Shake-up at Semen Gresik

The owners of publicly-listed Semen Gresik finally moved decisively to stop the rot that has been eating away at their cement company since last year. An extraordinary shareholders meeting of the government-controlled company voted on Tuesday to oust its chief executive officer and chairman before their tenures end, in 2005 and 2003 respectively.

The drastic move is urgently required to prevent further damage caused by street demonstrations and labor strikes staged by employees who have opposed Semen Gresik's privatization.

Some shareholders made a last minute attempt to abort the meeting by invoking a provision of the Limited Liability Company Act that stipulates that directors or commissioners who are to be fired before their tenure ends shall be given a chance to defend themselves. But common sense finally prevailed as only 0.006 percent of the 81.07 percent voting shares represented at the meeting voted against the shake up of the management and supervisory boards.

The shareholders-- government with 51 percent, the investing public with 23.46 percent and Cemex Asia Holding Ltd with 25.53 percent-- held president Urip Timuryono and chief commissioner Setiadi Dirgo responsible for the employee revolt which disrupted production and caused inefficiencies at the company in December and January.

One cannot help but strongly suspect that both the president and chairman, if not sponsoring, gave tacit support to the employees who demonstrated and went on strike in a bid to sabotage the government's decision to sell its stake to Cemex and, by so doing, these corporate officers miserably failed to defend the shareholders' interests.

How could Semen Gresik employees have spent their paid time conducting wild demonstrations and labor strikes, and even harassing and threatening Cemex executives, and not been firmly dealt with? How could the employees leave their jobs and travel to Jakarta at Semen Gresik's expense, had it not been for the support of management?

Even more questionable have been the motives for the employee revolt, because what they have demanded has nothing to do with labor rights, employee welfare or future career prospects. The movement smacked of a fight by management to maintain their positions against the interests of the owners, who hired the president and chairman in the first place.

The government itself, as the majority owner, has decided to divest its entire stake in the company for its long-term good, and the employees and the entire management team should fully support the decision as long as it is lawfully executed and the deal does not harm the public interest or violate employee rights.

There would be lawlessness and chaos in the corporate world if employees were allowed to revolt against the decisions of the owners of the companies that employed them. Succumbing to the employee revolt will kill the government program to sell 24 companies this year, seven of which are scheduled to be privatized in the first semester alone.

Employees can be, and in fact are, encouraged to contribute ideas and suggestions for better corporate performance but owners' decisions are beyond the authority of workers to meddle in.

The employee revolt in December and January caused Semen Gresik an estimated Rp 100 billion (US$9.5 million) in losses from production disruptions and export cancellations, not to mention the damage done to its image. The estimated losses alone are already as large as 30 percent of Semen Gresik's net profits in 2000. Just look at how the Semen Gresik share price on the Jakarta stock exchange fell from Rp 7,500 before the employee revolt to as low as Rp 5,250 in December and January.

The new president and chairman admittedly will face an uphill battle reestablishing a peaceful working climate as the group of vested interests that wants to maintain Semen Gresik as their cash cow would be unlikely to behave as good losers. They have to work hard to sell the corporate policy decisions already adopted by the shareholders, reeducate employees on exactly what their rights are, and inform shareholders of their authority.

Their next task, which is certainly no easier, is to change the management of Semen Gresik's subsidiaries, Semen Padang in West Sumatra and Semen Tonasa in South Sulawesi, who have also openly supported employee revolts against the government's divestment decision.

The decision at the Semen Gresiks' shareholders meeting is a strong signal that the government will act firmly on policy measures it perceives to be right and accountable. Hopefully, the government will be equally resolute in pushing ahead with Semen Gresik's privatization.