Implementation of GCG still a long way off

Implementation of GCG still a long way off

Dadan Wijaksana, The Jakarta Post, Nusa Dua, Bali

The country's die-hard and endemic corruption, collusion and
nepotism have become major hurdles to the implementation of good
corporate governance (GCG) principles in the public and private
sectors, experts have said.

Failure in implementing GCG principles also contributed to the
current slow pace of economic recovery, they added.

GCG requires transparent, independent, accountable and fair
management.

Chairman of the National Commission for Corporate Governance
(NCCG) I Nyoman Tjager said that compared with other countries in
the region, Indonesia's performance in implementing GCG
principles had been among the worst.

He was speaking while opening a two-day seminar on GCG in the
resort island of Bali last week.

A survey of investor opinion by international consultancy firm
McKinsey put Indonesia at the bottom of the list in Asia in terms
of implementation of GCG principles, according to Nyoman.

Furthermore, Indonesia ranked 88th of the 99 sample countries
surveyed by Berlin-based Transparency International on its
corruption perception index (CPI). Based on the survey, Indonesia
stood only slightly above Bangladesh, Nigeria and Uganda.

Erry Firmansyah, president director of the Jakarta Stock
Exchange, cited both external and internal factors that have
prevented the implementation of GCG in the country's private
sector.

"On external factors, reforms are still inadequate, especially
those in public governance, law enforcement and macro policies
and regulations," Erry said in the seminar.

"And internally, the typically family-oriented businesses of
the country have also acted as a constraint on GCG implementation
in the country."

Executive secretary of the office of the state minister of
state-owned enterprises Bacelius Ruru agreed that the family-
oriented nature of the country's companies was a factor behind
the slow progress of GCG implementation in the country.

Bacelius added that poor GCG practices had not only prevented
companies from achieving their corporate goals, but worse still,
were also prone to fraud.

Recent collapses of American giant companies, including Enron,
WorldCom, Xerox, Merck and many others, were partly attributable
to violations of GCG principles, he added.

Bacelius and Erry agreed that an intensified effort to improve
business practices based on GCG principles was badly needed now,
given that Indonesia had entered a variety of free, borderless,
trade agreements.

So far, they said, the government has introduced some
regulations to promote prudence in corporations, in line with
international standards, to gradually establish GCG in the
country.

As far as publicly listed companies were concerned, for
example, each was required to have at least 30 percent of its
board as independent directors and to establish an audit
committee within the company.

Such a committee would be tasked to independently review major
issues regarding the company's internal control and financial
activities. Independence in this case means it would have no
connection with the company's majority shareholders and
management.

The government, as majority shareholder, has also applied a
similar ruling to publicly listed state enterprises.

But for those that have not yet gone public, the percentage of
independent directors is lower, at 20 percent.

"The full implementation of GCG practices is still a long way
off, but with continued and comprehensive efforts from all
stakeholders, I'm optimistic that we can get there someday,"
Nyoman said.