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Managing a corporation cannot be done arbitrarily and without clear and transparent rules. Bad corporate governance is perceived by the public as the root cause of the economic crisis in Asia and Latin America. Therefore, good governance or Good Corporate Governance in managing a company is vital.
According to the Organization for Economic Cooperation and Development, Good Corporate Governance itself is a system used to direct and control the company’s business activities and regulate each entity’s division of tasks, rights, and obligations within the interest in the company, especially the directors. In Indonesia, the legal basis for Good Corporate Governance is found in legislation, namely Law Number 40 of 2007 concerning Limited Liability Companies in Article 92 in conjunction Article 97 which regulates the duties, rights, and obligations of the board of directors in managing the company. Even lex specialis, for companies in the form of State-Owned Enterprises or BUMN, are subject to special regulations regarding Good Corporate Governance, namely the Regulation of the Minister of State for SOEs Number PER-01/MBU/2011 concerning Good Corporate Governance BUMN in conjunction with Regulation of the Minister of State-Owned Enterprises Number PER-09/MBU/2012 concerning the Implementation of Good Corporate Governance in SOEs.
One example of a case that illustrates the urgency of implementing Good Corporate Governance is the acquisition of the Basker Manta Gummy Block in Australia by PT Pertamina (Persero) through its subsidiary, PT Pertamina Hulu Energy. In this case, it was suspected that there was a violation of the principles of Good Corporate Governance committed by the company’s director, who continued to carry out the acquisition process without the approval of the Board of Commissioners, even though there were indications of criminal corruption as decided by a Decision of the DKI Jakarta High Court Number 34/PID/SUS-TPK/2019/PT.DKI of 2019. The cassation panel ultimately decided that the action taken by the Board of Directors was legitimate as a business judgment rule, and the act was not a criminal act of corruption as stipulated in the Supreme Court Decision Number 121K/Pid.Sus/2020. However, the implications of the litigation itself were widely felt.
The implications of not implementing the principles of Good Corporate Governance can be illustrated from the case. Many possibilities can occur. In the case of a State-owned company, it may become unwittingly embroiled in corruption. A private limited or listed company may even trigger a violation of the Company Law. All types of companies risk pecuniary loss, loss of reputation, and waste of valuable managerial time where common sense good corporate governance is not followed.
Therefore, it is indispensable that Good Corporate Governance is implemented in Indonesia. However, there are many challenges when companies intend to apply this principle, including a lack of commitment and knowledge from the company’s leadership to implement good corporate governance. A perceived lack of law enforcement by the authority also contributes to companies’ nonchalant attitudes for the need to comply with even the most basic principles of corporate governance. However, despite the obstacles, the enforcement of Good Corporate Governance is significant for the company’s sustainability, the avoidance of violating the law, and to achieve its main objective making profits and preventing losses. (TWK)