Awareness of GCG improves, but lacks public support
Awareness of GCG improves, but lacks public support
Sudibyo M. Wiradji
The Jakarta Post
Jakarta
The implementation of good corporate governance (GCG)
practices in Indonesia has shown positive progress since its
introduction five years ago, despite the lack of support from the
government and the general public.
According to the National Committee for Corporate Governance
(NCCG), a number of GCG principles have now become mandatory for
publicly listed companies.
"When it was introduced here in 1998, GCG was conceived only
as 'knowledge', but now many companies have applied GCG
principles in their business practices," NCCG chairman Nyoman
Tjager said.
The former senior official of the Capital Market Supervisory
Agency (Bapepam) said that all public companies were obliged to
adopt GCG principles through a regulatory approach.
Among the mandatory GCG practices for public companies are the
appointment of an independent commissioner, an independent
director and an auditing committee.
"Almost all of the companies listed on the local stock
exchanges have appointed an independent commissioner to their
supervisory board since the introduction of the GCG principles in
Indonesia," Nyoman added.
The GCG principles are generally defined as a set of rules
that define the relationship between shareholders, managers,
creditors, the government, employees and other internal and
external stakeholders in regards their rights and
responsibilities.
These principles guarantee the rights of shareholders; the
equitable treatment of shareholders; the role of stakeholders;
the timely and transparent delivery of information on all matters
material to company performance, ownership and stakeholders, as
well as the responsibilities of the board and management; the
supervision of the management and the accountability to the
company and shareholders.
Applying GCG practices have long-term benefits for companies,
such as easier access in raising capital, a lower cost of
capital, improved business performance and a good impact on share
prices.
In Indonesia, the GCG concepts were introduced in 1998 at the
peak of the country's economic crisis. Poor GCG practices and
widespread corruption in the government partly contributed to the
economic crisis.
Nyoman said the government has also required state-owned
companies to apply the GCG concept to their activities,
especially those principles related to transparency and
supervision.
"Based on a recent assessment conducted on 16 state-owned
companies, it can be concluded that there is a growing awareness
among state company executives about the benefits of applying GCG
principles," he said.
Nyoman, who is now a senior official at the office of the
state minister of state enterprises, said that NCCG had produced
the Code for Good Corporate Governance in Indonesia.
He acknowledged that the lack of government and public support
impeded the flourishing of GCG in Indonesia, for example, as seen
in the existence of red tape at government offices.
He said GCG should run parallel to public governance in the
sense that each party in the public sector should also perform
its role, function and task according to good governance.
In the context of regional authority, for instance, local
regents, governors and mayors should support companies wishing to
operate a business in their areas by simplifying the bureaucratic
procedure. "In return, the company concerned should also conduct
community development activities," he said.
Executive director of the Indonesian Institute for Corporate
Governance (IICG) Dadi Krismantono shared Nyoman Tjager's views,
saying that the companies' full commitment to implementing a GCG
system would rely heavily on the macro-environment and thus, also
required the government to apply good governance.
Implementing a GCG system cannot be separated from the
environment where companies operate. "How can a company implement
a GCG system properly when the macro-sector is not conducive to
the system," he said.
The widespread red tape at the government level, for instance,
has caused many companies to doubt whether they could adopt the
GCG principles in their business practices, he said.
At the regulatory level, for instance, many public companies
have questioned Bapepam's lack of consistency regarding the
sanctions it imposed on public companies found to be in violation
of the regulation.
It is thus unfair to blame companies for not fully
implementing a GCG system in their businesses. "Both the
companies and the government should apply governance," he said.
The latest survey on GCG ratings by the Indonesian Institute
for Good Corporate Governance (IICG) disclosed that only a few
public companies that implement GCG were fully aware about the
benefits of GCG.
"Most public companies implement the GCG because they are
obliged to do so," he said.