Good Corporate Governance ~ Healthy | Smart

The Basic Principles of Corporate Governance

Komite Nasional Kebijakan Governance or KNKG (2006) stated that each company must ensure that the basic principles of good corporate governance is applied to every aspect of business and at all levels of the company. The basic principles that are:

1. Transparency

To maintain objectivity in business, companies must provide material and relevant information in a way that is easily accessible and understood by stakeholders. The companies should take initiative to reveal not only the problems implied by the regulatory legislation, but also important for decision-making by shareholders, creditors and other stakeholders.

2. Accountability

Companies should be accountable for its performance with transparent and reasonable. Therefore, the company must be properly managed, scalable, and in accordance with the interests of the company by considering the interests of shareholders and other stakeholders. Accountability is a necessary condition to achieve sustainable performance.

3. Responsibility

Companies must obey the legislation and carry out responsibilities for people and the environment that can be maintained in the long term sustainability and to be recognized as a good corporate citizen.

4. Independency

To accelerate the implementation of the principles of good corporate governance, companies must be managed independently so that each company does not dominate the other and did not receive the intervention from the other parties.

5. Fairness

In carrying out its activities, the company should always pay attention to interests of shareholders and other stakeholders based on the principles of fairness and equality.

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Healthy | Smart | Rich, at: 4/21/2012

Good Corporate Governance (GCG)

Corporate governance is a concept that can be used to improve economic efficiency, which includes a set of relationships between the company's management, board of directors, shareholders and other corporate stakeholders.

Corporate governance also provides a structure that facilitates the determination of the goals of a company, and as a means to determine the performance monitoring techniques. Watts (2003), stated that one of the ways used to monitor and restrict the issue of contract management is the opportunistic behavior of corporate governance. Related with agency problems, corporate governance is a concept based on agency theory that expected to serve as means to give confidence to investors that they will receive a return of the funds that they have invested. In other words, corporate governance directed to reducing asymmetry information between principal and agent, which in turn could reduce earnings management measures (Ujiyanto and Bambang, 2007).

Until now, there are many varying definitions of Good Corporate Governance (GCG). But generally have the same purpose and understanding. Forum for Corporate Governance in Indonesia or FCGI (2000) in the first publication is using the definition of the Cadbury Committee, that is:

"seperangkat peraturan yang mengatur hubungan antara pemegang saham, pengurus (pengelola) perusahaan, pihak kreditur, pemerintah, karyawan serta para pemegang kepentingan intern dan ekstern lainnya yang berkaitan dengan hak-hak dan kewajiban mereka, atau dengan kata lain suatu sistem yang mengatur dan mengendalikan perusahaan."

In addition, FCGI explained that the purpose of Corporate Governance is to create added value for all stakeholders.

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Healthy | Smart | Rich, at: 4/20/2012