Corporate Governance and Corporate Compliance

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Corporate governance and

corporate compliance
Etbis
Pengertian dan manfaat
Corporate governance is described as a set of

relationships between the management, board of
directors, stakeholders and shareholders of a company.
Corporate governance creates a structure which helps company in:
• setting objectives
• running daily operations
• considering the interests of their stakeholders
• ensuring the company operates in a safe and sound manner
• complying with relevant laws and regulations
• protecting the interests of its customers..
There are a number a techniques and strategies that are required
to create a sound corporate governance infrastructure. These are:
• the corporate values, codes of conduct and other standards of

appropriate behavior and the system used to ensure compliance
with them
• a well-articulated corporate strategy against which the success
of the overall enterprise and the contribution of individuals can be
measured
• the clear assignment of responsibilities and decision-making
authorities, incorporating a hierarchy of required approvals from
individuals to the board of directors
• establishment of a mechanism for the interaction and
cooperation among the board of commissioners, board of
executive directors, senior management and the auditors
• strong control systems, including internal and external audit
functions, risk management functions independent of business
lines, and other checks and balances
• special monitoring of risk exposures where conflicts of interest

are likely to be particularly great, including business relationships
with borrowers affiliated with the company, large shareholders,
senior management, or key decision-makers within the company
• financial and managerial incentives to act in an appropriate

manner. These should be offered to senior management,
business line management and employees in the form of
compensation, promotion or other forms of recognition.
• appropriate information flows internally and to the public.

Struktur Tata Kelola
The structure of corporate governance in companies has many

variations depending on local customs, legal restraints and the
historical development of each company.
Although there is no single structure that can be prescribed as

ideal, there are important governance issues that must be
addressed in order to ensure adequate checks and balances are
built into the structure.
8.1 Principles of corporate governance for companys
8.1.2 Corporate governance structures
These are:
• oversight by the board of commissioners, board of executive

directors or supervisory board
• oversight by individuals not involved in the day-to-day running of

the various business areas
• direct line supervision of different business areas
• independent risk management and audit functions
• key personnel are ‘fit and proper’ for their jobs
• regular reporting.
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8 Corporate governance for

companys
8.2 Implementation of sound corporate governance

8.2.1 Establishing strategic objectives and a set of corporate values
It is important for a company to set clear strategic

objectives and a corporate ‘ethos’. Equally important is
the communication of such policies to all areas of the
company.

A company that does not have strategic objectives will
find it difficult to manage its activities because there will
be a lack of focus in the use of its resources. By
establishing a corporate ethos, the company will be able
to conduct its business according to clearly defined
values.
8.2.1 Establishing strategic objectives and a set of corporate values
The company’s set of values should be applied to all areas of the

company including the board of directors. They should encourage
the reporting of problems in a timely fashion and prohibit corruption
and bribery both internally and externally.
These values should be supported by policies to prevent situations

that can challenge the operation of good corporate governance.
A clear policy reinforces a company’s values in dealing with such

situations.

The board of directors should ensure that systems and processes
are in place to monitor and report compliance with its policies.
8.2.2 Clear lines of responsibility and accountability
To be effective in monitoring and controlling the activities

of a company the board of directors must set clear lines
of authority and responsibility. This process should
include the directors themselves.
All areas of business activity should have a clear and unequivocal

line of accountability to ensure that any problems will be subject to
a focused response from management.
Personnel should also be clear as to the level of authority they hold

and the level of authority of those with whom they interact.

Clear lines of accountability provide a stable environment for the
daily management of the company’s operations and allows for an
efficient decision-making process.
8.2.3 Responsibilities of the board of directors
The board of directors (or its equivalent) has the ultimate

responsibility for the management and performance of a company.
Therefore, it is important that directors:
• are qualified for the posts they hold

• understand their role within the corporate governance framework
• are not subject to undue influence from internal or external
sources.
The directors should ensure they receive sufficient information to

judge the performance of the management of the company
independently of the view of management, shareholders or
government.
A strong board of directors will:
• understand their oversight role and their “duty of loyalty” to the

company and its shareholders
• serve as a ‘checks and balances’ function in relation to the day-

to-day management of the company
• feel feel empowered to question company management and are

comfortable insisting upon straightforward explanations from
company management
• recommend sound practices learnt from other situations
• provide dispassionate advice.

A strong board of directors will:
• not be overextended
• avoid conflicts of interest in their activities with, and

commitments to, other organizations
• meet regularly with senior management and internal auditors to

establish and approve policies, establish communication lines
and monitor progress toward corporate objectives
• absent themselves from decisions when they are incapable of

providing objective advice
• not participate in day-to-day management of the company.

8.2.3 Specialized committees
In addition specialized committees may be created to allow

appropriate board members to have oversight of specific areas.
Committees may cover areas such as:

• risk management - providing oversight of the senior
management’s activities in managing credit, market, liquidity,
operational, legal and other risks of the company
• audit - providing oversight of the company’s internal and external
auditors and ensuring that management is taking appropriate
corrective actions in a timely manner to address control
weaknesses, and non-compliance with policies, laws and
regulations
• remuneration – providing oversight of compensation of senior
management and other key personnel and ensuring that
compensation is consistent with the company’s culture, objectives,
strategy and control environment.
8.2.4 Senior management oversight
A key element in good corporate governance is the group

of officers responsible for running the company: the
senior management. The senior management must have
comprehensive oversight of their line managers similar to
the board of directors’ oversight function.
Key/strategic management decisions should be made by more

than one manager. In addition, the following management
situations should be avoided:

• senior managers who are overly involved in business line
decision-making
• senior managers who are assigned an area to manage without
the necessary prerequisite skills or knowledge
• senior managers who are unwilling to exercise control over
successful, key employees (such as traders) for fear of losing
them.
8.2.5 The role of internal and external auditors
Internal and external auditors play a key role within the corporate
governance framework.
The board should recognize that they a critically important agents

of the board.
The work of the auditors should be used to validate the information

provided by senior management.
8.2.5 The role of internal and external auditors
This process can be enhanced by the board:
• recognizing the importance of the audit process and

communicating this importance throughout the company
• taking measures that enhance the independence and stature of
auditors
• utilizing, in a timely and effective manner, the findings of auditors
• ensuring the independence of the head auditor through their
reporting to the board or the board's audit committee
• engaging external auditors to judge the effectiveness of internal
controls
• requiring timely correction by management of problems identified
by auditors.
8.2.6 Compensation policy
It is important that the board of directors develop a compensation

policy that reflects the company’s culture, objectives, strategy and
control environment. The board should set the compensation for
senior management and other key personnel.

The compensation scheme should be designed to motivate senior
management to act in the best interests of the company. It should
discourage short term performance measures that may leave the
company exposed to long term risks.
Salary scales should be set that personnel are not overly

dependent on short term performance in relation to their total
remuneration package.
8.2.7 Transparency
It is difficult for stakeholders, market participants and the general

public to judge the effectiveness of the board of directors and
senior management if there is a lack of transparency with regard to
the company’s structure and objectives. Sound corporate
governance can be enforced by a high level of transparency and
therefore public disclosure should include:
• board structure (size, membership, qualifications and
committees)
• senior management structure (responsibilities, reporting lines,
qualifications and experience)
• basic organizational structure (line of business structure, legal
entity structure)
• information about the incentive structure of the company
(remuneration policies, executive compensation, bonuses, stock
options)
• nature and extent of transactions with affiliates.
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Company

Corporate governance and

Corporate governance is described as a set of

Corporate governance creates a structure which helps company in:

• the corporate values, codes of conduct and other standards of

• special monitoring of risk exposures where conflicts of interest

• financial and managerial incentives to act in an appropriate

• appropriate information flows internally and to the public.

The structure of corporate governance in companies has many

Although there is no single structure that can be prescribed as

8.1.2 Corporate governance structures

• oversight by the board of commissioners, board of executive

• oversight by individuals not involved in the day-to-day running of

• direct line supervision of different business areas

• independent risk management and audit functions

• key personnel are ‘fit and proper’ for their jobs

8 Corporate governance for

8.2 Implementation of sound corporate governance

8.2.1 Establishing strategic objectives and a set of corporate values

It is important for a company to set clear strategic

8.2.1 Establishing strategic objectives and a set of corporate values

The company’s set of values should be applied to all areas of the

These values should be supported by policies to prevent situations

A clear policy reinforces a company’s values in dealing with such

8.2.2 Clear lines of responsibility and accountability

To be effective in monitoring and controlling the activities

All areas of business activity should have a clear and unequivocal

Personnel should also be clear as to the level of authority they hold

8.2.3 Responsibilities of the board of directors

The board of directors (or its equivalent) has the ultimate

• are qualified for the posts they hold

The directors should ensure they receive sufficient information to

8.2.3 Responsibilities of the board of directors

A strong board of directors will:

• understand their oversight role and their “duty of loyalty” to the

• serve as a ‘checks and balances’ function in relation to the day-

• feel feel empowered to question company management and are

• recommend sound practices learnt from other situations

• provide dispassionate advice.

8.2.3 Responsibilities of the board of directors

A strong board of directors will:

• avoid conflicts of interest in their activities with, and

• meet regularly with senior management and internal auditors to

• absent themselves from decisions when they are incapable of

• not participate in day-to-day management of the company.

8.2.3 Specialized committees

In addition specialized committees may be created to allow

8.2.4 Senior management oversight

A key element in good corporate governance is the group

Key/strategic management decisions should be made by more

8.2.5 The role of internal and external auditors

The board should recognize that they a critically important agents

The work of the auditors should be used to validate the information

8.2.5 The role of internal and external auditors

This process can be enhanced by the board:

• recognizing the importance of the audit process and

8.2.6 Compensation policy

It is important that the board of directors develop a compensation

Salary scales should be set that personnel are not overly

It is difficult for stakeholders, market participants and the general

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