International Business Management

Year: 2013
Volume: 7
Issue: 4
Page No. 295 - 305

The Impact of Governance Structure to the Effectiveness of the Board in Implementing Good Corporate Governance at Indonesian State-Owned Enterprises

Authors : Synthia A. Sari

Abstract: Corporate governance has been implemented in Indonesian State-Owned Enterprises (SOEs) since 2002, however scandals over the SOEs are still occurring until today. Most of these cases happened as a result of weak control by the Board of Commissioners (BoC) against the board of management (BoD) due to unique governance structure in Indonesia. The primary aim of this study is to shed light on the extent of the governance structure impact upon the effectiveness of the BoC in Indonesian SOEs through analysing two factors; power and roles of the BoC. Being exploratory in nature, this study uses qualitative method in order to enhance an understanding of BoC real practices in Indonesian SOEs. Triangulation method is used for data collection, including semi-structured interviews with 19 informants over 8 SOEs. The study indicates that Indonesia governance structure with the two-tier model which followed its own path does not support effectiveness of the BoC in Indonesian SOEs. This is due to peculiarities in parallel position of the BoC to the BoD that have an impact on power of the BoC over the BoD and unclear roles of the BoC. Thus, it may seem that Indonesia has to apply the two-tier structure without any changes. This study aims to fill the gap in the literature by analysing impact Indonesia governance structure to effective BoC through assessing actual views and perceptions from members of the BoC, the BoD and the government as shareholder’s representative. It also provides information on corporate governance system in Indonesia which difference with Western countries.

How to cite this article:

Synthia A. Sari , 2013. The Impact of Governance Structure to the Effectiveness of the Board in Implementing Good Corporate Governance at Indonesian State-Owned Enterprises. International Business Management, 7: 295-305.

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