BUSINESS ETHICS AND THE CONCEPT OF GOOD CORPORATE
GOVERNANCE IN CREATING VALUE-BASED COMPANIES
Introduction
The wheels of business will run smoothly if the pillars that surround it also stand firm,
one of these pillars is law. The law here will regulate legal relations whose implementation
is in the form of regulating the rights and obligations of the legal subjects involved. In
transactions in the economic field, the law is often not included from the beginning. In this
last case, new business people will feel the importance of the law when a dispute occurs.
New business people are looking for legal platforms and paradigms that govern the
transactions they have made. It's like the law is only used as a shield.
Economic development is driving force main driver of development national
development, but economic development must be accompanied by mutually reinforcing and
integrated efforts with the development of other fields.
Literature Review
Business Ethics in Business
Aside from the legal pillars, one more thing that must be considered in doing business
is the business ethics itself.
Ethical concerns for business have existed as long as business itself, meaning that
since business was born in order for humans to fulfill their needs, ethics have always
accompanied their business activities.
There are several arguments that say that in running a business, ethics are needed,
namely:
Business is not just about profit but needs to consider humane values, otherwise it
will sacrifice the lives of many people, so that society also has an interest that
business is conducted ethically.
Business is conducted between one human being and another, so it requires ethics as
a guideline and orientation for human decisions, activities, and actions in dealing
(business) with one another.
Business today is conducted in fierce competition, so business people who compete
while maintaining ethical norms in an increasingly professional business climate will
win.
Legality and morality are related but distinct from each other, as an activity that is
legally acceptable is not necessarily ethically acceptable.
Ethics must be differentiated from empirical science, which is based on A symptom
or fact that repeats continuously and occurs everywhere will give birth to a scientific
law that applies universally.
Special situations that lead to exceptions to ethics cannot be used as a reason to judge
that business does not recognize ethics.
The ubiquitous protests show that there are still many people and groups in society
who want business to be run properly and with ethical norms in mind.
In relation to business ethics, its application has several principles, namely:
The principle of autonomy, which is the attitude and ability of humans to act based
on their own awareness of what they consider good to do;
the principle of honesty
the principle of doing no harm and the principle of doing good;
principles of fairness;
the principle of respect for oneself.
A company that wants to achieve success in its business, at least needs three main
things, namely:
Good products
Good management
Business ethics
Business is not enough with good sales figures and significant profits, but it is also
inseparable from moral aspects, so it can be said that good business has moral meaning.\
In business, ethical behavior is based on :
God is our judge;
Social contract, living in a society means binding oneself to the society that has been
agreed upon, therefore morality unites business people. Morality is an absolute
requirement that must be recognized by everyone if they want to engage in business
activities;
Virtue, the highest refinement of human nature. A modern-day business person must
have integrity.
The negative view of the importance of business, which is based on the opinion that
ethics and business are two different things and separate from each other, has begun to be
abandoned, because business people now realize that in order to maintain their business
activities, business ethics are necessary.
One thing that needs to be considered in order for business activities to run well, is :
Business ethics can only play a role in a moral community, not an individual
commitment, but embedded in a social framework;
Business ethics ensure that business activities are sustainable in the long term, not
focused on short-term profits;
Business ethics will increase employee satisfaction which is an important stake
holders to pay attention to.
Business ethics brings business people into international business.
Good Corporate Governance
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
As a Determining Factor to Increase Company Value and Quality
The issue of Good Corporate Governance is a central theme at the beginning of the 21st
century and is one of the factors that can increase the value of the company's image so that
the company has an advantage in the field of quality of service for its customers and the
quality of life that its employees can get.
The term Good Corporate Governance is often interpreted as corporate governance.
The implementation of the concept of Good Corporate Governance into a company is
believed to have become a necessity a must for modern companies. The implementation of
Good Corporate Governance means how the company's management manages the company
properly, correctly and with integrity. Therefore, the principles of Good Corporate
Governance cover all aspects of the organization, business and corporate culture.
Good Corporate Governance principles are internationally accepted corporate
principles, although their application varies from country to country depending on the
emphasis.
The principles of Good Corporate Governance are rules, norms or guidelines that are
needed in a healthy company management system. The principles of Good Corporate
Governance include:
Transparency, namely openness in carrying out the decision-making process and
openness in disclosing material and relevant information about the company.
Independence, which is a condition in which the company is managed professionally
without conflict of interest and influence / pressure from any party that is not in
accordance with the applicable laws and regulations and sound corporate principles.
Accountability, namely conformity in the management of the Company to the
prevailing laws and regulations and sound corporate principles.
Fairness, namely fairness and equality in fulfilling the rights of stakeholders arising
based on agreements and applicable laws and regulations.
The principles of Good Corporate Governance include at least the following objects:
Protection of stakeholders, such as the protection of minority shareholders, workers,
investors, consumers, the environment and society.
Improve company performance.
Effective business and enterprise management
Intensive supervision of the company's operations.
Good and optimal relationships between shareholders, directors, commissioners and
other stakeholders.
Clear rules and guidelines for behavior among company actors
Fiduciary duties of company controllers
Effective and efficient processes and structures.
Effective and efficient decision making
A good working mechanism and a balanced division of duties, rights and
responsibilities between company behaviors.
Systems, rights, processes, controls and good management of the company.
In addition, the application of the principles of Good Corporate Governance to a
company is a requirement that cannot be bargained for anymore and this is already a
conditio sine qua non for a company that is managed professionally. Moreover, companies
such as public companies, companies that manage a lot of public funds, such as securities
companies, mutual fund companies, and other companies funds, banking and insurance,
which must be managed professionally, will not be able to compete with their competitors if
the principles of Good Corporate Governance are not applied.
There are two main influential factors that are interrelated with each other in
implementing the principles of Good Corporate Governance into a company, namely as
follows:
Rule of Law, which is a set of rules governing the relationship between shareholders,
management, creditors, government and other stakeholders, and
Law Enforcement, which is a set of mechanisms that directly or indirectly support
efforts to enforce these rules.
The purpose of implementing Good Corporate Governance, for a company is:
Maximizing the value of the company by increasing the principles of openness,
accountability, trustworthiness, responsibility, and so that the Company has strong
competitiveness, both nationally and internationally.
Encouraging professional, transparent, and efficient management of the company as well as
empowering functions and increasing organ independence.
Encourage organs in making decisions and carrying out actions to be based on high moral
values and compliance with the law To prevailing laws and regulations, as well as awareness
of the existence of corporate social responsibility towards stakeholders and environmental
sustainability around the company.
Increase the company's contribution to the national economy
Improving the national investment climate Implementation of good corporate principles
governance into the company will bring many benefits, including the following:
Improving communication
Minimize impact potential
focus on key strategies
Increased productivity and efficiency
Continuity of benefits
Promotion of corporate image
Increased customer satisfaction
Gaining investor confidence
Easier to obtain capital
Lower cost of capital
Improve business performance
Affects the stock price
Improve economic performance.
The importance of implementing the principles of Good Corporate Governance into
a company is due to the following:
That institutional investors put more trust in companies that have Good Corporate
Governance, even placing the principle of Good Corporate Governance as one of the
main criteria, in addition to the criteria for financial performance and growth
potential.
There are indications of a link between the economic crisis in Asian countries at the
end of the 20th century and the weak application of Good Corporate Governance
principles in companies in these countries. The weak application of the principles of
Good Corporate Governance in these Asian countries can be seen in actions such as
family management, collusion with the government, protection politics, government
intervention, bribery and others.
The application of Good Corporate Governance principles has become a necessity in
the internationalization of markets, including the modernization of financial markets
and capital markets, so that investors are willing to invest. This trend is rapidly
spreading in various parts of the world.
The principles of Good Corporate Governance have provided the basis for the
development of the value of the company in accordance with the current evolving
business landscape which is very much in line with the current business environment
prioritizing the values of independence, transparency, professionalism, social
responsibility and others.
Furthermore, when viewed in terms of its influence, the application of the principles
of Good Corporate Governance in a company has the following two consequences:
External Consequences
The application of the principles of Good Corporate Governance has an influence on the
company's external environment. In this case, the company must act and make decisions in
such a way that no stakeholders outside the company are harmed. Therefore, in running its
business, a company must not harm the interests of creditors, as well as the community and
the environment.
External Consequences
The application of the principles of Good Corporate Governance which has an influence on
the internal environment of the company is the regulation and decision making of the
company by considering the interests of stakeholders in the company interests of
stakeholders in the company. In this case, the business implementation of the company The
must pay attention to the interests of majority shareholders, minority shareholders and
company employees. The various interests of these internal parties must be protected
proportionally, where one must not harm the other party.
Research Methodology
In accordance with the field of study of business law, the approach used is nomative
juridical, which examines and tests secondary data in the form of positive law.
This research is descriptive analytical, namely describing and analyzing legal
provisions, legal theories related to the problem under study to draw a conclusion. The
purpose of this descriptive research is to make a description, description or painting
systematically, factually and accurately about the facts, characteristics and relationships
between the phenomena being investigated. (Andriyani, Y., & Zulkarnaen, W., 2017: 94)
All data obtained was analyzed using the qualitative normative analysis method, which
is a data analysis that does not use mathematical formulas.
Results And Discussion
Application GOOD CORPORATE GOVERNANCE in the Banking World
The Government of Indonesia has made efforts to develop GCG Implementation
Guidelines in collaboration with the World Bank, Asian Development Bank (ADB) and other
Non Government Organizations other non-government organizations, trying to adopt GCG
best practices and international standards as published by the OECD World Bank and BIS.
In March 2001, the National GCG Committee drafted the GCG Guidelines as an "umbrella"
and guide for other sectors to follow which are tailored to the characteristics and conditions
in their respective sectors. Furthermore, in September 2001, the Ministry of Finance also
issued Guidelines for the Implementation of GCG, especially in state-owned banks. For the
banking sector, the National Committee for the banking sector and BI have also developed
guidelines for the implementation of GCG for national banks which include 5 main
principles namely TARIF (Transparency, Accountability, Responsibility, Independency,
Fairness).
The guidelines also outline the duties and responsibilities of each organ of the
organization which is an important prerequisite for the implementation of GCG, namely
shareholders, stakeholders, the Board of Directors and commissioners including the
functions of committees under the Board of Directors and Commissioners such as the Audit
Committee, Remuneration, Risk Committee and Nomination Committee as well as the role
of independent Directors/commissioners, the Audit system which includes Internal Audit
and External Audit and the function of the Corporate Secretary.
Bank Indonesia as a banking supervisor has not developed a guideline for the
implementation of GCG for national banks, but explicitly BI has set various provisions to
ensure that banks are run in a healthy manner by competent and credible management to
accommodate the principles of Good Corporate Governance, among others:
Transparency of Bank's Financial Condition & Enhanced Role of External Auditor
That in order to improve the transparency of the Bank and to enable stakeholders and the
wider public to assess and monitor the performance of the Bank as an effort to create market
discipline. Bank Indonesia has drafted PBI (Bank Indonesia Regulation) No. 3/22/PBI/2001
dated December 13, 2001 concerning Transparency of Banks' Financial Conditions which
Requires Bank to disclose to the public about non-performing loans (NPLs), controlling
shareholders, special relationships with affiliated parties, risk management practices in the
Bank's financial statements, either on a quarterly, semester or annual basis. This provision
also regulates the relationship between public accountants, the Bank and Bank Indonesia,
including the requirements for public accountants and the process of assessing the fit and
proper test of auditors in order to improve the quality of audit results, as well as special
provisions governing the Indonesian Banking Accounting Guidelines (PAPI) which are
international standards as an effort to overcome the problem of weak accounting systems in
banking.
Transparency of Bank Indonesia's Supervisory Measures
Based on the provisions of PBI No. 3/25/PBI/2001 dated December 26, 2001 concerning the
Implementation of Bank Status and the Handover of Banks to IBRA (Exit policy), among
others, intensive supervision and special supervision are established for banks experiencing
problems such as the adequacy of Minimum Capital Adequacy (CAR), Maximum Lending
Limit (LLL), non-performing loans (NPLs), Health Level (TKS), Risk profile and liquidity.
Banks that are unable to fulfill the action plan in the form of capital improvement plans and
the obligation to fulfill supervisory actions to improve their financial performance will be
announced through Bank Indonesia's web site within a certain period of time. The
information to the public includes, among others, the current condition of the Bank as well
as supervisory measures by Bank Indonesia and improvement plans by the Bank. With this
information, it is expected to reduce the information gap (asymmetric information) so that
market participants can obtain the information more complete information and can provide a
fair assessment of the development and performance of a particular Bank.
Fit & Proper Test
To improve the competence and integrity of the Bank's management, through a fit and
proper test of the owners, controlling shareholders, Board of Commissioners, Directors and
Executive Officers of the Bank who will enter and have been active in the Bank (existing) in
the management of the Bank's operational activities, since 2000 Bank Indonesia has
established various requirements and selection processes as stipulated most recently through
PBI No. 5/25/PBI/2003 dated November 10, 2003 concerning the fit and proper test. The fit
and proper test assessment is an activity that is inseparable from the implementation of Bank
supervisory duties by Bank Indonesia and needs to be carried out on an ongoing basis by
assessing the competence, integrity, financial viability and or financial reputation of the
parties being assessed. With the consistent implementation of this provision, it is expected
that qualified banking human resources will be available and able to maintain public trust at
all times so that in turn it can increase the stability and stability of the banking system.
Independence of Bank Management
Based on PBI No. 2/27 / PBI / 2000 year 2000 on Commercial Banks, especially Article 19
to Article 25, members of the Board of Commissioners and Board of Directors are not
allowed to be affiliated and or have financial relationships with other members of the Board
of Commissioners and Board of Directors or be controlling shareholders in other companies
as well as the requirements for independent Board of Directors and Commissioners. In these
provisions, it is required that the Board of Commissioners is at least 2 people, there must be
at least 1 Independent Commissioner to the owner of the Bank, and for the Board of
Directors, there must be a minimum of 3 people, then the President Director must come
from a party independent of the controlling shareholder. This provision also stipulates that in
the event of a conflict of interest, members of the board of commissioners, members of the
board of directors, executive officers and branch office heads are prohibited from taking
actions that may harm the Bank and must disclose the conflict of interest in every decision.
Compliance Director and Enhancement of the Role of the Bank's Audit Function
In accordance with PBI No. 1/6/PBI/1999 on the Management of the Compliance Director
and the Implementation of Standards for the Implementation of the Internal Audit Function
of Commercial Banks, the Bank is required to appoint a Compliance Director who is
responsible for ensuring the Bank's compliance with existing regulations. The function of
the Compliance Director is intended as a central point of contact between the Bank and
Bank Indonesia in order to prevent deviations or violations of banking regulations and other
regulations.
In addition, to enhance the role of internal audit conducted by the Bank, minimum
guidelines are also established that must be carried out by the Internal Audit Unit (SKAI) to
improve the effectiveness of the Bank's internal control implementation.
Law Enforcement
To ensure consistency in law enforcement in banking, in addition to the application of
applicable regulations by Bank supervision, since 1999 Bank Indonesia has had a Special
Banking Investigation Unit (UKIP).
To accelerate the investigation process of alleged irregularities in the banking sector, it
is expected to Bank Indonesia officials can be given the authority as investigators of Civil
Servants (PNS) as it is given to Customs and Excise and Bapepam, in accordance with
applicable laws and regulations. With this authority, it is expected that Bank Indonesia
officials can immediately block accounts suspected of being a means / collection of criminal
proceeds and confiscate documents related to banking irregularities.
Risk Management and Internal Control
The situation of the external and internal environment of banking is experiencing rapid
development which will be followed by increasingly complex risks for banking business
activities.
Furthermore, the increasing complexity of these risks will increase the need for sound
governance practices (goodgovernance) and the functions of identification, measurement,
monitoring and control of the Bank's risk. The increase in these functions is intended so that
the business activities carried out by the Bank do not cause losses that exceed the Bank's
ability or that can disrupt the Bank's business continuity. Therefore, Bank Indonesia on May
19, 2003 issued PBI No. 5/8/PBI/2003 concerning the Implementation of Risk Management
for Commercial Banks. The effectiveness of the implementation of risk management is
determined by the effectiveness of the supervision of the Bank's management, the adequacy
of policies, procedures and the application of limits, the adequacy of the process of
identification, measurement, monitoring, control and risk management information systems,
as well as the implementation of comprehensive internal control. By implementing risk
management effectively and consistently, it is expected that national banking, can gradually
compete in the banking business environment, nationally and internationally.
Bank Strategy and Business Plan
In order to improve the practice of healthy governance (GCG) in the banking industry, Bank
Indonesia also established provisions that require the Bank to prepare a medium and long
term business plan/corporate plan (PBI No. 2/27/PBI/2000 dated December 15, 2000
concerning Commercial Banks) and annual budget and work plan (RKAT) through the
provisions of the Decree of the Board of Directors of Bank Indonesia in 1995, which is
intended to enable the Bank to establish strategic objectives (a well articulated corporate
strategy) and a set of values (values) of the Bank that must be communicated to the strategic
inherent in the Bank's operations.
Management in Bank Health Level
In order to improve the sound management of the Bank and increase the principle of
prudence, since 1993 Bank Indonesia has also established provisions governing the Health
Level of the Bank where one of the assessment factors is the management factor as part of
the overall CAMELS factor (Capital, Asset Quality, Management, Earnings, Liquidity,
Sensitivity to Market Risks). The assessment of management performance, among others, is
carried out by Bank Indonesia and by the Bank by means of independent self-assessment of
the General Management component, namely the adequacy of the structure and composition
of the Bank's management, handling conflicts of interest, independence of the Bank's
management, the Bank's ability to prevent deterioration of GCG quality, the quality of Bank
information transparency and customer education programs, and the effectiveness of the
performance of Committee functions in the Bank, which are elements of GCG
implementation.
Conclusion
Based on the above, the following conclusions can be drawn:
In conducting business activities, business people must have high business ethics, so
that with business ethics
It is expected that there are limits that must be obeyed by business people in running
their business.
The role of law in business activities is very decisive, because with clear legal rules,
business people have legal certainty in carrying out their business activities because
there are signs that regulate their business activities.
Implementation Good Corporate Governance can increase the value and quality of a
company, so that the company can become a healthy company.
Obedience to a regulation and honesty for every business actor and company
management are determining factors for the creation of Good Corporate Governance.
