GOOD CORPORATE

GOVERNANCE
Akuntansi Untuk Ahli Hukum
Fakultas Hukum Universitas Indonesia

Rosewitha Irawaty
 Meaning of Corporate Governance
u Corporate Governance is the process
and structure used to direct and
manage the business and affairs of the
company towards enhancing business
prosperity and corporate accountability
with ultimate objective of realizing long
term shareholder value, whilst taking
into account the interest of other
stakeholders.

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 The Purpose of Corporation

u The Agency Problem

u The Purpose of Corporation:

- Primacy of shareholders interest &

enhancement of shareholder value

VS

- Stakeholder theory

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 Why Corporate Governance
Matters in Indonesia?
u Protection to the right of shareholders
u The right of stakeholders are fully taken into account
and does not elaborate
u To reduce high risk investment in the country
u Investors are willing to invest in well-governed
company
u Companies with good CG will perform better over the
time
u Good CG means of limiting or reducing the risk that a
company is exposed
u The Investors (especially foreign investors) think good
CG matters.

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Why Good Corporate Governance
Matters for a Company in Indonesia

u Family-owned Public Listed Company?

u Fresh Start After Debt Restructure?
u Attract New Investor?
u Equitable Treatment to Shareholders?
u Others?

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 STRUCTURE OF CORPORATE
GOVERNANCE
Stock Exchange
Listing
Requirements &
Statements of
Accounting
Practice

Legal Regulation
Codes of
conduct
Guidelines
Statements of
Best Practice

Business
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 Traditional Corporate Governance
u Whether a company has its traditional
corporate governance?
u Is traditional corporate governance
effective to deal with the need of the
investor, public and stakeholders?
u Whether a company need an inclusive
corporate governance?

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 Basic Principles of GCG
u Transparency
u Independence

u Accountability

u Responsibility

u Fairness

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 Indonesian Code of Good
Corporate Governance
u The Rights of Shareholders
u Equitable Treatment of Shareholders
u The Role of Stakeholders in Corporate Governance
u Disclosure and Transparency
u The Responsibilities of Board
u The Role of Corporate Secretary
u Confidentiality
u Business Ethics and Corruption
u Donations
u Compliance With Health, Safety and Environmental
Protection Regulations Having the Force of Law
u Equal Employment Opportunities

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 Key Person in GCG
u Shareholders
u Board of Commissioners
u Directors
u Managers
u Corporate Secretary
u Committee Audit
u Internal Control Unit
u Team for implementation of GCG

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 Approach for Good Corporate
Governance

u The Compliance Approach

u The Best Practice Approach
u The Empowerment Approach
u The Stakeholder Approach

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 Approach in Implementation of
Good Corporate Governance
u Functional Approach
(creation of a functional department to
spearhead the establishment and
maintenance of good governance practices)

u Collegiate Approach
(establishing effective corporate governance
is spearhead by the board itself and
involves all directors equally in the process)

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 Code of Conducts
(codes of ethics, statements of business principles, business practice)

u Enhance the company’s reputation for fair and

responsible dealing
u Help to maintain high standards of behavior
throughout the organization
u Give all employee a clear idea of what the
company is setting out to do and how it will do
u Help to develop pride among staff and to give a
focus to the organization as a whole
It is a statement of the company’s own
values.

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 Elements Code of Conducts
u A general statement signed by the chairman and/or the
chief executive officers emphasizing the board’s, and
management’s, commitment to the code. It may include
an overall statement of the company’s objectives, a
mission statement or a summary of the company’s basic
philosophy.

u A section dealing with responsibilities to shareholders and

the financial community generally. It may include
statements on:

• Disclosure of information
• accounting policies and practices
• insider trading
• conflict of interest

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 Elements Code of Conduct
u A section on relations with customer and consumers which may include
reference to:
Service to customer
A commitment to offering quality and fair value
Safety of goods
Product recall and related practices
Pricing policies and practices
Use of market power

u A section on relation with suppliers which may include reference to:

Procurement procedures
Tendering procedures used, including a commitment to fair and equal
treatment of tenders
Payment procedures

u A section on employment practices which may include reference to:

Occupational health and safety
Equality of employment opportunity
The right of all employees for pension
Policy and practice on alcoholism and drug dependence

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 Elements Code of Conduct
u A section on responsibilities to the community which may include
references to:
Environmental policy
Support for community activities
Policy and practice on donations

u A section on personal conduct which may include reference to:

Bribery, inducements and commissions
Policy on the giving and receiving of gifts and entertainment
Use of privileged information
The handling of conflict of interest
The misuse of company assets and resources
Personal conduct outside hours of work, including outside employment

u A section on the monitoring of compliance and the means to be used in

ensuring compliance.

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 Implementation of Good Corporate
Governance

u Commitment of the Board (Commissioners & Directors)

u Key Persons’ knowledge and understanding on the GCG
u Mapping on the practice of Good Corporate Governance
u Introduce Voksel’s Code of Conducts
u Prepare Board Manual on the GCG
u Training GCG to top and senior member of management
u Implementation of GCG in any sector of the company
u Audit and assessment on the implementation of GCG
u Continuous Improvement

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 A PROBLEM OF DISCLOSURE
OECD Principles:
Section IV: Disclosure and
Transparency
The corporate governance framework
should ensure that timely and accurate
disclosure is made on all material matters
regarding the corporation, including the
financial situation, performance,
ownership and governance of the
company.

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 OECD Principles
u A. Disclosure should include, but not limited to, material information
on:
1. The financial and operating results of the company.
2. Company objective
3. Major share ownership and voting rights
4. Members of the board and key executives, and their remuneration.
5. Material foreseeable risk factors
6. Material issues regarding employees and other stakeholders
7. Governance structures and policies

u B. Information should be prepared, audited and disclosed in accordance

with high quality standards of accounting, financial and non-financial
disclosure, and audit

u C. An annual audit should be conducted by an independent auditor to

provide an external and objective assurance on the way in which
financial statements have been prepared and presented.

u D. Channels for disseminating information should provide for fair, timely

and cost-efficient access to relevant information by users

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 Indonesian Code of Good Corporate
Governance: Disclosures and Transparency

u Under Indonesian code, a company shall disclose

material information through its annual and
financial statements to shareholders and the
relevant government authorities in accordance
with the prevailing regulations, in a timely,
accurate, understandable and objective manner.
u The Indonesian code stresses also the importance
of materiality in the disclosure of information and
other sensitive issues in the information and also
information regarding implementation of the
principles of good corporate governance

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 THE KEY POINTS:
u GOOD CORPORATE GOVERNANCE

u LEGAL AND REGULATORY FRAMEWORK

u LAW ENFORCEMENT

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 Environment, Social &
Governance (ESG)
u a set of standards that refers to the three main
criteria in measuring sustainability (environment,
social and governance.
u ESG is often used in business as a key metric in
making investment decisions and also serves as a
reference for companies reporting the impacts of
their business.
u ESG has become a globally recognized
consideration in making investment decisions and
is increasingly becoming the focus of companies’
strategic and operational agendas.

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 Three Criteria to measure
sustainability
u Environment à Businesses examine how their activities
affect the environment, and how they can actively play their
part as environmental stewards
u Social à Businesses consider their reputation and
relationship with stakeholders, such as local communities,
suppliers, customers, employees, and affiliated parties, and
how they can create a positive impact for their conditions and
welfare.
u Governance à Businesses maintain good governance

principles to ensure going concern.

the three criteria of ESG are highly used in investment analysis,
processes and decision-making.

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The End