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Specifics of Corporate Governance in Indonesia

Such as those in the banking, power, mining, oil and gas, post and telecommunications, railways, and shipbuilding sectors, several significant sectors of Indonesia's economy continue to be either State-controlled or significantly dominated by entirely State-owned businesses (SOEs). Many SOEs begin as small, privately held businesses that are either owned by a single, powerful shareholder, by members of a family, or by a very small group of owners. The majority of controlling shareholders are also members of the board of directors and serve as the company's president directors. Weak corporate governance systems are frequently the outcome of failure to separate ownership and control. Another corporate governance issue that must be addressed is poor consolidated accounting, or even the absence of it. The ICL of 1995 and the Law on SOEs of 2003 first exposed Indonesia to the present Board of Commissioners and Board of Directors concepts. The oversight procedures established by the AoA are nevertheless frequently disregarded by boards of directors. Furthering economic progress is severely hampered by a lack of corporate governance experience.

Indonesia initially regulated the Limited Liability Company in 1848. Through the 1967 Foreign Investment Law, foreign investment in Indonesia was initially permitted. Indonesia's legislative and regulatory environment for corporate governance has significantly strengthened during the last five years. ICL and other laws and regulations that apply to a particular industry are required to be followed by businesses in Indonesia. ICL permits, for instance, the election of members of the Board of Commissioners and Board of Directors by a limited liability company, and the election of the President Director and President Commissioner by the GMS, respectively¹.The Institute of Chartered Certified Market Accountants (ICC) and the Indonesian Institute of Company Directors jointly publish An Introduction To Corporate Governance Framework in Indonesia (IOC). ICL offers a complete collection of official directives, legislation, and regulations² for businesses in Indonesia.