Paper Corporate Governance

Session 2

Davy Rizqi Akbar - 1806213030

Farid Fajar - 1906389151

A. Structure of Board Governance in Public and Private Sector

Source : https://www.kalbe.co.id/corporate-governance

The structure of board governance in Indonesia refers to Law No. 40 of 2007 which discusses
Limited Liability Companies. The structure consists of the General Meeting of Shareholders (GMS), the
Board of Commissioners and the Board of Directors. In carrying out their duties, the GMS, the Board of
Commissioners and the Board of Directors are guided by the principles of transparency, accountability,
responsibility, independence and fairness to ensure the continuity of the Company's business while still
taking into account the interests of all shareholders.
The GMS is the highest position in board governance. It is a forum for shareholders to formulate
important decisions by taking into account the best interests of the Company, with due observance of the
requirements set out in the Company's Articles of Association and all applicable laws and regulations.
The Board of Commissioners and the Board of Directors are jointly responsible for the long-term
sustainability of the Company's business. The management of the Company is carried out by the Board of
Directors, while the Board of Commissioners is responsible for overseeing the performance of the
management of the Company. Therefore, the Board of Commissioners and the Board of Directors need to
have compatible perceptions about the company's vision, mission and values.

B. The Characteristic, Roles, Responsibility, and Effectiveness of the Board

The board has the responsibility to maintain the company's long-term sustainability and has specific
objectives, namely:
1. Good internal control and risk management
2. Return for shareholders is achieved
3. Maintain the protection of stakeholders fairly flower
4. Having the right leadership succession for sustainability from management
For board commissioner, they also have roles, which is to collectively responsible for supervising and
providing advice to the board of directors and also ensuring that the company performs Good Corporate
Governance and the most important point is that the BOC is prohibited from making operational decisions
For board of director, their roles are ;
- For the management sector, BOD needs to create a vision, mission, value, long and short term
program; managing resources effectively and efficiently.
- To mitigate risk management, BOD needs to arrange and enforce the management risk system to
every aspect of the company; calculate risk before making strategic decisions; elect the PIC over
risk control.
- For internal control sector, BOD need to arrange and enforce a reliable internal control system,
create force of internal control (listed company, BUMN, BLU)
- To prevent miscommunication, BOD needs to ensure good communication between management
and stakeholder with empowering corporate secretaries.
- For social responsibilities, BOD needs to ensure the fulfillment of CSR with focus and clear
written planning.

In Indonesia Corporate Law 40/2007 also explain about board commissioners and board director
responsibilities. For the responsibilities of the board of directors, BOD shall undertake the management of
Companies in the interest of the Companies and in accordance with the Company's purpose and
objectives and Boards of Directors are authorised to undertake the management contemplated at
paragraph 1 in article 92 in accordance with any policy that seems appropriate within the limits specified
in this Act and/or the articles of association. For the responsibilities of the board of commissioner, BOS
shall supervise management policies, the running of management in general, with regard to both company
and company’s business, and give advice to the BOD.

For effectiveness on the board, it is divided into two, namely monitoring culture and decision making. in
the monitoring cultures themselves are divided into several points:
- Pays attention to factors that can influence culture. Be alert to signs of possible cultural problems.
- Regular analysis and interpretation of evidence and information.
- Looking to identify areas of good practice and excellence that can be used to drive up standards
across the business
- Periodic reflection of culture and changes. Assess and monitor culture for alignment with purpose
and values.
And for decision making also divided into several things :
- Investing time in the design of their decision-making policies and processes
- Be aware of factors that can limit effective decision-making
- Consider extra steps for significant decisions
- Review the effectiveness of the decision-making process
C. Appointment and Election of the Board
Indonesia adopts a two tier board system. The appointment and election of the board of directors and the
board of commissioners are regulated in Law number 40 of 2007 regarding limited liability companies.
Board of Directors
The terms of appointment and selection of the board of directors based on the Indonesian corporate act
No.40 / 2007 are as follows:
● Article 93 states that those who can be appointed as members of the Board of Directors are
individuals who are capable of taking legal actions, except that within 5 (five) years prior to their
appointment, they have:
a. is declared bankrupt;
b. became a member of the Board of Directors or a member of the Board of Commissioners
who was found guilty of causing a Company to go bankrupt; or
c. being convicted of committing a criminal act which caused losses to the state finances
and / or related to the financial sector.
● Members of the board of directors are appointed by the GMS in accordance with Article 94. The
article also states that for the first time the members of the Board of Directors are appointed by
the founders in the deed of establishment as referred to in Article 8 paragraph (2) letter b. The
board of directors is appointed for a certain period and can be reappointed
● If the Board of Directors does not meet the requirements in Article 93, based on Article 95 it is
explained that within a period of not later than 7 (seven) days as from the date of discovery, other
members of the Board of Directors or the Board of Commissioners must announce the
cancellation of the appointment of the member of the Board of Directors concerned in a
Newspaper and notify the Minister for recorded in the register of Companies.
Board of Commisioners
The terms of appointment and selection of the board of directors based on the Indonesian corporate act
No.40 / 2007 are as follows:
● Article 110 states that those who can be appointed as members of the Board of Directors are
individuals who are capable of taking legal actions, except that within 5 (five) years prior to their
appointment, they have:
a. is declared bankrupt;
b. became a member of the Board of Directors or a member of the Board of Commissioners
who was found guilty of causing a Company to go bankrupt; or
c. being convicted of committing a criminal act which caused losses to the state finances
and / or related to the financial sector.
● Members of the board of directors are appointed by the GMS in accordance with Article 111. The
article also states that for the first time the members of the Board of Directors are appointed by
the founders in the deed of establishment as referred to in Article 8 paragraph (2) letter b. The
board of directors is appointed for a certain period and can be reappointed
● If the Board of Directors does not meet the requirements in Article 111, based on Article 112 it is
explained that within a period of not later than 7 (seven) days as from the date of discovery, other
members of the Board of Directors or the Board of Commissioners must announce the
cancellation of the appointment of the member of the Board of Directors concerned in a
Newspaper and notify the Minister for recorded in the register of Companies.
D. Charter of Corporate Governance

A board charter is a policy document which is made in GMS that clearly defines the respective roles,
responsibilities and authorities of the board of directors (both individually and collectively) and
management in setting the direction, the management and the control of the organisation. the document
that serves as the legal framework assists the board in implementing good governance, particularly in the
event of a dispute. The charter consist of:
I. Introduction, including:
1. Board of Directors Profile, Size, Expertise and Independence
2. (Re)Appointment; Term of Office; Resignation
3. Chairman and Vice-Chairman
4. Company Secretary
5. Committees
II. Duties and Powers, including:
1. General Duties and Powers; Relationship with the Management team
2. Duties Regarding the Activities of the Management team Members
3. Duties Regarding the Members and the Performance of the Board of Directors and
Management team
4. Certain Other Duties of the Board of Directors
5. Supervision of Financial Reporting
6. Duties Regarding Nomination and Assessment of External Auditor
7. Compensation of Management team Members
8. Relation with the Owners
III. Meetings and Decision-Making, including:
1. Frequency, Notice, Agenda and Venue of Meetings
2. Attendance of and Admittance to Meetings
3. Chairman of the Meeting; Reports
4. Decision-Making within the Board of Directors
IV. Other Provisions, including:
1. Conflicts of Interest of Board of Directors Members
2. Compensation of Board of Directors Members
3. Induction Program, Ongoing Training and Education
4. Other Positions
5. Confidentiality
6. Miscellaneous
Annex 1, List of Definition
Annex 2, Board of Directors Profile
Annex 3, List of Approvals Required by Board of Directors

Case: Dispute 2018 AGM / AGMS - Tiga Pilar Sejahtera Food Tbk

Case summary:
 In 2018 there were problems regarding the 2017 financial statements of PT Tiga Pilar Sejahtera
Food at the Annual General Meeting of Shareholders. The total value markup was 4 trillion by the
old management at PT Tiga Pilar Sejahtera Food. This financial report has been audited by Public
Accountant Firm Amir Abadi Jusuf, Aryanto, Mawar and Partner with a disclaimer on the audit
results. However, the shareholders disagreed with the report because they did not trust the
management of the company which was related to a number of transactions and receivables from
companies that were allegedly owned by President Director Joko Mogoginta. Thus, the decision
of the Extraordinary General Meeting of Shareholders appointed a new president director, namely
Hengky Koestanto and who was given the task of auditing the accounts in the financial statements
for the financial year 207. The new management led by Hengky had sent Ernst & Young to do on
several accounts in the financial statements.

Analysis Results:

After discussing the situation with our group, we agreed that replacing Joko Mogoginta as
president director with Hengky Koestanto was the best option. This is because Joko Mogoginta's
governance is ineffective, as shown by a large number of misstatements of accounts in the
financial statements. Since this organization has an obligation to the community. Replacement is
also needed because this company has a responsibility to the public because it has used itself to
the Indonesia Stock Exchange.

The company's efficiency improved after PT TPS Food restructured. This can be seen in the case
of PT TPS, which paid its obligations and saw its stock price grow by 12.7 percent.
The presence of shareholders as shareholders of financial statement results is a manifestation of
shareholders of influence over the company, where the GMS results are the highest organ of a PT.
This rejection had a significant impact on the improvement of the corporate governance of PT
TPS Food so that a new management was formed. This rejection also proves that there is a
problem with the agent principle where the director's actions as an agent are not in accordance
with the interests and goals of shareholders as principles. The markup in PT TPS Food is thought
to have occurred because of the agent's personal interest to benefit himself.

References:
- Indonesian Corporate Act No. 40/2007
- Effective governance. 2016. The Board Charter A legacy from today’s board to future boards.
Retrieved February 26, 2021, from
 https://www.effectivegovernance.com.au/content/Document/News%20Uploads/eG-Board-Charte
r-Fact-Sheet_v0_3_18Aug16%5B1%5D.pdf
- Komite Nasional Kebijakan Governance (KNKG). 2006. Pedoman Umum Good
Corporate Governance Indonesia. Indonesia : KNKG
- Wareza, M. (2019). Kisah TPS Food, Berapa Lama 'Luka' Ini Sembuh? Retrieved
February 28, 2021, from
https://www.cnbcindonesia.com/market/20190706110209-17-83121/kisah-tps-food-berap
a-lama-luka-ini-sembuh