by miko kamal, phd principal, miko kamal & associates ... · 2/5/2013 · by miko kamal, phd...

By Miko Kamal, PhD Principal, Miko Kamal & Associates (Jakarta and Padang)

14/02/13 miko kamal & Associates 1

Looks at the determining factors that form the face of board of commissioners of the Indonesia’s non-‐listed SOEs by invesDgaDng the prevailing laws, regulaDons, self-‐regulaDons and pracDces of commissioners in six companies.


2. Theore)cal Framework •  Agents to shareholders:

-‐ commissioners and directors are elected by general meeDng of shareholders; -‐ the two boards are the shareholders’ agents; -‐ No co-‐determinaDon.

•  Suspension right: Except the suspension right, board of commissioners has not rights to appoint and dismiss member of management.

•  Commissioners’ liability: internal (acDviDes report) and external liability (legal liability)

•  Government as sole shareholders: Concentrated ownership or 100 % of shares owned by government; non-‐listed SOEs.


3. Empirical study (table 1, researched companies’ profile)

Companies Established Companies’ business sector

Companies’ asset in 2007 (trillion rupiah)

Company’s size (Big = ≥ 100 T, Medium =

1-‐100 T, Small = ≤ 1 T)

Number of par)cipan

ts

M 1957 Mining 253.551.191 Big 3

A 1945 Energy 272.502.808 Big 1

C 1984 Airport 7.476.187 Medium 4

Q 1997 Insurance 61.383.427 Medium 4

K 2003 Trading 875.674 Small 4

L 1996 PlantaDon 463.219 Small 2

Researched companies’ total assets 595.116.551 Total of parDcipants 18


•  Document analysis Examining relevant laws and regula2ons: -‐ Law No. 40 of 2007 on Company Limited Liability; -‐ Law No. 19 of 2003 on State-‐owned Enterprises; -‐ Government Regula)on No. 45 of 2005 on Establishment, Management, Supervision and LiquidaDon of State-‐owned Enterprises; -‐ Presiden)al Instruc)on of Republic of Indonesia No. 8 of 2005 on the Appointment of Members of Board of Directors and Board of Commissioners of State-‐owned Enterprises (revised by PresidenDal InstrucDon of Republic of Indonesia No. 9 of 2005); -‐ Decree of the Minister for State-‐owned Enterprises No. KEP-‐117/M-‐MBU/2002 regarding the ImplementaDon of Good Corporate Governance on State-‐owned Enterprises.


•  Document analysis Dealing with the researched companies’ self-‐regula2ons: -‐ annual reports -‐ corporate governance codes -‐ board manual -‐ codes of conduct -‐ company by-‐laws -‐ curriculum vitae of members of BOC -‐ online documents


3.1. Methods...cont. •  Interview -‐ undertaken in Jakarta from February – May 2009; -‐ 27 parDcipants -‐ 18 from the researched companies (BoC, BoD and Trade Union) -‐ other 9 parDcipants are experts, former of member of BoC, Vice-‐Chairman of CorrupDon EradicaDon Commission of Indonesia, non-‐government organizaDon acDvist, poliDcian and chief of corporate governance insDtuDon.


3.2. Data and results (table 2, commissioners’ types) Companies Number of

commissioners Types of commissioners

Public servants Businessmen/skilled workers

Academics Pensioners Big fish

M 7 4 2 0 1 0

A 6 1 1 3 1 0

C 5 3 0 0 2 0

Q 5 1 1 0 1 2

K 5 3 2 0 0 0

L 3 2 0 0 1 0

Total 31 14 6 3 6 2


3.2. Data...cont. (Percentage of types of the researched companies’ commissioners)


3.2. Data...cont.

•  Dual posiDon is ALLOWED •  The holding meeDng: at least once a month •  Appointment procedure: -‐ Laws; No mandatory fit and proper test. -‐ The researched companies’ self-‐regula)on; a fit and proper test must be undertaken. -‐ In prac)ce: shareholders have no held a fit a proper test.


3.2. Data...cont. (exhibit 1, SOE commissioners and directors elec)on process) SOEs’ commissioners elecEon process SOEs’ directors elecEon process

• Candidates to be selected

INFORMAL PROCESS (stage 1)

•  FINAL ASSESMENT TEAM : President (chairman), Vice President (Vice Chairman), Minister for Finance, Minister for SOEs, and Secretary Cabinet (Secretary)

POLITICAL PROCESS (stage 2) •  Minister for SOEs

appoints the elected candidates

PRO FORMA PROCESS (Stage 3) PRE PROCESS

(stage 1) Minister for SOEs shapes a fit and proper test team

TECHNICAL PROCESS (Stage 2) The Fit and Proper Test Team selects candidates

POLITICAL PROCESS (Stage 3) FINAL ASSESMENT TEAM : President (chairman), Vice President (Vice Chairman), Minister for Finance, Minister for SOEs, and Secretary Cabinet (Secretary)

PRO PORMA PROCESS (stage 4) Minister for SOEs endorses the elected candidates


•  Agency Problem: Public (ulDmate owners of SOEs) Vs. Government as public’s agent. •  Government has full power over the central control bodies of a company (elecDng and

dismissing commissioners and directors). •  Board of commissioners are considered less important than directors posiDon.

-‐ All of researched companies’ commissioners group (PUBLIC SERVANTS, BUSINESSMEN, PENSIONERS, ACADEMICS AND BIG FISH) are busy people. -‐ the holding meeDng: once or twice a month -‐ the commissioners’ appointment process is not undertaken as seriously as the board of directors’ appointment; NO fit and proper test has been held in elecDng members of board of commissioners.

•  TPA (Final Assessment Team) is a legal tool to do PoliDcal interference. PoliDcal interference is authorised by PresidenDal InstrucDon No. 8 of 2005 (amended under the PresidenDal InstrucDon No. 9 of 2005) regarding Final Assessment Team , TPA)


•  What kind of corporaDon model adopted by Indonesia?

•  What are the roles of board of commissioners •  What are the types of commissioners found by this study?

•  What are the stages of board of commissioners’ selecDon process?


by miko kamal, phd principal, miko kamal & associates ... · 2/5/2013 · by miko kamal, phd...

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