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WOMEN'S LEADERSHIP DEVELOPMENT MODELS AND
STRATEGIES FOR SUSTAINABILITY COMPANY
Introduction:
Currently, in general, organizations or companies carry out their operations in the
context of an environment that continues to experience rapid change, is more complex and
full of uncertainty. The Covid-19 pandemic that began in early 2020 has forced organizations,
including business organizations or companies, to change significantly and the problems that
arise have become more complex. Restrictions on social activities through the PSBB (Large-
Scale Social Restrictions) policy and turning into PPKM (Enforcement of Restrictions on
Community Activities) have overhauled many company strategies operationally, including in
Human Resources (HR) management practices, one of which is by implementing a hybrid
working scheme, namely working in the office or Work From Office (WFO) and working at
home or Work From Home (WFH).
The transformation process has been carried out by many companies to define
employee performance and productivity to maintain the existence and sustainability of the
company (corporate sustainability). The current pandemic conditions and the new normal in
the next few years, further strengthen the importance of companies to pay serious attention to
the triple bottom line (TBL) theory of corporate sustainability (Elkington 1997, Elkington
2004), which is popularly known as 3P, namely people, profit and planet. The sustainability
of the company will be largely determined by the three interrelated TBL components, namely
people/personnel (people), profit/finance (profit) and environment (planet).
In relation to corporate sustainability, several studies have been conducted to look at
the elements of corporate sustainability in the aspects of financial and non-financial
performance (Kantabutra 2006, Jing 2009, Avery and Bergsteiner 2010, Avery and
Bergsteiner 2011, Jing and Avery 2016, Piwowar-Sulej and Iqbal 2022), as well as leadership
as an element that greatly determines the sustainability of the company (Avery and
Bergsteiner 2010). Apart from financial performance, corporate sustainability is demonstrated
by social, environmental and governance performance (Hadad and Maftuchah 2015; Graham
2019). To measure the impact on business performance and sustainability, Kantabutra (2006)
presents three main measures, namely financial performance, employee satisfaction and
customer satisfaction, while research by Avery and Bergsteiner (2010) shows that leadership
can affect corporate sustainability as seen from brand performance and reputation, customer
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satisfaction, financial performance and value for shareholders and stakeholders.
The corporate sustainability framework or triple bottom line/TBL theory from
Elkington (1997, 2004) is very relevant to be applied in business practices in various types of
companies, including state-owned companies. The company's profit is strongly influenced by
the existence of people who work, where there are people who formulate strategies, programs
and policies, and there are also people who carry out and produce them. The
operationalization of the company is also highly dependent on company leaders, both in the
smallest units such as supervisors (supervisors) to the level of managers, general managers
and directors. All elements of people in the company both as workers and leaders play a very
important role for the success of the company. Furthermore, a greater role and influence for
the management of the company is determined by the leaders in the company, especially the
top leaders (directors of the company) to provide direction in moving the company so as to
generate profits, foster company capital and ensure the survival of the company.
State-owned companies also have greater goals and challenges than non-state-owned
companies, because SOEs are not only for profit, but also to provide maximum benefits and
benefits for the Indonesian people at large. When talking about corporate profits in state-
owned companies, it is necessary to look at corporate profits, by including social and
environmental contexts to measure business performance. Companies should also pay as
much attention to social and environmental issues as they do to financial issues. Similarly,
social and environmental diversity, where SOE companies are scattered throughout the
country, needs to pay attention and promote local wisdom in resource management, especially
human resources (HR). The current and future success of state-owned companies will be
determined by how the company manages the triple bottom line synergy of people, profit and
planet in good business practices. Achieving sustainability is a complex issue for all elements
in the system, namely the organization and the human resources within it (Brocket and Rezaee
2012; Rezaee 2016; Graham 2019, Piwowar-Sulej and Iqbal 2022).
State-Owned Enterprises (SOEs) are business entities or companies whose majority
or all of the capital is owned by the state through direct participation, which comes from
separated state assets (Law No. 19/2003 on SOEs). To improve performance and added value,
the Indonesian government, in this case through the Ministry of SOEs, continues to make
efforts to streamline and improve the portfolio of the number of SOEs, through corporate
restructuring programs, including holding, mergers, acquisitions and clustering. Figure 1.1
shows the development of the number of SOEs in the last three years, where it is planned that
in the next 5 (five) years SOEs will be made more effective and efficient with less than 70
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SOEs.
In line with the long-term strategy, the Ministry of SOEs has grouped SOEs into
clusters according to the value chain and core business of each SOE to improve value chain
strengthening and efficiency. Figure 1.2 illustrates the division of tasks of SOEs in each of the
6 clusters supervised by the Deputy Minister of SOEs. The development of SOEs in 12
clusters has further evolved, with one cluster formed to accelerate the process of holding and
transformation of SOEs with the cluster coaches/coordinators being PT Danareksa and PT
PPA (Asset Management Company). This cluster is included in the Telecommunications &
Media Cluster and consists of 38 SOEs, classified into 2 sub-clusters, namely the SOE
Revitalization and Restructuring sub-cluster (15 SOEs) under the coordination of PT PPA,
and the SOE Scale Up sub-cluster under the coordination of PT Danareksa, with 21 SOE
members.
Referring to the division of clusters and downsizing of SOEs through the holding of
SOE supply chains, the number of SOEs continues to decrease. This is one of the efforts to
group SOEs based on their functions and tasks, which also aims for efficiency. The condition
of the number of SOEs in summary as of June 30, 2021 is shown in Table 1.1.
Total assets of SOEs by 2019 amounted to IDR 8,739 trillion, up 51.7% from the
2015 position of IDR 5,760 trillion. Meanwhile, SOE equity in 2019 amounted to IDR 6,075
trillion, an increase of 61.1% compared to 2015. SOE revenues have also increased over the
past five years to Rp 2,456 trillion, or 144.5% of 2015 revenues. Furthermore, SOEs'
contribution to the state through tax and dividend payments amounted to IDR 176 trillion (in
2015) to IDR 284 trillion (in 2019), while dividend payments from IDR 37 trillion in 2015 to
IDR 50 trillion in 2019. Another contribution of SOEs to the national economy is capital
expenditure, the value of which in 2015 amounted to Rp 221 trillion, which has increased
every year, except that in 2019 the value of Rp 367 trillion was 18% lower than the capital
expenditure in 2018 of Rp 448 trillion. Furthermore, the contribution of SOEs in the last 5
(five) years is shown in the form of financial performance in 2015-2019 as Table 1.2.
Meanwhile, during the pandemic in Indonesia which began in March 2020, namely
the first case of Covid-19, the performance of consolidated SOEs in 2020 from total revenue
showed a decrease of 12% or from Rp 2,204 Trillion in 2019 to Rp 1,930 Trillion at the end
of 2020. The performance of the EBITDA (Earnings Before Interest Tax, Depreciation &
Accumulation) ratio of consolidated SOEs, due to the pandemic also decreased by 24% or
from IDR 369 Trillion in 2019 to IDR 279 Trillion in 2020, with a margin of 17% in 2020
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which decreased to 14% in 2020. Net profit performance in 2019 amounted to IDR 125
Trillion or 6% to only IDR 13 Trillion or around 1% in 2020.
Furthermore, from Figure 1.3, it can also be conveyed that the consolidated revenue
for the 9-month period, namely up to September 30, 2021, closed at IDR 1,613 Trillion or
grew 14% compared to the same period in 2020. This increase in revenue was accompanied
by an increase in operating margins and EBITDA ratios, with margins rising from 1% to 13%,
or a net profit of (loss) IDR 5 Trillion in September 2020 to a net profit of IDR 61 Trillion in
September 2021.
In the period 2020-2024, the Minister of SOEs of the Republic of Indonesia has set 5
(five) SOE Program Priorities which, among others, are expected to ensure the sustainability
of SOEs, increase their role as agents of change in the nation (agents of development) and
continue to increase the contribution of SOEs to the national economy. The five priority SOE
programs are as follows:
1. Economic and Social Value for Indonesia, is an effort by SOEs to increase economic
value and social benefits, especially in the fields of energy, health and especially food
security.
2. Business Model Innovation, which is an effort by SOEs to change or restructure the SOE
business model through ecosystem development within the SOE, types of cooperation,
and accommodating the development of stakeholders' needs and focus on the main
business (core business).
3. Technology Leadership, which is an effort by SOEs to lead businesses globally in
strategic technology and institutionalize digital capabilities such as data management, big
data, AI (artificial intelligence) and advanced management.
4. Increasing SOE Investment, namely by optimizing the value of SOE assets and creating a
healthy investment ecosystem in Indonesia.
5. BUMN Talent Development, namely efforts to educate and train the workforce or
employees of BUMN in line with efforts to develop quality Indonesian human resources,
improve the professionalism of governance and HR selection systems in BUMN.
In the priority talent development program, the program is directed at developing the
younger generation (millennials) and women's leadership. The Ministry of SOEs has a
program to increase women's leadership in SOEs through the number of female directors of
SOEs. Table
1.4 shows the number of female directors in SOEs as of September 30, 2021, which
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is 13% or 63 out of a total of 425 directors. The number of female leaders in SOEs is expected
to increase to 25% by 2024, which is in line with the Sustainable Development Goals (SDGs).
The results of research on global women's leadership by Catalyst (2020) show that of
the world-class companies incorporated in the Fortune 500, only about 5.8% or as many as 29
female leaders as CEOs in 2019, and about 5.3% of women who fill the positions of members
of the Board of Directors of these world-class companies (Catalyst 2020). Likewise, research
from Zenger and Folkman (2019) that the percentage of women in senior leadership roles in
business is relatively stable, there are around 2% of S&P 500 CEOs are women, and even
those numbers are decreasing globally.
Leadership as the key to success for the sustainability of the company as the context
of the Triple Bottom Line (TBL) theory, plays a very important role to manage the people in
the company and lead them to realize the profitability of the company, as well as to maintain
and manage the company's ecosystem with the physical environment and social environment.
The presence of women in top management is basically an implementation of gender
equality and diversity, and many studies report the relationship between women's leadership
and increased company performance. A meta-analysis conducted by Hobbler et al. (2018)
shows representation of women on management is associated with firm performance,
particularly sales performance and innovation. However, stereotypical views of women are
still a gender issue in leadership. Management views are still the dominant discourse and
patriarchal views (Holmer-Nadesan 1996, Bona-Sanchez et al. 2023). It is said that there is
still a stereotypical categorization of managerial identity. In patriarchal discourse, women are
characterized as lacking in relation to the characteristics needed for managerial work. The
masculine is taken as the norm and the feminine is seen as a marker of difference. This
difference is visible in our everyday discourse when we talk about managers and female
managers. Therefore, language not only conveys social life but is an essential constructive
feature of it. Conceptualizing management and gender as discourse allows us to account for
the socially constructed and normalized meanings of gender and management so that they are
no longer based on issues equality so alone. More Further leadership issues women in
managerial possible us to focus attention on the dynamic aspects within the organization to see
the performance dynamically (Davies and Harre 1999, Shinbrot et al. 2019).
Gender issues, managers and leaders are influenced by a number of normative beliefs
and expectations, to which people are held accountable (Holmes and Stubbe 2003).
Managerial discourse is historically and politically situated in different occupational and
professional communities that differ depending on the national context. Thus, female and
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male managers engaged in any act of leadership can be held accountable for their
performance both as members of their gender and professional category. Furthermore,
individual categorizations can be used to justify or discredit other actions (Holmes and Stubbe
2003, Shinbrot et al. 2019). For example, a female manager may be praised for her aggressive
and successful strategies, but, simultaneously, her femaleness may be questioned.
Positioing theory allows us to reveal 'explicit and implicit patterns of reasoning
embodied in the way people act towards others' (Harré et al. 2009). It also makes it possible
to detect the meanings that people attach to the actions of others and themselves. Actions take
place within a local moral order that emerges in principles and practices involving duties and
rights. Thus, managers' competencies are not enough to give them access to certain practical
practices and conversations. This positioning takes place within a particular local moral order.
How people position women leaders is influenced also by the moral order of the organization
and their place in it. According to Harré et al. (2009) actions, whatever their practical
purpose, are treated as displays of character according to local understandings of acceptable
and contextually appropriate personas. Managers' standing therefore depends on how capable
they are perceived to be of fulfilling their commitments. Therefore, an investigation into
women's managerial leadership can provide reinforcement a new perspective on women's
leadership (Shinbrot et al. 2019) from the standpoint of positioning theory (Harre et al. 2009).
The Ministry of SOEs through its website said that until 2021, the level of gender
diversity in the leadership of SOEs is still relatively low. For this reason, one of the programs
of the Long-Term Plan (RJP) at the Ministry of SOEs is talent development, especially the
development of gender diversity in the management (diversity) of SOEs, through an increase
in female SOE leaders. This is because it is recognized that SOEs grew up in a more male
culture in the past.
However, the policy and direction of women's leadership development in SOEs are
still not supported by real programs. Dewi and Rachmawati's research (2014) reported that
women's leadership development in SOEs is still carried out by their own initiative and there
is still a lack of SOE investment policies on leadership development programs for female
employees. Therefore, it is necessary to develop a women's leadership development strategy
that is in line with the policy of increasing women's representation in the leadership of SOEs.
Representation is not just an issue of gender equality of men and women in SOEs, but can
also provide a new perspective on the role of women leaders in improving the performance
and sustainability of SOE companies.
Women's leadership in many studies is associated with firm performance such as
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organizational effectiveness, social and environmental responsibility and corporate
sustainability (Rao and Tilt 2016, Shaukat and Trojanowski 2016, Harris 2019, Shinbrot et al.
2019). Studies on women's leadership continue to gain attention and the presence of women
as leaders still faces challenges and obstacles, despite their leadership potential (Czabanowska
et al, 2017; Harris 2019, Shahzad et al. 2022). Several other studies examined the relationship
between women's leadership and organizational performance. Moreno-Gomez et al. (2018)
reported that gender diversity is positively associated with business performance through the
parameters of return on assets (ROA) and women's leadership which has an impact on return
on equity (ROE). Women's leadership has a positive impact on firm performance, credit rating
and corporate risk (Zhou 2020, Zulvina et al. 2021), has a positive effect through effective
investment and social engagement and reporting (Arayssi et al. 2016, El Khatib and Joy 2020)
and encourages innovation (Khushk et al. 2023). 2023.
In the context of business organizations, Avery's (2004, 2005) leadership theory
provides the concept of leadership as a leadership paradigm consisting of classical,
transactional, visionary and organic leadership. The leadership paradigm is presented in
several scientific journals, including research reports from Avery (2004, 2005, 2011), Avery
and Bergsteiner (2010, 2011), Jing and Avery (2016) and Jing et al. (2020). Furthermore, in a
meta-analysis study conducted by Gardner et al. (2010) stated that the concepts of visionary
leadership and organic leadership are seen as more strategic leadership concepts and continue
to emerge in practice (emerging leadership) along with business development. Both types of
visionary leadership and organic is more conceptualized in relation to company performance
and company sustainability. The role of top-level leadership as conceptualized in the upper
echelons theory is how leaders interpret the company's strategic environment and their ability
to make strategic decisions.
According to Laksmi and Shrivastav (2017), women's leadership style is different
from men's leadership style. According to Holmes and Stubbe (2003), women's leadership is
indirect and conciliatory, compared to men who tend to be direct and less confrontational.
Women leaders tend to be facilitative and collaborative although their contributions are less
visible in public, compared to male leaders who are competitive, autonomous and dominating.
Women's leadership is process- and people-oriented, while men's leadership is task- and
results-oriented.
As a party who makes decisions about company strategy to achieve long-term goals,
company leaders need to have adequate skills and competencies in the field of business and
organizational management (Gusman et al. 2020). Akram et al. (2019) conveyed a positive
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relationship between knowledge management dimensions and positive moderation with
empowering leadership for superior company performance. The mediation of knowledge
management and business capabilities conceptualized by the ability to see conditions outside
the company for marketing the company's products (outside-in marketing) (Mu et al. 2018)
encourages the need for further research on the mediating role of business competencies and
organizational competencies on women's leadership and its effect on company performance
and sustainability.
Regarding gender, the data shows that the number of female and male residents in
Indonesia shows a balanced condition. According to the Central Bureau of Statistics (BPS) as
of December 31, 2022, there was a female population of 136.36 million (49.52%) and a male
population of 138.99 million (50.48%). Efforts to improve the quality of Indonesia's
population are strategic and long-term efforts. In this case, efforts to prepare the quality of the
female population are carried out through the empowerment and leadership development of
Indonesian women, including SOEs. Because basically this is an effort to optimize the
demographic bonus with a balanced number of genders, as well as generations with young
ages.
Based on previous research conducted by Suriyankietkaew (2013), Jing et al. (2016,
2020, 2022), then that leadership affects the performance and sustainability of the company.
In order to fill the research gap, a study was conducted on women's leadership in state-owned
companies. This is also considering that female employees/leaders as one of the company's
resources need to be considered to continue to increase the number and quality in order to
make an optimal contribution to the company.
Furthermore, based on literature review, research conducted in SOEs is quite diverse
and mostly analyzes economic or financial performance. Therefore, this study is intended to
investigate women's leadership, the role of business competencies and organizational
competencies in the sustainability of state-owned companies. This research will also explore
the potential and key elements in the success of women's leadership development so that new
perspectives can be built and strategies for developing women's leadership, especially in
SOEs.
2.1.1. Triple Bottom Line Theory (TBL)
Corporate sustainability continues to be a concern for business people and the
challenge of maintaining the company's survival is increasingly complex and full of
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uncertainty. Advances in technology and science in the industrial era 4.0, in addition to
having brought about very revolutionary changes and developments with the application of
technology, namely automation and digitalization in the company's business processes, have
also had a disruptive impact on several industries. From this condition, many companies have
experienced a crisis and even collapsed or closed.
The Triple Bottom Line (TBL) theory (Elkingkton 1997, 2004) on corporate
sustainability, namely people, profit and planet, remains the focus of many studies on how
company leaders manage the synergy of financial, social and environmental, to maintain the
survival of the company and can continue its existence. The three main forces in the
continuity of the company's business, namely the company's economic prosperity, the
guarantee of environmental quality, and the realization of social justice will depend heavily
on people or Human Resources (HR) as subjects and business actors themselves. As the main
subject and asset of the company to move and move the organization, the role of employees or
HR elements in the company and the role of company leaders is very decisive, and becomes
the main thing to be considered in one of the pillars of TBL Theory (Elkington 2004).
Regarding people in TBL Theory, the sustainability of the company depends on how
the company as an organization can maintain the existence of employees, ensure the abilities
and capabilities of employees in accordance with the needs of the company, have a positive
attitude and behavior, and produce a good level of productivity to ensure the continuation of
company activities. Meanwhile, to drive the company and manage the activities and
operations of the organization, the presence of leaders who are also an element of people in
the organization is a very key factor (Rezaee 2016). By paying attention to the role of people
in the organization, the company has made efforts to perpetuate operations or maintain the
sustainability of the company for now and later, indefinitely.
Corporate sustainability is also seen as a continuous process of managing both
financial and non-financial corporate performance (Wu et al. 2013, Shahzad et al. 2022). This
perspective becomes the main view on corporate sustainability, namely how the company
realizes performance in all important aspects of all stakeholders. Corporate sustainability is
defined as the company's ability to meet the needs of the company's direct and indirect
stakeholders, namely shareholders or owners of capital, employees, clients, communities and
society at large (Zahid et al. 2020).
In the context of the future, corporate sustainability is a moving target that continues
to determine a company's business model, strategy, business processes and reporting structure
(Brockett and Rezaee 2012, Klettner et al. 2014, Rezaee 2016). Corporate sustainability is
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variously defined, depending on the context and historical period in which the term appears.
According to Klettner et al. (2014), sustainability is a dynamic corporate target with respect to
business models, strategies, business processes and reporting structures in the company in
order to achieve 4 (four) areas as benefits of corporate environmental and social
responsibility, namely (1) cost reduction, (2) competitive advantage, (3) creation of corporate
value in synergy and (4) a trusted corporate reputation. Meanwhile, corporate sustainability is
also defined as a continuous process to evaluate the company's performance in financial and
operational and other areas (Wu et al. 2013, Shahzad et al. 2022).
Corporate sustainability is a concern of researchers, including Rezaee (2016) and
Graham (2019) who examined the holistic model for corporate sustainability. In this case, to
assess a company that can continue to carry out its activities to achieve company goals or the
company has sustainability, the measurement parameters used are comprehensive. Graham
(2019) states that there is a paradigm shift in defining and analyzing corporate sustainability,
which considers all aspects of the company, which are grouped into 2 (two) broad groups,
namely the financial sector and the non-financial sector.
With regard to the company's role for the environment and social responsibility,
Graham (2019) states that there are four stakeholder assessment constructs for corporate
sustainability, namely (1) financial performance, (2) environmental performance, (3) social
performance and (4) corporate governance performance. Regarding the sustainability of the
company and the attention of several researchers who recommend further research, namely
Kantabutra (2006), Jing (2009), Avery and Bergsteiner (2010), Razaee (2016) and Graham
(2019), then to see the sustainability of the company, it is necessary to measure several
performances, namely: financial performance, employee satisfaction, customer satisfaction
and corporate governance. Meanwhile, with regard to social performance, Brockett and
Rezaee (2012) mention important factors in corporate sustainability including company
employee satisfaction and customer satisfaction. As for governance performance, this
includes the management of all business processes in the company (Graham 2019).
Other researchers have also conducted research on key performance factors of
corporate sustainability, including Kantabutra (2006), Jing (2009) and Avery and Bergsteiner
(2010, 2011) who reported several performance measures both financial performance
measures and non-financial performance measures. To measure the impact on business
performance and sustainability, Kantabutra (2006) proposed three main measures, namely
employee satisfaction, customer satisfaction, and financial management results. Jing (2009)
further examined several performance measures, namely financial performance, customer
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satisfaction, staff satisfaction, staff turnover and manager turnover. Furthermore, Avery and
Bergsteiner (2010) emphasized that for a company to be sustainable, it needs to pay attention
to improving customer satisfaction, brand and reputation and stakeholder value in the long
run.
The company's financial performance is the result of the work of all elements of the
company in generating profits or profits. To build investor and stakeholder confidence and the
sustainability of the company, the company needs to maintain the financial capability and
health level of the company, among others, by using the ratio of the rate of return on equity
(ROE), the rate of return on investment model or Return On Investment Capital (ROIC), the
rate of return on assets (ROA) and the level of profit (Graham 2019). Furthermore, regarding
the performance of corporate governance in order to increase transparency and accountability
and compliance with applicable regulations, the duties of management, namely directors and
supervisors (Commissioners or Supervisory Board) are indicators that can be analyzed
supported by good financial capabilities (Karlson 2016).
2.1.2. Upper Eschelons Theory
The Upper Echelons Theory is a theory that explains that the characteristics of top
leaders can influence firm performance (Hambrick and Mason 1984, Hambrick 2007). In this
study, top leaders or top leaders/management offer much greater power to predict
organizational outcomes and make strategic choices and actions. According to Hambrick
(2007), the decision-making process in the company is influenced by the cognitive
background of top leaders and how they perceive various events experienced by the company.
The top leaders in question are leaders at the top management level of the company, namely
the board of directors, as well as the relationship between their experience conditions,
knowledge, existing value systems to produce company performance. Furthermore, upper
echelon theory states that the management team is influenced by many attributes that shape
their way of thinking in understanding and dealing with various situations and decision-
making efforts. The attributes of the upper echelon management team include but are not
limited to: age, tenure in the company, socio-economic background, education and work
experience. Figure 2.1 shows a schematic upper echelon perspective where leaders interpret
the objective situation of the company's internal and external conditions.
According to Hambrick (2007) and Post and Byron (2015), the psychological state of
the management team and other strategic factors of the company such as innovation,
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diversification, Capital intensity, the novelty of work equipment, the complexity of the
company's administration, financial conditions and other external and internal situations
further affect the company's performance which is shown in the level of profitability, growth
and survival.
In Figure 2.1, demographic factors such as gender, education and age on company
performance and board process effectiveness are observable areas of influence on upper
echelon characteristics (Hambrick et al. 2015), which affect company performance. Female
directors are expected to color management experience and knowledge (Post and Byron
2015), for example, female directors are better able to understand consumer needs than male
directors (Catalyst 2020). In addition, female company leaders or female directors based on
research results show better educational qualifications (Carter et al. 2010). All of these
benefits can be obtained when companies have gender diversity in management composition,
or a balance of male and female directors.
Several studies examining the presence of women directors on corporate boards and
their relationship with corporate performance and sustainability, adopted from Post and Byron
(2015), show, among others, that women directors have prominent educational qualifications
(Carter et al. 2010), marketing and sales skills, work experience, good stakeholder
understanding (Buse et al. 2016), integration of knowledge and information, ethical and moral
reasons, and quality of decision making (Post and Byron 2015).
2.1.3. Leadership Theory
Leadership theory (Bass 1990) and many studies explain that leadership is the key to
organizational sustainability (Doppelt and McDonough 2017). Good leadership will have a
major effect on the quality of management and the competitive advantage of a company, and
this promotes the sustainability of the company.
Leadership is defined as the main element in decision-making, dynamics and
processes in an organization. The definition of leadership can basically be classified in three
ways, namely (1) as an attribute of a position, (2) as a characteristic or characteristic of a
person and (3) as a category of a person's behavior (Bass 1990, Yulk 2012). The definition of
leadership as an attribute or completeness of a position is the strength of a person or
interpersonal relationship, namely the assumption of group members that someone has the
power to determine patterns of behavior in connection with activities as a member of the
group (Yulk 2012).
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As a characteristic of a person, the notion of leadership is associated with the figure
of a change agent who acts to influence others, more than the other person acts (Daft 2011).
Whereas as a person's behavior, this according to Sweeney and McFarlin (2014) shows a
person's behavior that involves a set of influence processes between individuals, which aims
to motivate subordinates, create a forward vision and develop strategies to achieve
organizational goals.
Leadership has subsequently become an area of interest and much research has been
conducted to identify the characteristics, traits, styles and attributes of leadership. Leadership
is mostly researched in relation to causes that further impact certain factors for organizational
effectiveness, such as company performance, employee satisfaction, customer satisfaction,
work team progress and various other organizational factors. Furthermore, attention to
leadership is carried out with the aim of developing appropriate leadership development
strategies for organizations. A person's leadership is inseparable from all the character and
characteristics of the individual leader, as well as the ability and skills in leading, including
competence, technical skills (hard skills) and non-technical skills (soft skills) and other related
matters. These things are very important as material in HR research and development, because
superior leaders can give birth to superior organizations and progress as well (Daft 2011,
Sweeney and McFarlin 2014).
Leadership is the art of influencing people so that those who are led can work well to
achieve agreed goals. A person's leadership style is a person's way and approach in making
plans, giving instructions and motivating people (Divyaranjani et al. 2018). Leadership theory
is essentially the study of individuals who have certain physical and mental characteristics,
have a certain position or position in the group that is seen as more than members of the
group, where the individual leader has an influence on group members to act towards
organizational goals.
Leadership in understanding includes three categories, namely personal
characteristics, behavior and one's position in the group, where based on this, leadership
theory is basically a study of an individual or someone who has certain physical and mental
characteristics, has a certain position in a group or organization that is seen as more than
members of the group, then individual leaders have influence or can influence group members
to act towards predetermined goals (Divyaranjani et al. 2018).
Great Man Theory is an early theory of leadership presented by Thomas Carlyle in
the 19th century. This theory assumes that leadership traits and talents are carried from birth.
Subsequently, leadership theories such as Trait Theory, Contingency Theory and Behavioral
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Theories emerged. Servant Theory was first introduced in the early 1970s. This theory
believes that good leaders are those who are in charge of serving, maintaining and
maintaining the physical and mental conditions of their followers. On the positive side, this
theory emphasizes the leader's duty to contribute to the welfare of others as a form of social
responsibility. Furthermore, Transactional Theory is a theory of leadership that is based on an
agreement between a leader and his followers, for the purpose of obtaining commensurate and
mutually beneficial returns (transactions).
One of the many theories of leadership and organizational transformation is
transformational leadership theory and transactional leadership theory. This theory was
introduced by Burns in 1978 in a political context, then developed and refined by Bass in
1985 in an organizational context.
Leadership is based on the influence and relationship between leaders and followers,
where a transformational leader can motivate followers in three ways (Yulk 2012), namely (1)
making followers more aware of the importance of work results, (2) encouraging followers to
care more about the organization than their own interests, and (3) activating followers' needs
at a higher level.
Leadership theory continues to develop in line with the need to develop individual
leadership skills in organizations or companies. Kreitner and Kinicki (2017) classify
leadership in several approaches, namely: (1) trait approach (leadership is from birth), (2)
behavioral approach (leadership based on behavior and can be trained), (3) contingency
approach (leadership is learned from the behavior of carrying out tasks), (4) transformational
approach (leadership that manages followers to cooperate and commit).
Leadership skill development is the responsibility of each individual leader and also
the responsibility of the company. Based on global trends, leadership development programs
need to pay attention to several elements (Tozer 2012), namely the need to develop leaders as
individuals (self development), collective leadership development that does not rely on
individual excellence but distributes leadership skills collectively to all company employees,
and the development of leadership skills for innovation, because innovation is an inevitable
need for organizations to continue to move towards achieving goals with various challenges in
the organizational environment (Mihardjo et al. 2019).
Leadership development programs need to start from the recruitment stage of
potential leaders in the company (McEntire and Greene-Shortridge 2011). This is because not
all excellent leaders are born, but rather formed through education, training, experience and
assignment. Qualified individuals who are recruited from the beginning and have good
15
leadership character are an added value for the company. Various education, training and
assignment programs can further create excellent leaders according to the needs of the
company.
2.1.4. Leadership Paradigm
By looking at the existing conditions that leadership theory has developed from the
leader's point of view, then in its development in 2004, Avery, G.C. introduced a typology of
leadership called the leadership paradigm. This leadership paradigm is defined as a way to
unify the many theories and information of leadership research in a framework. This
leadership paradigm strongly considers that in the word leadership, there is a complex
interaction between leaders, followers, colleagues, organizations and environmental factors.
The leadership paradigm promoted by Avery (2004) uses a practical approach, that leadership
is very diverse, holistic or comprehensive, covers every level in the organization and consists
of many variables. The leadership paradigm, hereafter referred to as leadership, consists of
classical, transactional, visionary and organic leadership.
Classical leadership is the oldest paradigm that is still used in organizations today
(Avery 2011). This type of leadership refers to domination by a superior person or elite group,
who can then mobilize other members to act according to goals and directions, but may not be
explicitly stated. This type of leadership has limitations including: the leader cannot control
every action especially when the situation is complex. According to Avery (2011),
transactional leadership is a leader who adopts a consultative style to make decisions.
Leaders do not empower followers very often and followers have relatively low power in the
organization. Compared to classical leadership where the source of follower commitment is
due to the greatness of the leader, the source of follower commitment in transactional
leadership comes from negotiated rewards, agreements and expectations.
Visionary leadership, also known as transformational, charismatic, inspirational
leadership, is a type of leadership that emotionally engages employees in the organization
(Avery 2011). About this visionary leadership, many researchers are interested and discuss it.
This type of leader has high competence and a vision for success, where the leader inspires
and activates followers to perform beyond expectations. Leaders with visionary leadership use
a collaborative style to make decisions. They share issues with followers and provide
consensus before a final decision is made. The source of a visionary leader's follower
commitment comes from the influence of the leader's charisma and/or shared vision, more
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complex technical systems and the organization being co-controlled with followers.
Organic leadership is a relatively new paradigm in organizational studies. It was
originally introduced by Drath in 2001 and developed by Avery (2005, 2011). In organic
leadership, the formal distinction between leaders and followers is somewhat blurred, as the
paradigm relies on reciprocal action. Company employees will become partners who interact
with leaders in determining what makes sense, how to adapt to change and good direction.
Rather than relying on one leader, organic organizations tend to have multiple leaders. Organic
leadership allows for the coming together of people with different skill sets to interact with
each other, and they can also be leaders. The weakness of this leadership paradigm, which
relies on autonomy, freedom, discretion can result in loss of control and greatly increase
uncertainty. Then Avery (2011) further conveyed that under organic leadership, an
organization adopts mutual agreement in decision making. Members have a high level of
power as a result of shared leadership, with shared accountability and responsibility.
The measurement of the leadership paradigm presented by Avery (2004, 2005, 2011)
involves 13 (thirteen) indicators, of which 9 indicators were reviewed by Jing and Avery
(2016): (1) Decision making,
(2) Range of staff's power, (3) Power distance between leader and staff, (4) Key
players organization (key player role), (5) source of staff's commitment, (6) staff's
responsibility, (7) situation of management and leadership in the organization, (8) situation of
diversity in the organization, and (9) situation of control in the organization.
2.1.5. Leadership Paradigm for Corporate Sustainability
Leadership studies continue to evolve in line with the needs of organizations that also
develop contextually, especially with the influence of changing external conditions. In a
stable organizational environment, traditional leadership paradigms, namely classical and
transactional leadership (Avery 2011, Suriyankietkaw 2013), may survive. However, with
changes in the environment and demands on the organization, traditional types of leadership
are certainly challenged.
Meanwhile, according to Suriyankietkaew (2013) and Suriyankietkaw et al. (2022),
there are leadership paradigms that stand out or develop when associated with company
performance and company sustainability, namely the paradigm of visionary leadership and
organic leadership. Both types of leadership paradigms tend to perform better and are able to
respond to the challenges of changes in the organizational environment more effectively,
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compared to traditional leadership paradigms. In their research, Suriyankietkaew (2013) and
Suriyankietkaw et al. (2022) suggest that visionary and organic leadership paradigm types
have a relationship with company performance and company sustainability. T h e
effectiveness of both types of paradigms for company performance and sustainability is
driven by several factors, namely strong shared vision and values, self-leadership/self-
management, team orientation and devolved and consensual decision-making.
Regarding the relationship between leadership paradigms and corporate
sustainability, Kantabura and Suriyankietkaew (2012) have conducted a study on the
relationship between organic leadership and corporate sustainability. In this case, it is stated
that organizations whose leaders adopt organic leadership types tend to be able to respond to
environmental changes more effectively than organizations with other leadership paradigms. In
their study, Kantabura and Suriyankietkaew (2012) studied the characteristics of organic
leadership through the factors of shared vision and values, managing and leading themselves
and understanding each other as independent variables of research. Meanwhile, the company's
sustainability performance is seen from financial results, long-term shareholder value,
customer satisfaction, and reputation and brand.
2.1.6. Visionary Leadership
Leadership factors in organizations are often linked to the performance of an
organization. In the field of business, the leadership of the company is closely related to the
performance of the company, and furthermore to the sustainability of the company. Avery
(2011) differentiates styles in leadership by involving many interdependent factors, and
reflects diversity of contexts, organizational needs and preferences. Visionary leadership as
one of the prominent types of leadership (Jing et al. 2020, Karwan et al. 2021) today, due to
its characteristics that can help companies achieve good performance and promote corporate
sustainability. Visionary leadership in some literature is also known as "charismatic",
"transformational" or "inspirational" leadership (Suriyankietkaew 2013, Karwan et al. 2021).
Visionary leadership according to Jing et al. (2020) has a vision and a set of values
that guide collaboration between leaders and organizational members to achieve common
goals. Visionary leadership encourages transformation in the organization, from the condition
of self-interest to collective/shared interest, which takes place in the organization through
understanding the vision and values, preferences and aspirations of each employee in the
company. Visionary leadership is associated with motivation, organizational commitment and
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performance (Bass and Riggio 2006), and is also associated with teamwork and team
performance (Schaubroeck et al. 2007).
Companies with visionary leaders are suggested by some literature to tend to be
higher performing and better able to cope with environmental changes (Avery 2004, 2011).
Visionary leadership can enhance corporate sustainability and sustainable performance in
organizations (Kantabura 2006, Avery and Bergsteiner 2010, 2011, Karwan et al. 2021).
Visionary leadership is positively associated with higher financial performance of firms or
organizations under conditions of uncertainty. It consistently has a positive relationship with
employee perceptions of leadership effectiveness (Suriyankietkaew 2013, Karwan et al.
2021).
2.1.7. Organic Leadership
Next is organic leadership, which is also believed to be related to corporate
sustainability. This leadership concept and theory emerged since entering the 21st century,
known as organic leadership. This leadership is supported by the results of a meta-analysis
study by Gardner et al. (2010) on 353 articles in the period 2000-2009. Organic leadership
uses a leadership paradigm from leader centric to more on collective work (teamwork) from a
group of employees for the same goal. Organic organizations with organic leadership no
longer have formal leaders, because all are supported by the existence of a vision, mission and
organizational values with the same level of understanding at all levels and the existence of an
organizational culture (Jing and Avery 2016, Lough 2021).
Organic leadership is important because organizations are also rapidly developing
and advancing in the 21st century. Some researchers suggest that organizations that
implement organic leadership will be able to encourage the progress of organizational growth
and this will further promote the sustainability of the company. Jing and Avery (2016) and
Lough (2021) further mention that empirically, organic leadership is related to organizational
performance and supports company sustainability. Organic leadership will is more significant
when compared to other types of leadership paradigms and is positively related to
organizational performance.
2.1.8. Drivers of Leadership Effectiveness
The most important attribute of organic leadership according to Avery (2011) and
Lough (2021) is shared vision and values. Meanwhile, according to Jing et al. (2020) there
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are mediator variables that affect the implementation of the leadership paradigm, namely
vision, organizational climate or environment, and trust between leaders and followers. Some
of these elements are factors that encourage leadership effectiveness in organizations.
The strong shared vision and values factor is a driver of leadership effectiveness,
which in turn relates to company performance and sustainability. In this case the vision is an
articulation of the direction and purpose of the company and is an emotional commitment to
the organization and enthusiasm to carry it out (Berson et al. 2016). Having a vision is not
enough, but the vision needs to be strengthened with a mission and needs to be communicated
together between leaders and followers (Kantabutra and Suriyankietkaew 2012). Meanwhile,
corporate values are long-standing beliefs that serve as a guide for the company. These values
are generally seen as the cornerstone of corporate culture, the extent to which with agreed
values, all elements within the company guide and inspire each other on how to achieve the
vision (Avery and Bergsteiner 2011). Corporate vision and values have a strong impact on
employee commitment and this will increase the emotional bond between employees or
followers and their leaders (Kantabutra and Suriyankietkaew 2012, Lough 2021).
A well-communicated vision will help improve the performance of company
employees and enable these followers to appropriately work towards the company's desired
future. Research in relation to leadership paradigms, especially for emotion-based and
distributed leadership, suggests that leaders can also have a vision (Berson et al. 2016).
Further building on the positive effects of this communicated vision will have a positive
impact on employee performance and company performance (Lough 2021).
Next is the organizational climate, as a term used to describe the organizational
situation, with regard to the nature and conditions that can be perceived or felt by people in
the organization or in work units within the company (Schneider et al. 2013). While the
organizational environment is more used to see the physical conditions in the company
environment. The positive climate of the organization according to Schneider et al. (2013)
contains several aspects including innovative, communicative, interactive and warm relations
between employees and leaders, which indicates the extent to which managers care about the
welfare and opinions of their ranks.
In a climate that is very warm, communicative and innovative, team members tend to
be open in expressing their opinions and suggestions for organizational improvement.
Employees will strive to overcome challenges and together will strive to achieve
organizational goals (Schneider et al. 2013). A superior organizational climate will support
organizational performance, through increased company productivity and efficiency in
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achieving company goals (Chen and Hou 2016). A positive organizational climate can result
in increased job satisfaction for employees (Anderson et al. 2017), and can further increase
customer satisfaction (Al Omari et al. 2020).
Meanwhile, the work environment affects working conditions that can physically
improve the conducive work atmosphere. The work environment, among others, can be
indicated by the condition of work facilities that prioritize safety and security, relationships
and communication between employees, opportunities to discuss with leaders as well as
creative freedom and passion for innovation (Raja 2017).
Meanwhile, trust between leaders and followers is the third factor that drives the
effectiveness of organic and visionary leadership. Much literature states that trust for a leader
is very important. In leadership, the level of trust given by the organizational environment
will help improve performance as trust in the organization increases (Yang 2016, Kim et al.
2016, Yang et al. 2019, Jing et al. 2020). Trust in the organization is not only needed for
leaders or trust from the point of view of followers, but also trust is needed from the leader's
own point of view, namely trust in his subordinates (Yang 2016, Yang et al. 2019).
The trust that is established and maintained between leaders and followers will
generate more support for leaders, increase the cohesiveness of work units and work teams
and increase understanding and promote common interests to further increase job satisfaction
(Yang 2016). This matter of trust between leaders and followers requires confirmation of
whether this can be an intermediary or mediator for effective leadership in organizations (Jing
et al. 2020).
2.1.9. Women Leadership
In the development of the era, women who currently have equal employment
opportunities with men, also have the opportunity to become leaders in organizations.
Although basically the ability to lead and leadership theories do not distinguish between male
and female leaders, in practice, women leaders have distinctive characteristics, and this has
received a lot of research attention (Fitriani 2015). Women's leadership style is not the same
as the way men lead (Lakshmi and Shrivastav 2017). According to Holmes and Stubbe
(2003), women's leadership is indirect and conciliatory compared to men who tend to be
direct and less confrontational. Women leaders tend to be facilitative and collaborative
although their contributions are less visible in public, compared to male leaders who are
competitive, autonomous and dominating. Women's leadership is process- and people-
21
oriented, while men's leadership is task- and results-oriented.
On women's leadership, further according to research conducted by McKinsey
(2018), Indonesia can add $135 billion per year in Gross Domestic Product (GDP) in 2025 or
a 9% increase in total business turnover, when involving women in corporate leadership. This
is because women are considered to have many advantages that can drive company
performance, including driving execution, customer service and enthusiasm for work
(enthusiasm), more detail in providing added value, more detail in seeing problems or work
(Setiawan et al. 2018).
Based on McKinsey research (2018), it is stated that providing equal opportunities to
contribute to the company for women (equality) and the element of female leadership, this
will have a positive impact on the organization. Female leaders have several things that are
higher than male leaders, namely in the fields of: customer service, driving execution and
enthusiasm. On the other hand, there are some things that need to be improved in female
leaders such as strategic orientation, business acumen, visionary leadership (which are the
advantages of male leaders). The presence of female leaders will complement the
organization, and give color with excellence for customer service, driving execution and
passion/enthusiasm in work and performance.
McKinsey's research also states that companies that adopt equality will have 20%
higher performance. This is in terms of profitability and productivity, the ability to attract and
retain talent, creativity, innovation and openness, reputation and the ability to meet the needs
of its customers. So regarding equality or equality and women's leadership, it is not a gender
issue, but actually a business issue. Because the advantages of women if optimized and
implemented within the framework of the company's business in the right way, then it will
encourage business to be better.
Furthermore, according to Lakshmi and Srivastav (2017) said that in line with
globalization where organizations are becoming less hierarchical and more team-based,
organizations need leaders who can build relationships to add benefits to individuals and
organizations. Furthermore, according to Lakshmi and Srivastav (2017) women's leadership
style has the advantage of prioritizing relationships and teamwork, then this adds to the
benefits of an organization. Women's leadership develops greater interdependence, shares
knowledge and responsibilities and accomplishes tasks by empowering and facilitating
subordinates. In the context of organizations becoming more transformational, the
participative and collaborative leadership skills and styles typically exhibited by women are
prerequisites for organizational progress.
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Still on the distinctive characteristics of women leaders, researcher Rosener (1991)
mentioned that transformational leadership is indicated by the existence of a positive
relationship between leaders and subordinates that can strengthen individual and
organizational performance. Leaders who display a transformational style encourage workers
to look ahead of their own needs and focus on the interests of the organization's large group.
Research on how women and men lead (Holmes and Stubbe 2003) paid more attention to
women's leadership than men in transformational leadership style.
It is said that women tend to be better than men at negotiating, mediating,
facilitating, and communicating which are necessary for a more effective leadership style.
Feminine female leadership reduces hierarchy, satisfies subordinates, and achieves results,
and is better at helping their teams discuss uncertainty, and increasing their self-awareness. It
also helps to recognize the connection between people's feelings and their performance. In
facilitating discussions and finding solutions, women leaders are good at getting ideas from
everyone and encouraging innovation (Rosener 1991, Holmes and Stubbe 2003).
Regarding leadership style, female leaders have a distinctive style not based on
gender, but rather due to job characteristics (Yulianti et al. 2018). Women's characteristics
that can support leadership effectiveness are shown through two types of leadership, namely
transformational and feminism, which are characterized by the ability to persuade, prove
criticism wrong, the ability to encourage the team, have strong charisma, dare to take risks,
multitasking and patience. Some positive characteristics that stand out from women's
leadership as social beings as above, are then believed to be able to bind, harmonize and
encourage organizational resources to grow and compete well (Yulianti et al. 2018).
In addition, due to the development of the times, especially the demand to fulfill the
needs of life, women have become involved in working. In past and present societies,
women's leadership is quite prominent. RA Kartini from Java is very famous as a role model
for women's emancipation, in the present era there are Sri Mulyani Indrawati (Minister of
Finance), Retno Marsudi (Minister of Foreign Affairs), Tri Rismaharani (Minister of Social
Affairs), Susi Pudjiastuti (former Minister of Maritime Affairs and Maritime) who are
respected female leaders.
Furthermore, women's leadership in companies today is not just a gender or equality
issue, but rather a business issue (McKinsey 2018). Based on McKinsey's research (2018), it
is stated that providing equal opportunities to contribute to the company for women (equality)
and elements of female leadership, this will have a positive impact on the organization.
Female leaders have several things that are higher than male leaders, namely in the fields of:
23
customer service, driving execution and enthusiasm. On the other hand, there are some things
that need to be improved in female leaders such as strategic orientation, business acumen,
visionary leadership (which are the advantages of male leaders).
The presence of women leaders will complement the organization, and provide color
with excellence for customer service, drive execution and enthusiasm for work and
performance. McKinsey's research also states that companies that adopt equality will have
20% higher performance. This is in terms of profitability and productivity, ability to attract
and retain talent, creativity, innovation and openness, reputation and the ability to meet the
needs of its customers. So that regarding equality or equality which has now developed into a
gender justice (equity), then it is not only a gender issue, but actually a business issue because
it is closely related to business development and sustainability. Because the advantages of
women if optimized and implemented within the framework of the company's business in the
right way, then it will encourage business to be better.
Women's representation in company management basically addresses two main
issues, namely the level of representation of women in board positions in companies or the
percentage of women's representation on the board of directors and the number of companies
that have one or more women on the board of directors (World Economic Forum, 2021). The
ratio of women's representation on company boards is less than the percentage of companies
that have women on their board of directors. This shows that the majority of director seats are
still occupied by men and few by women, and for some reason the position of female director
is simply considered a token.
Jhunjhunwala (2012) reported that the global statistics of the ratio of women's
representation in companies in three consecutive years were 9.2% (2009), 9.4% (2010) and
9.6% (2011), while for companies that had at least one female director were 55.3% (2009),
56.4% (2010) and 58.3% (2011). Global statistics on Fortune 500 companies by Governance
Metric International in 2009 recorded 23% of companies with no female directors, 26% had
only one female director, 29% had two female directors and 23% had three or more female
directors.
Women's leadership in the company is shown through the presence of female
directors of the company. Based on several studies, the presence of women directors in the
company is positively related to company performance (Dezco and Ross 2012, Ntim 2015)
which is indicated by financial performance, corporate governance, social performance and
for the environment, among others through Corporate Social Responsibility (CSR) activities
(Rao and Tilt 2016, Shaukat et al. 2016). Furthermore, women's leadership in companies can
24
encourage corporate sustainability (Klettner et al. 2014, Graham 2019).
The board of directors is an important component in the company that if it runs
effectively will be able to reduce agency costs and can maximize company profits and
shareholder aspirations. Independent directors are one type of director in a company's
management team who plays an important role, namely monitoring or supervision in relation
to agency theory (Panda and Leepsa 2017, Hamdan 2020).
The presence of female leaders in the company can sometimes cause resistance from
the company environment or work unit. This can be triggered by the lack of information about
the female leader, the leader's lack of communication and other factors. Resistance to the
presence of the leader can then trigger conflict in the organization. The ability of women
leaders to build relationships with organizational members is needed to overcome conflict or
reduce the potential for conflict that may arise (Falikowski 2002, Nahrowi et al. 2015). Some
leader behaviors in dealing with conflict according to Falikowski (2002) and Nahrowi et al.
(2015) include This is done through competition, collaboration, avoidance, accommodation
and compromise through negotiation.
2.1.10. Good Corporate Governance
Corporate governance is a form of responsibility for the company's activities carried
out by the board of directors or executive management of the company, with the aim of
providing strategic and tactical guidance, setting targets and company goals and risks that
must be considered in managing company resources. Corporate governance is designed to
direct the professional management of the company by adhering to the principles of
transparency, accountability, responsibility, independence, and fairness based on applicable
laws and business ethics (IFC 2018, Graham 2019).
Measurement of good corporate governance performance based on Brockett and
Rezaee (2012) is seen from several aspects, namely: (1) execution and oversight by the board
of directors and board of commissioners; (2) management; (3) compliance; (4) internal
auditing; (5) external auditing; (6) monitoring; and (7) ethics. Meanwhile, the provisions of
good corporate governance in SOEs are based on the 2011 Ministerial Regulation and the
2012 Decree of the Secretary of the Minister of SOEs. Good corporate governance (GCG) is
analyzed from several aspects, namely:
(1) Commitment to sustainable good corporate governance; (2) Attitude and
responsibility of capital owners/shareholders and General Meeting of Shareholders (GMS);
25
(3) Board of Commissioners/Supervisory Board; (4) Board of Directors;
(5) Information disclosure and transparency; and (6) Other aspects.
Some prominent indicators that can be measured in this aspect of corporate
governance include the number of committees in the board of commissioners, the presence of
independent commissioners, diversity in directors and commissioners in terms of gender,
expertise, cultural background and ethnicity, number of audit committee members, number of
meetings (Brockett and Rezaee 2012). Meanwhile, from the management side, some
indicators that can be used are risk management, code of ethical behavior, budget and
performance evaluation, published company profits (earning release), frequency of review or
frequent management control activities.
Furthermore, some indicators of company compliance include the existence of a
compliance committee, the existence of a compliance function, whistle-blowing policies
programs and procedures. For internal audit factors, several indicators according to Brockett
and Rezaee (2012) are the existence of an internal audit function, adequate resources in the
internal audit work unit. External audit factors include independent auditors, audit and auditor
quality, compliance with external auditor standards. As for indicators of legal aspects and
financial advisors (legal & financial advisors), among others, are the existence of functions
and personnel in charge of the legal field. For the monitoring factor, the indicators used and
can be measured are investor ownership, online stakeholder voting, approval of major
business transactions such as mergers and acquisitions. Meanwhile, for the ethical aspect,
several indicators can be used, including employee productivity, satisfaction, competence and
commitment employees, reasonable compensation and compliance with all applicable
business-related regulations.
2.1.11. Agency Theory
Referring to the Agency Theory developed by Jensen and Meckling in 1976 and
Eisenhardt in 1989, the role of top management or company directors is very important in
carrying out the aspirations of the capital owners or shareholders of a company (Zogning
2017). Agency problems will arise when personnel working in the company utilize company
resources for personal gain, and this is difficult to monitor by the company owner. For this
reason, the owner of capital or shareholders of the company assigns a group of people as
directors of the company to carry out the management of the company according to existing
aspirations (Panda and Leepsa 2017).
26
In managing a company, there are basically two main tasks of the board of directors,
namely managing the resources in the company and monitoring the company for the benefit
of shareholders. The effective composition of a company's board of directors is important in
corporate governance arrangements. The effectiveness of the work of the board of directors is
encouraged by the diversity of the board of directors (diversity in board), including gender,
education, expertise, age (Hambrick 2007, Hambrick et al. 2015). Diversity and independence
of the board of directors is one of several issues faced by modern companies (Asri 2017). In
many studies on gender diversity in companies, the theory used is agency theory (Low et al.
2015, Ararat et al. 2015, Zogning 2017, Panda and Leepsa 2017). In this theory, the duties of
directors include protecting the rights of shareholders, in which case female directors are
found to be strong monitors (Adams and Ferreira 2009). Female directors are better at
communication and decision-making processes (Buse et al. 2016), more risk-averse than male
directors (Srinidhi et al. 2011).
2.1.12. Glass Ceiling Theory
Glass Ceiling Theory is a concept developed by Gay Bryant in 1984, describing the
concept of invisible handicaps that prevent women from occupying top positions in the
structure of a company. This theory was then presented by Dominguez et al. (2019) by
reviewing the difficulties and obstacles faced by women to reach the top position or upper
echelon in the company, precisely the obstacles for women to become members of the
company's board of directors. What women face in this theory include cultural and social
conditions that prevent women from gaining connections and strength to overcome obstacles
to becoming top leaders. One of the reasons for these conditions is the reluctance for women
to organize, so that this brings difficulties for women to reach top management positions in
organizations or in prestigious companies.
Glass ceilings are organizational and social barriers that prevent women from taking
on top leadership roles in certain organizations. Gender norms result in incorrect assumptions
about the roles of men and women, where men are expected to be a more important part of the
family who provide all the economic resources and strength of the family. Stereotypes and
social norms that exist in society become invisible barriers (glass ceilings) that need to be
better understood to overcome and empower women legally and socially. In this case, so that
women have the same opportunities as men and can become top leaders of
organizations/companies.
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2.1.13. Women Directors in Companies
The presence of women in board positions in companies around the world is known
as board diversity. In the "Fortune 500" and "Fortune 100", an annual list based on the version
and published by Fortune Magazine that ranks 500 and 100 publicly and privately owned
companies based on their gross revenue and research conducted by the Alliance for Board
Diversity and Deloitte (Catalyst 2020), further states that in 2018 the number of African-
American / Black women and women in the Asia Pacific who occupy board seats continues to
increase. The increase was 26.2% for African-American/Black women on corporate boards
and a 38.6% increase for Asia Pacific women. This figure is higher than the survey in the
previous period, 2012-2016, as shown in Table 2.1.
Furthermore, for the condition of female directors in Indonesia, a study by Darmadi
(2011) on female directors in Indonesia revealed that the average percentage of women in the
company's board of directors is 11.2%. The study was conducted on 383 companies listed on
the Indonesia Stock Exchange (IDX) in 2009. The percentage of female directors in Indonesia
is not much different from the conditions in Australia and the UK. In most studies in
developed countries, research shows that a larger percentage of female directors results in
higher financial performance. However, this is different in Indonesia. Companies listed on the
Stock Exchange in Indonesia are mostly family-controlled (Darmadi 2011), so the presence of
women on the board of directors tends to be due to family relationships with controlling
shareholders rather than expertise and work experience.
In terms of women's representation on the board of directors, the conditions in
Indonesia are relatively similar to those in ASEAN countries, which have a percentage of
around 14.9% (IFC 2019). However, the condition of women leaders in Indonesia who
occupy senior management or one level below the board of directors is 18.4% or still quite far
below the average percentage of ASEAN countries (25.2%).
According to a study by the International Finance Corporation (IFC) entitled Gender
Diversity of Corporate Boards in ASEAN, companies with more than 30% female board
members have an average ROA of 3.8%, or higher than companies with no female director
representation (ROA=2.4%). In Indonesia, according to the IFC study, the top three industries
with the highest percentage of female directors are industry (26%), real estate (20%) and
consumer good (15%). The surveyed companies from Indonesia make up about 5% of the
total ASEAN companies surveyed.
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2.2. Empirical Review
Several research reports show the influence of leadership factors on company
performance. Research by Appelbaum et al. (2015) reported that leadership acts to direct at
various levels and influence organizational outcomes both directly and indirectly. Leaders
continue to shape employee attitudes during change and also direct antecedent factors and
encourage them to change. The presence of resistance to change translates into perceptions,
commitment and involvement in the change process, all of which are spaces for leaders to
manage the interaction of the organizational environment with these factors and ultimately
determine the organizational outcomes resulting from change initiatives.
Research by Moreno-Gomez et al. (2018) reported that gender diversity is positively
associated with business performance. The relationship between gender diversity at the top of
the corporate hierarchy as CEO (Chief Executive Officer) and as a top management team
(board member) has an effect on business performance when it comes to business operations
(Return on Assets/ROA). Even female representation has a significant positive effect in the
boardroom and on subsequent business performance, as measured through shareholder-
oriented metrics (Return on Equity/ROE).
Zhou's (2020) research results state that reaching the percentage threshold of female
leaders is crucial for them to have an impact on firm performance. In addition to company
performance, female leadership also has a positive impact on the company's credit rating and
its overall risk, which is also an important aspect of overall company performance. Later
research by Arayssi et al. (2016) also reported that the presence of women on the board of
directors has a favorable effect on corporate risk and performance through the promotion of
corporate investment through the provision of corporate social and environmental benefits,
and through corporate reports.
Christoper et al. (2021) also reported a significant effect of the presence of female
leaders on company performance. In this case it was reported that hospitals with female CEOs
performed significantly better than male-led hospitals on one financial metric. Research by
Sattar et al. (2021) reported consistency with the agency theory framework where female
directors give significance to increasing company profitability. Post and Byron's (2015)
research also found that the representation of female directors has a positive effect on two
responsibilities A key responsibility of company directors is the monitoring of performance
and the delivery of corporate strategy.
Then Tariah's research (2019) reported evidence of a positive influence between the
presence of female directors and company performance, as well as CEO diversity and
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company performance. Jiyothi and Mangalagiri's research (2019) also reported that female
directors create a positive and significant impact on company performance through the return
on assets (ROA) parameter. Then El-Khatib and Joy (2020) also reported that having women
on the board of directors improves company performance and reduces risk. Zulvina et al.
(2021) also examined a census of 31 mining companies listed on the Indonesia Stock
Exchange (IDX) with complete data for the 2017-2019 period, and reported the research
results that female directors have a positive effect on firm value.
The pro view of the existence of women's leadership as a result of research by
Lakshmi and Shrivastav (2017) provides empirical evidence of differences in women's
leadership styles. Women's leadership style is conveyed more towards building relationships,
sharing knowledge and responsibility in completing tasks by subordinates, empowering and
facilitating the ranks. This characteristic of women's leadership is very suitable for the
conditions of an organization that continues to grow, and for organizations that are
undergoing transformation, the expertise and leadership styles of women who are
participatory and collaborative will greatly encourage the success of change.
This pro-women's leadership view is also conveyed by Rosener (1991) and Bilal et
al. (2021), where transformational leadership tends to develop positive relationships between
leaders and subordinates to strengthen individual and organizational performance. This
transformational leadership encourages employees to complete their work, see their own
future and see the future of the group and organization. Leadership with transformational style
is widely demonstrated by female leaders (Rosener 1991, Bilal et al. 2021).
The different views on the presence of women in upper management and their
influence on company performance provide recommendations for research to provide
empirical evidence that explores the presence and/or representation of women on the board of
directors or at the upper management level rather than polemicizing on issues of gender
equality and the need for a proportion of women in corporate leadership. Gender equality
referred to in this study is not limited to the term equal rights for men and women or equal
rights for men and women (gender equality), but also refers to gender justice. This research
supports the concept of equality of men and women for political, economic, civil, social and
cultural rights as well as providing equal access opportunities. Furthermore, this research also
strongly supports gender justice, which is the process and fair treatment of women and men
(equity). Gender justice means that there is no role standardization, double burden,
subordination, marginalization and violence against women and men.
Katsaros' (2022) research report provides a new perspective on the importance of
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leadership in driving corporate financial performance.
The relationship between leadership and corporate financial performance is mediated
by employees' readiness to change, which is an indirect effect of the leader's role in building
the attitudes and behaviors of employees and the corporate ecosystem.
Feng et al. (2019) in their research conveyed that human leadership and moderating
leadership help companies to better utilize customer orientation to improve company
performance. The absence of moderating leadership may be particularly harmful for
companies operating in less competitive environments while the moderating effect is not
affected by competitive intensity. In addition, justice leadership has a positive impact on
companies operating in a more competitive environment, where it helps companies to realize
the benefits of customer orientation.
Akram et al. (2019) conveyed a positive relationship between knowledge
management dimensions, as well as positive moderation with empowering leadership. Mu et
al. (2018) reported the interaction between Outside-in marketing and human capital
capabilities (leadership and employee-proactive) showing the interrelationship between
outside-in marketing and leadership to achieve superior firm performance. The results suggest
that companies are more Outside-in marketing by devoting resources to developing leadership
skills and nurturing employee proactivity.
The importance of mediating knowledge management and business capabilities
conceptualized by outside-in marketing in achieving company performance provides a new
proposition for further investigation of the mediating role of business competencies and
organizational competencies, especially in women's leadership and their influence on
company performance and sustainability.
2.2.1. Visionary Leadership and Corporate Sustainability
Visionary leadership as one of the prominent types of leadership can help companies
achieve good performance and promote corporate sustainability (Jing et al. 2020). Visionary
leadership in some literature is also known as charismatic, transformational or inspirational
leadership (Suriyankietkaew 2013). Visionary leadership according to Jing et al. (2020) has a
vision and a set of values that guide collaboration between leaders and their staff to achieve
common goals. Visionary leadership encourages transformation in the organization, from the
condition of self-interest to collective/shared interest, which takes place in the organization
through understanding the vision and values, preferences and aspirations of each employee in
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the company.
Visionary leadership is associated with motivation, organizational commitment and
performance (Bass and Reggio 2006), and is also associated with teamwork and team
performance (Schaubroeck et al. 2007, Karwan et al. 2021). Companies with visionary
leaders are suggested by some literature to tend to be higher performing and better able to
cope with environmental changes (Avery 2011, Karwan et al. 2021). Visionary leadership
can improve corporate sustainability and sustainable performance in organizations (Avery
2004, Kantabura 2006, Avery and Bergsteiner, 2010, 2011, Karwan et al. 2021).
2.2.2. Organic Leadership and Corporate Sustainability
Empirically based on a number of studies, organic leadership is strongly related to
organizational performance. Jing (2009) from his research results conveyed that the organic
leadership paradigm has a more significant positive relationship with organizational
performance than other paradigms, but is quite close to the visionary leadership paradigm.
This is supported by several studies where organic leadership is strongly related to team and
organizational effectiveness (Manz et al. 2009, Lough 2021, Liu et al. 2022), as well as being
related to employee performance and satisfaction (Vecchio et al. 2010), organizational
performance (Schaubroeck et al. 2007). By Jing & Avery (2016) organic leadership is
identified as having a significant positive relationship or impact on organizational
performance, where organizations tend to perform higher and more effectively than
organizations that adopt other leadership paradigms. In his research, Suriyankietkaw (2013)
positively predicted organic leadership to increase sustainability capabilities for companies.
Organizations with an organic leadership paradigm refer to both 'leader' and
'leaderless' organizations. This is because organic organizations tend to have many leaders, so
that the organization can become a leader, where Jing and Avery (2008, 2016) highlight that
organic organizations do not have formal leaders, but the interaction between them can act as
a form of leadership united by a shared vision, values and culture. Organic organizations with
organic leadership allow organizational members to have the freedom to self-regulate and
participate in joint decision making. It relies more on the ability of its members to solve
problems and make decisions for the benefit of the organization. Leadership is team or
network-based and therefore the organization moves towards a sustainable path while
responding to changes in the organization's external environment (Manz et al. 2009, Liu et al.
2022).
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Most of the leadership literature adopts the organic leadership paradigm which tends
to respond to environmental changes more effectively than organizations with other
leadership paradigms, and therefore organizations are more sustainable (Suriyankietkaw 2013,
Liu et al. 2022). In this case a shared vision between leaders and followers is key to high
performance, in addition to high self-accountability, responsibility and adaptability of leaders
and organizational members (Avery and Bergsteiner 2011).
2.2.3. Business Competencies
The effectiveness of a person's leadership in an organization, especially in a company
or business is largely determined by the leader's skills in influencing and directing its
members in accordance with the direction and goals of the company (Miharjo et al. 2019). A
leader in a company is like a role model who has certain skills, Where in business, the leader
is required to have technical knowledge and leadership in the business field or the company's
main business.
2.2.4. Digital Leadership
Miharjo et al. (2019) said that in this industrial era 4.0, The Upper Eschelon theory
(Hambrick 2007) is still relevant. Leaders of the digital era and who are able to lead
organizations digitally with a digital mindset (digital leadership) will be instrumental in
transforming their organizations as a result of the era of disruption and innovation. Research
conducted by Miharjo et al. (2019) analyzed that a person's leadership in an organization or
company has a direct and indirect influence on business model innovation carried out by the
company, as part of digital transformation (Berman 2012, Li 2018). The indirect impact of
digital leadership on business model innovation is moderated by the leader's orientation to the
consumer experience. Digital leaders in this case play an important role in ensuring the
company's digital transformation based on their mission, vision, knowledge, experience and
ambition, based on performance management at the level of digital maturity and fundamental
company development on digital service excellence and digital culture (Li 2018).
These digital leaders must act using a digital mindset or global mindset that connects
each business element and must be more creative in supporting a culture of innovation in their
companies. They must think in new ways of doing business, have a deep understanding and
good knowledge in taking risks and decisions and encourage their companies to become
increasingly innovative and decentralized. These digital leaders must have the ability to lead,
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direct and evaluate the digital transformation process in the company, which is currently
inevitable (Rudito and Sinaga 2017). Meanwhile, digital transformation in organizations and
companies needs to be carried out by empowering all resources and potential of the
organization and all elements of added value owned (Mihardjo et al. 2019, Li 2018).
Furthermore, Rudito and Sinaga (2017) said that leaders with digital leadership skills can
facilitate their companies to have digital capabilities and are integrated in the development of
corporate culture and competencies that must also be digital.
A leader with digital leadership capabilities can then make digital technology an
advantage and competitive value of the company and can implement it in all lines of the
company (Bermen 2012), involve digital technology to the maximum in developing business
strategies and decision making (Li 2018) and encourage the use of digital technology to
increase the value and image of the company and expand the market (Mihardjo et al. 2019).
Research by Miharjo et al. (2019) shows that companies doing business today must
apply digital leadership to build a good consumer experience (Ravichandran et al. 2016) and
create innovation in business models (Kreutzer et al. 2017). Leader orientation on customer
experience shows a strong relationship in the development of business model innovation in
industry 4.0. This also indicates that in this era of disruption, consumers are becoming an
important factor for business model innovation sustainability of the company's competitive
advantage. This is an excellent input in the development of supply chains to build business
model innovation.
The consumer experience that digital leaders pay attention to is closely related to
customer focus competencies, where leaders have the ability to identify customer or consumer
needs and provide the company's best service. Leaders with digital capabilities are needed to
meet the demands of industry 4.0 consumers and the post-pandemic or endemic era, where
consumers have had a new experience in obtaining goods and services with all the
conveniences through the use of technology. Digital leadership balanced with customer focus
skills creates leaders who are very concerned about consumer needs and experiences, and that
if their needs are treated and met properly with the help of technology and information,
consumers will not mind the price (Miharjo et al. 2019).
2.2.5. Global Business Savvy
Today's leaders need not only to have knowledge and business acumen at the
national level, but also at the international level (Peng, 2022). This is because with
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globalization, business opportunities are very wide open, especially since all aspects of life
are connected by the internet. To be a good business leader at the national and global levels,
leaders need to be armed with business savvy and organizational savvy (Black et al. 2013).
Global business savvy is a competency that a leader possesses so that he or she can
recognize the world market. Leaders with this skill will look for international opportunities
for more efficient access to their company's market presence and supply chain for the
production of goods and services. Some of the knowledge that must be mastered by leaders
who will be able to take their companies through international networks, among others, must
know the resources and locations that provide comparative advantages, understand the special
conditions of the country where the partner is located, understand the political stability of the
country, including understanding the ins and outs of company operations, marketing, finance, HR
and other strategic knowledge for the smooth running of the company's business (Black et al.
2013, Peng 2022). Meanwhile, according to Tseng (2021), to become a global talent, a person
must have knowledge and skills that can distinguish several important things between the
business destination country and the country where the company is located, such as labor
laws, marketing channels, financialpractices. Another important thingis to have knowledge
and skills such as global business, global mindset, competence for cross-culture, resilience,
ability to deal with global business, global mindset, competence for cross-culture, resilience,
and ability to deal with global business ambiguity, ability to withhold judgment.
2.2.6. Customer Focus
Competencies according to Pulley (2012) based on the Iceberg Model of
Competencies are characteristics of a person that can be seen and measured including skills to
use knowledge and demonstrate skills, attitudes and abilities that can support improved
performance. Meanwhile according to Rutter et al. (2021) customer-focus leadership is
leadership that prioritizes customers and makes customers number one. This type of
leadership uses a team approach that focuses on prioritizing the customer experience that
leads to customer satisfaction, customer loyalty and repeat business.
Customer focus is a competency that leads to a person's attitude, which puts the
customer at the center of the strategy and operational plan. Some of the behaviors of leaders
who have this competency include: being able to clearly identify customers who must be
served, being able to build relationships with customers by listening and seeking feedback,
following or fulfilling all commitments that have been delivered to customers, being able to
35
identify and monitor customer metrics to improve performance, recognize attitudes that can
meet customer satisfaction and anticipate and respond to changing customer needs (Rutter et
al. 2021).
2.2.7. Building Strategic Partnerships
Strategic partnerships need to be built even if the company is already an industry
leader. These strategic partnerships provide access to facilities, equipment and raw materials
that some companies may only have the advantage of using on their own. In this case,
strategic partnerships are especially important in a fast-moving business environment
(Gibbons 2019). Strategic partnerships also promise shared goals and help employees have
new perspectives and opportunities to learn new skills and adapt capabilities to partners. This
is good intellectual capital for companies and businesses.
To obtain optimal benefits from strategic partnerships, there are several strategies
that can be done (Gibbons 2019). First, form alliances within the industry, especially
companies whose business nature is a complement to the company's business (compliment).
Second, partner with large companies, this is to increase internal capabilities and build greater
business trust from the market. The third is to expand collaboration outside the industry, for
example Uber and Spotify, making Uber customers able to listen to Spotify since 2014, for
Uber adding value to the service and for Spotify also increasing the number of customers.
Strategic partnerships can increase customer value, fill knowledge gaps in one's own
organization, reduce product development costs, and even open up opportunities to enter new
markets.
Partnership or business partnership is important for companies to ensure revenue and
become a sustainable competitive advantage of the company (Jane 2011). Nowadays,
companies cannot only rely on their own resources to increase their competitiveness, but need
to partner with other parties through strategic business partnerships with suppliers, vendors,
distributors and even consumers. The ability to build strategic partnerships is a competency
that needs to be owned by leaders in this era, especially if the company plans to increase its
market internationally. There are two types of strategic partnerships (Jane 2011), namely
strategic alliances and joint venture. Strategic alliances are business partnerships between
companies and partners to increase the competitiveness of each party and utilize external and
internal resources through a process of mutual learning and change. Meanwhile, joint venture
is a form of business partnership that aims to strengthen the company to compete.
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2.2.8. Strategic Orientation
Strategic leadership is the leadership of a person to be able to think strategically,
namely anticipating the future, maintaining corporate flexibility, thinking strategically and
initiating changes in the organization to create a competitive advantage (Daft 2011). Leaders
with strategic thinking, will be future-oriented and will be very concerned about the position
of the company with its competitiveness. This leader will connect partnerships with the
company's ability as a learning organization (Kosasih and Tarigan 2016).
While strategic orientation is defined as an objective methodology that explains the
expected steps in the future by building a vision, mission, values, formulating key objectives
and developing plans to achieve competitive advantage. To be able to become leaders who
have a strategic orientation, they need to focus on long-term planning, which requires
continuous practice and focus (Kosasih and Tarigan 2016).
2.2.9. Driving Execution
Driving execution is a competency that must be owned by the CEO (Crandell and
Orr 2021), consisting of 3 (three) main skills, namely: building accountability for achieving
set business targets, finding progress on key metrics and balancing long-term strategic goals
with short-term tactical goals. Based on Crandell and Orr's (2021) research, leaders who are
strong in the ability to execute or drive the execution of a program or plan are those who have
experience in general management.
Leaders with driving execution competencies have the confidence to make decisions
effectively by utilizing certain approaches and are able to ensure that the decision is carried
out properly to achieve the goals that have been set (Tozer 2012). Leaders with this
competency need to be equipped with the ability to prepare for better execution, which
according to Zenger and Folkman (2016) must be ready with implementation plans and
methods, set goals and deadlines, provide more feedback at every stage of program
implementation with positive input, can handle conflict well and build work team unity.
2.2.10. Organizational Competencies
Organizational competence is the leader's ability to manage the organization he
leads. This competency includes management of organizational innovation ( driving
innovation), skills in building organizational competencies.
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capabilities organization (developing organization capabilities), managing
diversity and leading change.
2.2.10.1. Driving Innovation
Innovation is a necessary renewal in every stage of work and business. To encourage
the emergence of innovation (driving innovation) according to Crandell and Orr (2021), there
are several ways for organizational leaders, including (1) building a team dedicated to
innovation, (2) introducing a platform for sharing ideas and thoughts, (3) creating a process
for selecting innovation ideas that arise, (4) using innovation advisors, (5) encouraging
collaborative trials to increase the success of innovation ideas, (6) communicating innovation
ideas to employees (to buy in), (7) communicating specifically about the benefits of
innovation to internal and external ranks about the results of innovation so that each can
adjust to the innovation.
Innovation is a new creation that contains several elements such as services and
solutions, technology, experience, methods and processes, a valuable result, fashion and
design, new goods or projects. The benefits of innovation are (1) it can solve problems that
seem impossible to solve, (2) innovation can increase employee productivity in the
workplace, (3) innovation can display unique qualities, (4) innovation can help beat business
competitors (Basheer and Sulphey 2012). The objectives of innovation include increasing
productivity, improving the quality of goods or services, saving time, increasing efficiency,
creating convenience and customer experience, reducing risk, accelerating employee and
company performance, increasing business, insight and knowledge and improving quality of
life.
Leadership effectiveness is very influential in implementing change and innovation
in organizations (Miharjo et al. 2019). These things need to be developed in every
organizational leader such as rewarding, communicating, motivating, supporting others,
involving others, training others, encouraging teams to collaborate. Research by Basheer and
Sulphey (2012) proves that there is a significant influence between communication skills and
the effectiveness of organizational change, including the ability to create innovation. In this
case it is recommended that organizations develop and need to adjust the HR system,
especially the performance appraisal system, training and development by including
leadership behaviors that are relevant to change and innovation.
2.2.10.2 Developing Organization Capabilities
Organizational capabilities are the functional, technical and practical assets and
disciplines that companies possess and help drive long-term competitive advantage
(Bachmann et al. 2021). When developing organizational capabilities, the focus is placed on
improving service efficiency and effectiveness by managing resource utilization against
service demands. The elements that exist in organizational capabilities are human resources,
work processes, tools and systems, organizational structure design and organizational
capabilities knowledge and metrics systems. Developing organizational capabilities aims to
integrate people, processes, systems and tools, organizational structures, knowledge and
metrics systems that proactively manage the business through changes that create competitive
advantage.
Organizational capability consists of elements of human resources, processes,
organizational structure, leadership, strategy and rewards. It also consists of capability
building environment, capability building competition and capability building capability.
Facing the current era of disruption with various changes in the business world, according to
Swedjemark (2018) building organizational capabilities consists of several important things,
namely: aligning the company's strategy and the actions to be taken, assigning the right
resources, and setting targets and how to achieve them.
Regarding resources, efforts are needed to determine sufficient resources to build
organizational capabilities, as well as investment and time to build these resources. Leaders
need to be realistic in setting investments so that the investment results continue to grow and
remain in accordance with the needs of the company. Furthermore, regarding targets, leaders
need to set and agree on targets with clear benchmarks with all levels. For this, leaders need to
have the competence to build organizational capabilities by preparing the organization in
terms of competence, capacity, ways of working, cross-functional coordination, and
interrelated people to anticipate problems and complexities in the organization/company.
2.2.10.3. Leading Change
According to Pulley (2012) managing change is a competency where a leader who
has it can support activities that position the business for the future, offering new ideas and
perspectives. Leading change is deeper in meaning than just managing change according to
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Doppelt and McDonough (2017). In a fast-moving world, the presence of leaders is more to
continue to oversee the company's adjustment to environmental changes, and this causes the
need for leaders who can continue to be adaptive and not stop after changing, or continue to
lead changes in the organization. In this case, leaders who have the competence to lead
change are those who have a vision and strategy. As stated by Doppelt and McDonough
(2017), there are 8 (eight) steps for a leader to become a leader of change for their
organization, namely: (1) establish a sense of urgency to make changes,
(2) establishing a change team, (3) developing a vision, mission and strategy, (4)
communicating the change, (5) empowering and broadening action to change, (6) creating
short-term wins, (7) consolidating results and continuing positive change with more, (8)
embedding new, more effective and efficient approaches and adapting them to the corporate
culture, to then show employees that these changes benefit customers, increase productivity
and other things that improve results.
According to Ganz (2010), a leader to lead change has motivation or several factors
that can encourage these leaders, namely setting the direction of change, getting commitment
from subordinates and overcoming obstacles to change. In this case, leaders with a high level
of self-efficacy (a person's belief in their ability to complete something) can be seen by the
number of leadership efforts they make to lead change.
2.2.10.4. Managing Diversity
According to Rahman (2019) diversity in the workplace is one of the important
factors to encourage businesses to run smoothly. Diversity refers to the variety of differences
in people in an organization, including gender, ethnicity, race, ethnic group, age of service,
cognitive style, organizational function, background and other diversity. This condition is
quite challenging for the field of corporate HR management, where organizational diversity
can be better utilized for organizational effectiveness.
Organizational diversity has many advantages, namely increased productivity,
creativity and problem solving, attracting and retaining talent, helping to build communication
in teams and increasing market share and the number of diverse customers (Rahman 2019).
Leaders in diverse organizations face many challenges, including time management, decision-
making and speed of work. Difficulties also arise, among others, to motivate people to work
intelligently and diplomatically, mentoring and coaching become rather challenging, because
the character of employees is very high in diversity. Meanwhile, according to Sharma (2016)
and Marinova et al. (2016), diversity practices can underlie trust building, better solutions,
customer loyalty and employee engagement at various levels. Meanwhile, the management of
diverse organizations requires professional HR managers who have skills in organizational
development, communication, psychology, assessment and leadership (Kulik 2014).
Several things can be done by leaders in managing diversity, including (1)
identifying diversity, for example in terms of age, ethnicity, religion, seniority, (2) justice and
fair treatment, which in essence is equality so that each individual gets a fair chance at work,
(3) a recruitment system that is open to anyone (equal employment opportunity), (4) learning
the characteristics of each, where from these differences will emerge ideas and thoughts that
are complementary and rich from various perspectives, (5) building good internal
communication, where leaders need to have good communication skills to support their duties
and obligations (Kulik 2014).
2.3. Summary of Previous Research
Research conducted by Kantabutra and Suriyankietkaew (2012) analyzed organic
leadership in relation to corporate sustainability. The leadership studied here is leadership in
general, not differentiated whether the leader is male or female. It is stated in the article of
Kantabutra and Suriyankietkaew (2013) that organizations that adopt the organic leadership
paradigm tend to respond to environmental changes more effectively than those who apply
other leadership paradigms. Therefore, the organization will be more sustainable. This
research hypothesizes that the more organizations adopt organic leadership, the better the
sustainability performance results. Organic leadership characteristics such as shared vision
and values, self-leadership, self-management, shared meaning making are independent
variables, while sustainability performance outcomes such as financial results, shareholder
value, long-term, customer satisfaction, brand and reputation are dependent variables.
Furthermore, research by Suriyankietkaew (2013) that connects leadership with
corporate sustainability analyzes that the types or paradigms of leadership that are currently
emerging are visionary leadership and organic leadership. However, Suriyankietkaew (2013)
did not differentiate between male or female leadership. It was found in this study that
visionary and organic leadership each directly predicted improved corporate sustainability
performance. The relationship between visionary and organic leadership and corporate
performance is mediated by strong shared vision and values, self-leadership or self-
management, team orientation, delegated and consensual decision-making.
Graham (2019) further examined corporate sustainability in relation to women's
41
leadership and business ethics. Several studies referenced by Graham (2019) have suggested
that corporate sustainability effectiveness increases when women are in corporate leadership
positions due to gender differences in business strategy and ethical considerations influenced
by social roles. In Graham's (2019) quantitative study, the relationship between corporate
leadership gender and financial, environmental, social and corporate governance performance
was examined over four years. Evidence suggests that the impact of female leaders on
corporate sustainability year-on-year is significantly greater than that of male leaders their
male counterparts across a range of performance outcomes, industries and time periods. A
limitation of this study is the small sample size.
Research on women's leadership and firm performance was also carried out by
Flabbi et al. (2019), Shinbrot et al. (2019) and Shahzad et al. (2022), with the results showing
that female leaders are better equipped to interpret productivity signals from female workers,
and attest to the underrepresentation of women at the top of corporate leadership.
Furthermore, Moreno-Gomez et al. (2018) which examines that gender diversity is positively
related to company business performance. Researcher Zhou (2020) who examined whether
female leaders improve company performance and found that female leaders have an impact
on company performance and credit ratings.
Arayssi et al. (2016) reported that female directors have an influence on corporate
risk and performance through effective investment and corporate social engagement. Yang et
al. (2019) in their research showed a negative effect of female leaders on company
performance, Shinbrot et al. (2019) who examined the potential of women leaders in
contributing to sustainable development. Furthermore, Reineke et al. (2016), Jiyothi and
Mangalagiri (2019), Lori et al. (2019), Tariah (2019), El-Khatib and Joy (2020),
Gruszczynski (2020), Noguera (2019), Noguera et al.
(2020), Rahman and Zahid (2021), Sattar et al. (2021), Zulvina et al. (2021).
Meanwhile, regarding company performance, the term is used to indicate part or all
of the company's activities within a certain period of time which results in the company's
success in achieving its goals and objectives. Company performance is also defined as the
company's ability to achieve its goals through the effective and efficient use of existing
resources, and shows the extent to which the company achieves results when compared to
targets and plans or previous performance (Setiawaty 2019).
Research related to business competencies and company sustainability was
conducted by several researchers, including by Mu et al. (2018), Akram et al. (2019). These
researchers studied the business skills of leaders and linked them to the performance and
ability of the company to survive or the sustainability of the company. The research results of
Akram et al. (2019) and Mu et al. (2018) showed a positive relationship between knowledge
management and empowering leadership elements on employee empowerment.
Furthermore, research on leadership, business competencies and company
performance was conducted by Feng et al. (2019) and Katsaros (2022), where the results
show that leadership factors are important in driving the company's financial performance,
where humanist leadership and moderating leadership which in turn become business
capabilities or competencies can encourage increased customer orientation and lead to
improved business performance (Feng et al. 2019).
Previous studies make references in the preparation of research models. In this case,
the thoughts on Suriyankietkaew's research (2013) which examines leadership that is
currently growing is visionary leadership and organic leadership is an important reference.
Furthermore, that leadership has an effect on the sustainability of the company (Kantabutra
and Suriyankietkaew 2012) is also another important reference, and Graham's research (2019)
on corporate sustainability analyzed from financial performance, social performance,
environmental performance and governance performance is also the basis for the preparation
of this research framework. As well as research from Feng et al. (2019) and Katsaros (2022),
also Mu et al. (2018), Akram et al. (2019) that analyze the importance of leader competencies
in running a business and managing an organization are also an important basis in the
framework for this research. The literature study material in this dissertation is matrixed in
Appendix 1.
2.4. Framework of Thought
The conceptual model of this research was initiated by the idea of the importance of
leadership in corporate sustainability. Corporate sustainability is needed to meet the needs of
both direct and indirect stakeholders of the company, namely capital owners, shareholders,
employees, clients and the wider community. (Zahid et al. 2020). In the context of the future,
corporate sustainability is a moving target that continues to determine the company's business
model, strategy, business processes, and reporting structure (Klettner et al. 2014) in order to
achieve 4 (four) areas of benefits from corporate social and environmental responsibility,
namely cost reduction, competitive advantage, synergy creation of corporate value and a
trusted corporate reputation.
Corporate sustainability is also seen as a continuous process of managing both
financial and non-financial corporate performance (Wu et al. 2013). This perspective is the
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main view on corporate sustainability, namely how the company realizes performance on all
important aspects of all stakeholders. This triple bottom-line (TBL) perspective or elements of
profit, planet and people (Elkingkton 2004) is used as a framework and becomes the main
theory in the construction of the research model. How the top leaders of the company manage
the synergy of financial, social and environmental to sustain the life and sustainability of the
company.
Company leaders will determine the sustainability of the company, namely how they
manage existing resources to realize the company's goals, vision and mission, and provide
financial and non-financial benefits, including providing benefits and benefits for the social
community, especially state-owned companies or BUMNs whose existence in addition to
making profits must also provide the widest possible benefits for the community and the state.
Based on the above thoughts, at the middle level, the Upper Echelons Theory (Hambrick and
Mason 1984) is used as a middle range theory to develop a research model, namely how top
leadership interprets strategic conditions and situations and determines strategic choices and
action plans in managing the synergy of corporate and social resource management to realize
company sustainability. Top leaders analyze internal and external conditions and situations,
interpret and interpret, then with their characteristics they formulate action options to realize
company performance and realize company sustainability.
Schematically, the above framework is made in a conceptual conceptual model as
Figure 2.2. The Tripple-Bottom Line theory is used as the main theory to build a corporate
sustainability perspective, where companies must be able to manage people, profits, and
social and environmental in a synergistic manner. For state-owned companies, the three TBL
components become the foundation for the company to ensure the sustainability of the
company that provides the widest possible profit and benefits for employees, social-
community, nation and state. The Theory of Top Echelons (TEA) is used as an intermediate
theory to develop a model construction of the role of leadership in corporate sustainability
where leaders interpret the conditions and situations of the strategic environment to determine
the choice of policies, strategies and action plans in the company, which are influenced by the
characteristics of top leaders, especially leadership paradigms and competencies.
The role of leadership in the sustainability of the company in the perspective of the
Theory of Upper Echelon (TEA) shows that top leaders see, analyze and interpret the
conditions of the strategic environment to then take action options to produce company
performance and win the competition. According to the TEA perspective, strategic situations
and conditions cannot be known objectively, but can only be interpreted and interpreted.
Subjective factors from the personal top leaders will greatly influence the determination of
direction, choice of action and how to manage the organization or company (Hambrick and
Mason 1984).
Meanwhile, in the context of the company, the agency theory underlies the
relationship between the company management in terms of company leaders or directors with
all owners or stakeholders. Noting that the leader is a very important factor that affects the
running of the company, the research framework is based on theory and empirical review of
existing research on the leadership paradigm. Regarding leadership related to the performance
and sustainability of the company, the prominent leadership paradigm is the paradigm of
visionary leadership and organic leadership. Both types of leadership paradigms tend to
perform better and are able to respond to the challenges of changes in the organizational
environment more effectively, compared to traditional leadership paradigms (Suriyankietkaew
2013, Suriyankietkaew et al. 2022). It is argued that organizations whose leaders adopt
organic leadership types tend to be able to respond to environmental changes more effectively
than organizations with other leadership paradigms.
Furthermore, considering that women's leadership in SOEs is highly encouraged and
even has measurable targets for the Government, in this case the Ministry of SOEs, the
framework was further developed to study the relationship between women's leadership and
company sustainability. Then by studying literature and empirical reviews of the
characteristics of women's leadership that are different from male leadership, the research
framework is further developed to study whether the abilities possessed by women leaders in
the company, namely in the field of business and organizational management (Akram 2019,
Gusman et al. 2020) have a mediating role in the influence of women's leadership on
corporate sustainability.
2.4.1. The Effect of Women's Visionary Leadership on Company
Sustainability
Visionary leadership is one of the prominent types of leadership (Jing et al. 2020)
today, because its characteristics can further help companies achieve good performance and
encourage company sustainability. Visionary leadership encourages transformation in the
organization, from the condition of self-interest to collective/shared interest, which takes
place in the organization through understanding the vision and values, preferences and
aspirations of each employee in the company. This leadership has a positive association with
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higher financial performance of the company or organization under conditions of uncertainty
(Suriyankietkaew 2013).
Regarding the presence of female leaders, research by Nguyen et al. (2015) found
that gender diversity has a positive effect on firm performance and that female representation
has a positive effect on performance. The leadership role of women in top management is one
of the critical elements in facilitating the positive impact of women directors on firm
performance and sustainability (Groening 2019). Women leaders also need to have business
skills and the ability to manage organizations so that their role as leaders can encourage
company performance and sustainability. Based on the explanation above, the hypothesis in
this relationship is:
2.4.2. The Effect of Women's Organic Leadership on Company Sustainability
Next is organic leadership, which is also believed to be related to company
sustainability. This is supported by a meta-analysis study conducted by Gardner et al. (2010)
on 353 articles in the period 2000-2009. Organic leadership uses a leadership paradigm from
leader centric to more on collective work (teamwork) from a group of employees for the same
goal.
2.4.3. The Effect of Business Competencies on Company Sustainability
In the current era, the perspective of The Upper Eschelons theory is very relevant
(Miharjo et al. 2019). In facing the conditions and environment of the digital era leaders and
who are able to lead organizations digitally with a digital mindset (digital leadership),
effective leaders will play a very important role in transforming their organizations as a result
of the disruption era. Besides being digitally fluent, leaders in the global era need to have
knowledge and business intelligence at the global level in addition to or armed with business
savvy and organizational savvy. Global business savvy is a competency possessed by a leader
so that he or she can recognize the world market. Leaders with this skill will seek
international opportunities for more efficient access to markets. This includes knowledge such
as labor laws, marketing channels and financial practices (Tseng 2021).
Furthermore, for business sustainability, company leaders must also be customer-
focused, i.e. prioritizing customers and directing their efforts towards increasing customer
satisfaction, customer loyalty and repeat business (Rutter 2021). Company leaders also need
to have a strategic orientation and ability to build partnerships (Crandell and Orr 2021) and
drive execution (Tozer 2012).
2.4.4. The Mediating Effect of Business Competencies on Women's Leadership
and Corporate Sustainability
A leader in the company is required to have abilities and skills related to the type of
business managed by the company. Katsaros (2022) provides a perspective on the importance
of business competency factors in leadership and driving company performance. Likewise,
the results of research by Feng et al. (2019) which presents ethical leadership and competitive
intensity as moderating customer orientation on company performance provides empirical
evidence that humane leadership and moderating leadership help companies to better utilize
customer orientation to improve company performance, especially in a less competitive
environment. This leadership ability helps companies to realize the benefits of customer
orientation in improving company performance.
The importance of business competency mediators in leadership and improving
company performance is reinforced by the results of research by Mu et al. (2018) showed a
link to achieve superior company performance. It is reported that companies that are more
Outside-in marketing devote resources to develop leadership skills and maintain proactive
employees for company performance. Furthermore, the mediation of knowledge management
and business capabilities conceptualized by outside-in marketing in achieving company
performance provides a new proposition for further research on the mediating role of business
competencies and organizational competencies, especially in women's leadership and their
influence on company performance and sustainability.
3.1.1. Structural Equation Model (SEM) Method
The Structural Equation Model or SEM method is a multivariate modeling to analyze
structural equation relationships, one of which is PLS (Partial Least Square) as an analysis
tool. This method is a combination of regression analysis and factor analysis, and is a
development of path analysis. Some of the advantages of the SEM method include: (1)
building a research model with several or many variables, so as to connect the theory with the
research data obtained, (2) can be used to examine variables that are not observed or cannot
be measured directly, (3) can test errors in the measurement of unobserved variables, (4) can
be used to confirm the theory in accordance with the data obtained from the research results,
and (5) testing complex research with several or many variables simultaneously.
The SEM method consists of two analyses, namely the measurement model and the
structural model (Hair et al. 2013, Hair et al. 2019). In the measurement model, there are two
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types of variables, namely latent variables and observed variables. Before analyzing the
structural model, the research model will be tested through Confirmatory Factor Analysis
(CFA) analysis to see whether the indicators (observed variables) have correctly reflected the
latent variables (Hair et al. 2013, Hair et al. 2019). For the CFA test, researchers used the
Goodness of Fit Index (GOFI) test, t-value and loading factor. To find out whether the
indicator reflects the latent variable, there are 2 tests carried out, namely the validity test and
the reliability test. An indicator has good validity, if its absolute t-value is higher than its
absolute t-value.
≥ 1.96 or significant (equivalent to a probability value ≤ 0.05 and Standardized
Factor Loading (SFL) ≥ 0.5 (Hair et al. 2013, Hair et al. 2019). Reliability testing is done by
calculating Construct Reliability (CR) ≥ 0.70 and Varian Extracted (VE) ≥ 0.50.
After the CFA test meets the statistical criteria, the structural model analysis can be
carried out. This structural model analysis contains an overall model fit test using GOFI
(Goodness of Fit Index), followed by a path significance test. The results of the path
coefficient significance test are then used to test the research hypothesis by comparing the
research hypothesis statement with the significance test results. From this research hypothesis
test, it will be concluded whether the research hypothesis is supported or not supported.
In this study, significance testing was carried out at a 1% error chance and a 5% error
chance through the F Test and the results were then compared with Table F. As for the path
model analysis, researchers used WarpPLS software (Solimun et al. 2017) which is
considered very suitable with a multivariate analysis model that uses many latent variables
simultaneously and simultaneously. Many of these variables also have a hierarchy of
structured causal relationships that use many indicators on each variable and can be analyzed
through the PLS-SEM approach.
According to Hair et al. (2013), the steps of analyzing the PLS-SEM model can be
done through: 1) Conceptualization of the structural model (relationship between latent
variables); 2) Determine the algorithm analysis method; 3) Determine the resampling method;
4) Make a path diagram chart (path analysis); 5) Evaluate the model, and 6) Report the
analysis results. For determining algorithm analysis, according to Solimun et al. (2017) there
are three algorithms in WarpPLS, namely the outer model parameter estimation algorithm,
inner model, and hypothesis testing.
In the WarpPLS program there are 5 outer model algorithms, namely PLS
Regression, PLS Model Mix, PLS Mode A, PLS Mode B and Robust Path Analysis. PLS
Regression is for regression calculations, PLS Model Mix is for the inner model that affects
the outer model, PLS Mode A for reflective indicator models, PLS Mode B for reflective
indicators, and Robust Path Analysis is the average score of two latent variable data.
Meanwhile, the parameter estimation algorithm in the inner model is simply made through the
calculation of the path coefficient of the effect of the explanatory/predictor variables on the
response/related variable. As for hypothesis testing in WarpPls, the resampling algorithm is
used, namely the calculation of variance and p-values.
3.1.2. Analytical Hierarchy Process (AHP) Method
The Analytical Hierarchy Process or AHP was invented by Thomas Saaty in 1980,
and is seen as an effective tool to help make very complex decisions and help determine
priorities in making the best decisions (Saaty 2008). AHP determines a group of criteria to be
used in determining priorities and selects a group of alternatives to be taken as the best choice.
One criterion and alternative will be calculated for their respective weights to be used in
pairwise matrix calculations. The higher the weight of the criteria and alternatives, the higher
the level of importance of the variable. Calculations by AHP are based on the experience of
decision makers or experts in the field of women's leadership and human resources, which in
this case are experts and practitioners with expertise and experience on the subject under
study.
The working principle of AHP is to compile a hierarchy of various criteria and
alternatives. Each criterion will be relatively compared with other criteria using a pairwise
matrix. Likewise for alternative choices. The advantages of AHP include being able to explain
the decision-making process graphically, so that it is easy to understand and describe in detail.
The AHP method also tests the consistency of the ranking calculation results. If the
consistency test shows inconsistent results, it means there is a deviation in comparing
relatively, either for criteria compared to criteria or alternatives compared to alternatives
(Saaty 2008). AHP helps researchers to get a priority scale by using the consideration of
experience, views, knowledge, intuition and original data from experts. In this research, the
experts and practitioners with considerable experience in the field of human resource
management and a comprehensive view of women's leadership will be involved.
Figure 3.1. The following shows the next stage of research, namely testing expert
opinions with the AHP method. The elements of AHP in this research plan are shown as
focus, criteria and alternatives. The components in the alternatives use the results of SEM
analysis of the research data, namely the skills that need to be further developed by women
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leaders of SOEs.
CONCLUSIONS :
The conclusion of this research answers the research objectives that have been set, which are
as follows:
1. Women's leadership in SOEs is characterized by Visionary and Organic Women's
Leadership. Visionary Women's Leadership has a high level (88%) with strong
loading factors for the dimensions of key organizational players and the power of
distance with good staff. Meanwhile, Organic Women's Leadership has a high level
(80%), shown through dimensions with high loading factors, namely leadership skills,
relationships with subordinates, and good work roles.
2. Organic Women's Leadership has a significant effect on Company Sustainability.
Meanwhile, Visionary Women's Leadership has a significant effect on Company
Sustainability through mediation of Business Competence.
3. The results showed the mediating role of Business Competencies (fully mediation) and
Organizational Competencies (partialy mediation) on the influence of women's
leadership for corporate sustainability in BUMN.
4. The model of women's leadership development for corporate sustainability in SOEs,
which was developed based on women's perspectives, involved Visionary and Organic
Leadership variables as well as mediation of Business Competencies and
Organizational Competencies. The strategy for developing women's leadership for
corporate sustainability in SOEs is structured with elements of management
commitment, organizational strengthening, enablers, constraints and changes to be
achieved. This development strategy requires several actors, namely company
management (SOE directors), women leaders, government, other parties (family,
women's community and society).
