give
ensure that the faithful to the undivided allegiance
corporate executives organization's when making
with whom she or he mission. decisions affecting
works carry out their In other words, they the organization.
management are not permitted This means that
responsibilities and to act in a way conflicts of interest
comply with the law in that is inconsistent are always to be
the best interests of with the central resolved in favor of
the corporation. goals of the the corporation.
organization.
The pillars of successful corporate governance
are: accountability, fairness, transparency,
assurance, leadership and stakeholder
management.

Strong corporate governance mechanisms

remove the opportunity for employees to
make unethical decisions.