Applications of good corporate governance relating to shareholders, commissioners, and directors of limited liability companies in Indonesia
-
DOIhttp://dx.doi.org/10.21511/ppm.17(3).2019.33
-
Article InfoVolume 17 2019, Issue #3, pp. 410-420
- Cited by
- 1020 Views
-
203 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
This critical analysis seeks to explore the inclusivity and feasibility of the legal application of organizational governance principles related to limited liability companies (LLCs) in Indonesia, which are considered essential pillars of Indonesia’s economic stability. The investigators employed the non-probability purposive sampling to select 150 study participants from a population of 250 administrative panel members working in PT Bank Rakyat Indonesia and PT Bank Mandiri. Structured and semi-structured questionnaires were constructed and distributed online through emails. The subjects’ responses were coded manually, using the NVivo software for ease of analysis. The result showed that (1) 84.5% of participants believed that ineffective relationship building approaches, corruption, and inadequate information disclosure mechanisms among internal and external shareholders formed the main challenges to implementation of corporate governance principles in Indonesian LLCs, (2) 97.8% of the respondents believed the Indonesian Company Law (ICL) had achieved significant milestones in guiding the application of sound corporate governance principles by explicitly outlining the roles and responsibilities of stakeholders and providing sufficient protection for minority stakeholders, and (3) 78% of participants agreed that the ICL has introduced and reinforced critical rights and protections to shield shareholders from unfair regulations internally formulated by a company. In its findings, the investigation confirmed that poorly structured information sharing systems, fraud, and ineffective relationship building were the main factors that contributed to current inadequacies. 84.5% of the respondents believed that ineffective relationship building approaches, corruption, and inadequate information disclosure mechanisms among internal and external shareholders formed the main challenges, trends, and issues to the implementation of corporate governance principles in Indonesian LLCs. The study also confirmed that the implementation of GCG related legislations had reinforced the professional duties and obligations of stakeholders, alongside offering legal protections for minority business actors.
- Keywords
-
JEL Classification (Paper profile tab)K22, O16, G34
-
References57
-
Tables0
-
Figures0
-
- Al Daoud, K. A., Ismail, K. N. I. K., & Lode, N. A. (2015). The impact of internal corporate governance on the timeliness of financial reports of Indonesian firms: Evidence using audit and management report lags. Mediterranean Journal of Social Sciences, 6(1), 430.
- Annisa, N., & Kurniasih, L. (2012). Pengaruh corporate governance terhadap tax avoidance [The effect of corporate governance on tax avoidance]. Jurnal Akuntansi dan Auditing, 8(2), 123-136.
- Arevalo, J. A., & Aravind, D. (2011). Corporate social responsibility practices in India: approach, drivers, and barriers. Corporate Governance: The International Journal of Business in Society, 11(4), 399-414.
- Ashbaugh-Skaife, H., Collins, D. W., & LaFond, R. (2006). The effects of corporate governance on firms’ credit ratings. Journal of Accounting and Economics, 42(1-2), 203-243.
- Bals, L., & Tate, W. (2017). Transparency. In L. Bals & W. Tate (Eds.), Implementing Triple Bottom Line Sustainability into Global Supply Chains (pp. 90-155). Routledge, London, UK.
- Bernstein, S., & Cashore, B. (2012). Complex global governance and domestic policies: Four pathways of influence. International Affair, 88(3), 585-604.
- Bratton, W. W., & McCahery, J. A. (2002). Comparative corporate governance and barriers to global cross reference. In J. A. McCahery, P. Moerland, T. Raaijmakers & L. Renneboog (Eds.), Corporate Governance Regimes: Convergence and Diversity (pp. 23-54). Oxford University Press, Oxford, UK.
- Calder, A. (2008). Corporate Governance: A Practical Guide to the Legal Frameworks and International Codes of Practice. Kogan Page Publishers, London, UK.
- Carter, D. A., Simkins, B. J., & Simpson, W. G. (2003). Corporate governance, board diversity, and firm value. Financial Review, 38(1), 33-53.
- Chang, S. E. (2018). Indonesian Company Law. Routledge, Abingdon-on-Thames, UK.
- Chi, C. W., Hung, K., Cheng, H. W., & Lieu, P. T. (2015). Family firms and earnings management in Taiwan: Influence of corporate governance. International Review of Economics and Finance, 36, 88-98.
- Claessens, S., & Fan, J. P. H. (2002). Corporate governance in Asia: A survey. International Review of Finance, 3(2), 71-103.
- Claessens, S., Djankov, S., & Klingebiel, D. (2001). Financial restructuring in East Asia: halfway there? (SSRN Electronic Journal. Financial Sector Discussion Paper No. 3).
- Creswell, J. W., & Plano Clark, V. L. (2017). Designing and conducting mixed methods research. Sage Publications, California CA.
- Cuervo, A. (2002). Corporate governance mechanisms: A plea for less code of good governance and more market control. Corporate Governance: An International Review, 10(2), 84-93.
- Daily, C. M., Dalton, D. R., & Cannella, Jr. A. A. (2003). Corporate governance: Decades of dialogue and data. Academy of Management Review, 28(3), 371-382.
- Daniel, W. E. (2003). Corporate governance in Indonesian listed companies-A problem of legal transplant. Bond Law Review, 15(1), 345-375.
- Darmadi, S. (2013). Corporate governance disclosure in the annual report: An exploratory study on Indonesian Islamic banks. Humanomics, 29(1), 4-23.
- De Andres, P., & Vallelado, E. (2008). Corporate governance in banking: The role of the board of directors. Journal of Banking & Finance, 32(12), 2570-2580.
- Du Plessis, J. J., Hargovan, A., & Harris, J. (2018). Principles of Contemporary Corporate Governance. Cambridge University Press, Cambridge.
- Etikan, I., Musa, S. A., & Alkassim, R. S. (2016). Comparison of convenience sampling and purposive sampling. American Journal of Theoretical and Applied Statistics, 5(1), 1-4.
- Fan, J. P. H., & Wong, T. J. (2005). Do external auditors perform a corporate governance role in emerging markets? Evidence from East Asia. Journal of Accounting Research, 43(1), 35-72.
- Farrar, J. (2008). Corporate Governance: Theories, Principles and Practice. Oxford University Press, Oxford, UK.
- Gillespie, P. (2012). The challenges of corporate governance in Indonesian oil palm: opportunities to move beyond legalism? Asian Studies Review, 36(2), 247-269.
- Gilson, R. J. (2001). Globalizing corporate governance: Convergence of form or function. The American Journal of Comparative Law, 49(2), 329-358.
- Gourevitch, P. A., & Shinn, J. (2005). Political Power and Corporate Control: The New Global Politics of Corporate Governance. Princeton University Press, Princeton, NJ.
- Haniffa, R. M., & Cooke, T. E. (2005). The impact of culture and governance on corporate social reporting. Journal of Accounting and Public Policy, 24(5), 391-430.
- Honggowati, S., Rahmawati, R., Aryani, Y. A., & Probohudono, A. N. (2017). Corporate governance and strategic management accounting disclosure. Indonesian Journal of Sustainability Accounting and Management, 1(1), 23-30.
- Iu, J., & Batten, J. (2001). The implementation of OECD corporate governance principles in post-crisis Asia. Journal of Corporate Citizenship, 4, 47-62.
- Jao, R., & Pagalung, G. (2011). Corporate Governance, Ukuran Perusahaan, Dan Leverage Terhadap Manajemen Laba Perusahaan Manufaktur Indonesia. Jurnal Akuntansi Dan Auditing, 8(1), 43-54.
- Johnson, S., Boone, P., Breach, A., & Friedman, E. (2000). Corporate governance in the Asian financial crisis. Journal of Financial Economics, 58(1-2), 141-186.
- Joseph, C., Gunawan, J., Sawani, Y., Rahmat, M., Noyem, J. A., & Darus, F. (2016). A comparative study of anti-corruption practice disclosure among Malaysian and Indonesian Corporate Social Responsibility (CSR) best practice companies. Journal of Cleaner Production, 112(4), 2896-2906.
- Kaihatu, T. (2006). Good corporate governance dan Penerapannya di Indonesia. Jurnal Manajemen dan Kewirausahaan, 8(1), 1-9.
- Luo, X., Wang, H., Raithel, S., & Zheng, Q. (2015). Corporate social performance, analyst stock recommendations, and firm future returns. Strategic Management Journal, 36(1), 123-136.
- Mallin, C. A. (2011). Handbook on International Corporate Governance: Country Analyses. Edward Elgar Publishing, Cheltenham, UK.
- Mitton, T. (2002). A cross-firm analysis of the impact of corporate governance on the East Asian financial crisis. Journal of Financial Economics, 64(2), 215-241.
- Nasution, A. (2001). The meltdown of the Indonesian economy: Causes, impacts, responses, and lessons. ASEAN Economic Bulletin, 17(2), 148-162.
- Nasution, M., & Setiawan, D. (2007). Pengaruh corporate governance terhadap manajemen laba di industri perbankan Indonesia (26 p.). Simposium Nasional Akuntansi X. Makasar.
- Okpara, J. O. (2011). Corporate governance in a developing economy: barriers, issues, and implications for firms. Corporate Governance: The International Journal of Business in Society, 11(2), 184-199.
- Puspitaningrum, D., & Atmini, S. (2012). Corporate governance mechanism and the level of internet financial reporting: Evidence from Indonesian companies. Procedia Economics and Finance, 2, 157-166.
- Rama, M. D. (2012). Corporate governance and corruption: Ethical dilemmas of Asian business groups. Journal of Business Ethics, 109(4).
- Ramage, D. E. (2007). Indonesia: Democracy first, good governance later. Southeast Asian Affairs, 1, 133-157.
- Retno, R. D., & Priantinah, D. (2012). Pengaruh good corporate governance dan pengungkapan corporate social responsibility terhadap nilai perusahaan (Studi empiris pada perusahaan yang terdaftar di bursa efek Indonesia periode 2007–2010). Journal Nominal: Barometer Riset Akuntansi dan Manjemen Indonesia, 1(2), 84-103.
- Rosser, A., & Edwin, D. (2010). The politics of corporate social responsibility in Indonesia. The Pacific Review, 23(1), 1-22.
- Sari, M., Lubis, A.F., Maksum, A., Lumbanraja, P., & Muda, I. (2018). The influence of organization’s culture and internal control to corporate governance and its impact on state-owned enterprises corporate. Journal of Applied Economic Sciences, 13(3), 673-684.
- Sawicki, J. (2009). Corporate governance and dividend policy in Southeast Asia pre-and post-crisis. The European Journal of Finance, 15(2), 211-230.
- Siregar, S. V., & Utama, S. (2008). Type of earnings management and the effect of ownership structure, firm size, and corporate governance practices: Evidence from Indonesia. The International Journal of Accounting, 43(1), 1-27.
- Soesastro, H. (2003). Governance and the crisis in Indonesia In P. Drysdale (Ed.), Reform and Recovery in East Asia. London: Routledge.
- Waagstein, P. R. (2011). The mandatory corporate social responsibility in Indonesia: Problems and implications. Journal of Business Ethics, 98(3), 455-466.
- Wahyudin, A., & Solikhah, B. (2017). Corporate governance implementation rating in Indonesia and its effects on financial performance. Corporate Governance: The International Journal of Business in Society, 17(2), 250-265.
- Walter, A. (2008). Governing Finance: East Asia’s Adoption of International Standards. Cornell University Press, Ithaca, NY.
- Wu, X. (2005a). Corporate governance and corruption: A cross‐country analysis. Governance, 18(2), 151-170.
- Wu, X. (2005b). Political institutions and corporate governance reform in Southeast Asia. In K. L. Ho (Ed.), Reforming Corporate Governance in Southeast Asia: Economics, Politics and Regulation (pp. 16-37). Institute of Southeast Asia Studies (ISEAS) Publications, Singapore.
- Wulandari, N. (2006). Pengaruh indikator mekanisme corporate governance terhadap kinerja perusahaan publik di Indonesia. Focus Ekonomi, 1(2), 120-136.
- Xie, B., Davidson III, W.N., & DaDalt, P. J. (2003). Earnings management and corporate governance: The role of the board and the audit committee. Journal of Corporate Finance, 9(3), 295-316.
- Young, M. N., Ahlstrom, D., & Bruton, G. D. (2004). The globalization of corporate governance in East Asia: The “transnational” solution. Management and International Review, 31-50.
- Zattoni, A., & Cuomo, F. (2010). How independent, competent and incentivized should non‐executive directors be? An empirical investigation of good governance codes. British Journal of Management, 21(1), 63-79.