CORPORATE GOVERNANCE IN INDONESIATHE HISTORY OF GCG AND ITS DEVELOPMENT IN INDONESIA
- January 22, 2016
- Posted by: Pratama Indomitra
- Category: Business plans
It started from the suggestions for improvement of recordation regulations on Jakarta Stock Exchange (currently named Indonesia Stoch Exchange) that governed the regulations for emitents recorded on Jakarta Stock Exchage that obligated to appoint Independent Commissionaire and to establish Audit Committee in 1998, Corporate Governance (CG) started known to all public companies in Indonesia.
Subsequently, government of Indonesia signed the Letter of Intent with International Monetary Fund (IMF) that encouraged to make a more condusive climate for the implementation of CG. Indonesia’s government founded a special institution named National Committee concerning the Corporate Governance Policy (Komite Nasional mengenai Kebijakan Corporate Governance/KNKCG) through Decree of Coordinating State Minister for the Economic, Financial, Industry Number: KEP-31/M.EKUIN/06/2000. The main duties of KNKCG are to formulate and prepare the national policy recommendation regarding GCG (Good Corporate Governance), as well as to initiate and monitor the improvement in the field of Corporate Governance in Indonesia.
Through KNKCG, the General Guideline of GCG appeared for the first time in 2001, CG Guideline for Banking in 2004 and Guideline for Independent Commissioner and Guideline for Formation of Effective Audit Committee.
In 2004, Government of Indonesia expanded the duty of KNKCG through Decree Letter of Coordinating Minister for Economic of Republic of Indonesia No. KEP-49/M.EKON/II/TAHUN 2004 regarding the formation of National Committee of Governance Policy (KNKG) that expanded the scope of duty concerning the Governance Socialization not only in corporation sector, but also in public service sector.
In 2006, KNKG completed the CG Guideline that has been published in 2001 to be appropriate with its development. In GCG Guideline in 2001, several points prioritized were related to the disclosure and the transparency. Whereas, several points completed in Generaal Guideline of GCG in 2006 are as follows:
- Clarifying the roles of three supporting pillars (country, business world, and society) in creating the condusive situation to implement GCG;
- Principle Guideline of Business Ethic Implementation and Code of Conduct;
- Completeness of Company Organization such as Supporting Committee for Board of Director (Audit Committee, Risk Policy Committee, Nomination and Remuneration Committee, Committee for Corporate Governance Policy;
- Company managerial function by Director that involves five things in the implementation of GCG, namely management, risk management, internal control, communication, and social responsibility;
- The company’s obligation to other stakeholders besides the shareholder such as employee, business partner, and society as well as product and service users;
- Statement of GCG implementation;
- Practice guideline for the implementation of GCG Guideline.