Abstract
This critical analysis seeks to explore the inclusivity and feasibility of the legal application of organizational governance principles related to limited liability companies (LLCs) in Indonesia, which are considered essential pillars of Indonesia’s economic stability. The investigators employed the non-probability purposive sampling to select 150 study participants from a population of 250 administrative panel members working in PT Bank Rakyat Indonesia and PT Bank Mandiri. Structured and semi-structured questionnaires were constructed and distributed online through emails. The subjects’ responses were coded manually, using the NVivo software for ease of analysis. The result showed that (1) 84.5% of participants believed that ineffective relationship building approaches, corruption, and inadequate information disclosure mechanisms among internal and external shareholders formed the main challenges to implementation of corporate governance principles in Indonesian LLCs, (2) 97.8% of the respondents believed the Indonesian Company Law (ICL) had achieved significant milestones in guiding the application of sound corporate governance principles by explicitly outlining the roles and responsibilities of stakeholders and providing sufficient protection for minority stakeholders, and (3) 78% of participants agreed that the ICL has introduced and reinforced critical rights and protections to shield shareholders from unfair regulations internally formulated by a company. In its findings, the investigation confirmed that poorly structured information sharing systems, fraud, and ineffective relationship building were the main factors that contributed to current inadequacies. 84.5% of the respondents believed that ineffective relationship building approaches, corruption, and inadequate information disclosure mechanisms among internal and external shareholders formed the main challenges, trends, and issues to the implementation of corporate governance principles in Indonesian LLCs. The study also confirmed that the implementation of GCG related legislations had reinforced the professional duties and obligations of stakeholders, alongside offering legal protections for minority business actors.
Highlights
As a principle of employee and shareholder management, Good Corporate Governance (GCG), as explained in Indonesia’s Article 15 of Act No 25 of 2007, defines a limited liability company (LLC) as any individual or group of people who initiate any form of foreign or domestic investment (Chang, 2018)
The result showed that (1) 84.5% of participants believed that ineffective relationship building approaches, corruption, and inadequate information disclosure mechanisms among internal and external shareholders formed the main challenges to implementation of corporate governance principles in Indonesian LLCs, (2) 97.8% of the respondents believed the Indonesian Company Law (ICL) had achieved significant milestones in guiding the application of sound corporate governance principles by explicitly outlining the roles and responsibilities of stakeholders and providing sufficient protection for minority stakeholders, and (3) 78% of participants agreed that the ICL has introduced and reinforced critical rights and protections to shield shareholders from unfair regulations internally formulated by a company
The investigation confirmed that poorly structured information sharing systems, fraud, and ineffective relationship building were the main factors that contributed to current inadequacies. 84.5% of the respondents believed that ineffective relationship building approaches, corruption, and inadequate information disclosure mechanisms among internal and external shareholders formed the main challenges, trends, and issues to the implementation of corporate governance principles in Indonesian LLCs
Summary
As a principle of employee and shareholder management, Good Corporate Governance (GCG), as explained in Indonesia’s Article 15 of Act No 25 of 2007, defines a limited liability company (LLC) as any individual or group of people who initiate any form of foreign or domestic investment (Chang, 2018). The primary GCG doctrines include fairness, responsibility, accountability, and transparency These rules govern crucial company aspects, such as the division of duties, independence, and corporate structure management (Cuervo, 2002). The Capital Market Law is a more comprehensive and detailed set of regulations and mandates public LLCs to adhere to the rules and regulations stipulated by the Indonesian Stock Exchange. These legal provisions ensure that public enterprises operate in compliance with the Indonesian Stock Exchange and Financial Services Authority’s provisions. In line with the applications and implementations of GCG ideologies to guide the operations of the country’s limited liability companies, this research will narrow its focus to examine the legal provisions that govern the implementation of the GCG doctrines, and how they support active economic development
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