Shake-up at Semen Gresik

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.