Advertorial: PT Aneka Tambang

Advertorial: PT Aneka Tambang Publication: July 26 - Friday

Antam committed to good corporate governance

The recent string of financial scandals in the United States has clearly taught a valuable lesson to every company throughout the world on the importance of good corporate governance.

Market valuations are plummeting as investors direct funds away from equity rather than risk buying stock in corrupt and dishonest companies. Investors are wary of the next corporate scandal brought on by poor governance, and currently no amount of positive news of economic recovery will entice them back.

This negative sentiment towards the stock market has spilled over to Asia, although the fallout has been far less pronounced as most investors already discount the risk of corruption, false reporting, and non-conducive factors such as a poor judicial system.

In Asia, finding a company which is run using effective decision-making in consideration of the best interests of the company and its stakeholders can be difficult. This is also true of Indonesian companies, particularly state-owned enterprises.

Most people see them as corrupt and lacking transparency. However, for state-held diversified mining company PT Antam Tbk (Antam), good governance is a top priority and in terms of transparency, the company meets international standards.

As would-be equity investors intensify the search for high standards of governance, and begin to look more towards Asia, those companies with strong fundamentals and good governance have an opportunity to see their market valuation increase.

This is supported by a survey in the most recent McKinsey Quarterly, which states, "In emerging as in developed markets, companies that adopt strict corporate-governance practices are being rewarded by institutional investors."

Antam made improving corporate governance a priority when it listed on the Jakarta Stock Exchange (JSX) in 1997 and then dual- listed on the Australian Stock Exchange (ASX) in 1999. The challenges included implementing a more stringent regime of disclosure and transparency.

According to one Australian banker: "We do recognize that Antam's reporting and transparency has improved over the six years of our relations. This level of reporting gives us, as the lender, a greater confidence in our understanding of Antam's business".

At the end of 2001, Ernst & Young completed a three-month evaluation and assessment of Antam's governance efforts. The evaluation considered 12 key elements to evaluate the pillars of good corporate governance. The majority of Antam's elements were rated as "needs improvement" but none were seen as "poor".

Antam's external reporting was rated "good" and in terms of continuous disclosure, on par with other international mining firms.

Antam's President Director D. Aditya Sumanagara says, "Antam is fully committed to becoming not only a company run according to the highest standards of corporate governance, but also recognized as such by the capital market and our shareholders".

According to Aditya, the improvement of corporate governance is needed not only to ensure long-term benefits for the company and shareholders but also to ensure that Antam is not only profitable but also transparent and responsible.

Antam's Corporate Secretary, Dohar Siregar, says, "The results of the evaluation should be viewed as an indicator of how far Antam has come on its path to good governance since its listing on the JSX in 1997."

And Antam's governance work will continue. In May this year, Antam became the only Indonesian-owned and incorporated company to be fully listed on a western stock exchange when its application was accepted to convert from a Foreign Exempt Listing to an ASX Listing. With the full listing, Antam must comply with all ASX listing rules and the company's governance should continue to improve.

The JORC code, which was developed on the ASX, is the international standard used for the disclosures of mining companies.

A well-known mining equity analyst says, "The need to meet ASX standards in reserves reporting under the JORC code means that Antam's reporting is consistent with international standards and thus its numbers are comparable with other international mining companies."

The fact that Antam's reporting meets the requirements of the ASX adds credibility to the information for third parties, he adds.

Antam's effort to improve corporate governance has shown benefits. To date in 2002, the JSX is the world's second best performing exchange, having increased 20% in Rupiah terms and 55% in US dollar terms. This year Antam has outperformed the JSX, by 13%. This is in line with the above mentioned McKinsey report which states, "surveys suggest that institutional investors will pay as much as 28 percent more for the shares of well-governed companies in emerging markets".

The next step for Antam will be the implementation of a corporate policy manual with emphasis on the audit, remuneration and nomination committees and the code of conduct. Improving governance will remain an ongoing priority to help improve performance and create sustainable profitability. Shareholders, employees, customers, suppliers, communities, governments, and especially now investors, demand it.