SOEs should have audit committee to promote trust

SOEs should have audit committee to promote trust

JAKARTA (JP): An audit committee should be established in
state owned enterprises (SOEs) to help commissioners promote
practices of good corporate governance, according to a noted
executive.

Erry Riyana Hardjapamekas, the president of publicly listed PT
Timah, said here on Wednesday that the establishment of an audit
committee was important in order to improve the image of the
state companies whose operations were often abused by senior
government officials.

He also said promoting the image of state companies through
the implementation of good corporate governance was needed to
ensure the success of privatization.

"Good corporate governance should be implemented immediately,
including the formation of an audit committee. Otherwise no
investors would be interested in buying their shares," he said,
in a seminar on the implementation of good corporate governance
in state owned companies.

This year, the government plans to divest part of its
ownership in some 16 state-owned enterprises and expects to raise
about Rp 6.5 trillion (US$607 million) from privatization to help
cover the state budget deficit.

According to Erry, the committee should be led by an
independent commissioner in the company with several professional
members in order to avoid any conflicts of interest.

"The audit committee's activities should not be interfered
with by other commissioners, directors, or other interests," he
said.

He said that an audit committee would have the task of
supervising company directors as well as assessing the work of
internal auditors.

The government issued a decree in 1999 to encourage SOEs to
establish audit committees but it has yet to get a good response.

According to him, Timah has established an audit committee,
which is led by an independent commissioner, with two
professional members from outside the company.

Timah also required its staff from the top executives to those
three layers below them to report their wealth as part of the
promotion of good corporate management in the world's largest tin
producer.

"Such moves have significantly helped improve the performance
of Timah management," he said.

Mantaris Siagian, the secretary of the directorate general for
the supervision of state enterprises, said that the government
would reapply the fit and proper test in the appointment of the
executive board of SOEs.

He said that the test would be carried out on the 10 best
candidates selected from staff one level below the directors. The
Ministry of Finance had also established a special team to
conduct the test, he added.

The fit and proper test was introduced in 1998, following the
establishment of a state ministry for the supervision of state
enterprises during the administration of former president
Habibie. The test was however abandoned after the government
dissolved his office and integrated it into the Ministry of
Finance last year. (05)