Corporate Governance in Indonesia – Types of Decisions Made by Governing Bodies
By Rusmaini Lenggogeni
Pursuant to the provisions set out in the Indonesian Company Law, the Board of Directors (BOD), Board of Commissioners (BOC) and shareholders of companies in Indonesia have separate duties and functions. The members of the BOD are the day-to-day operating officers of the company. The Company Law gives the BOD the right to assign functions and authorities among the members of the BOD by stipulating such assignment in a BOD resolution (in the event that the General Meeting of Shareholders (GMS) does not stipulate it).
Meanwhile, the BOC serves a supervisory function. Under the Company Law, each member of the BOC is required, in good faith, with prudence and a sense of responsibility, to carry out their supervisory duties and advise the BOD in the interest of the company and in accordance with the company\'s purposes and objectives.
Shareholders do not participate directly in the management or supervision of the company, but they are nonetheless the highest authority in corporate governance. Shareholders, through the GMS, reserve the right to make decisions which the BOD or BOC are not authorized to make. The GMS decides on major issues of the company such as the appointment of BOD and BOC members, amendments to the Articles of Association (AOA) of the company, the liquidation of the company, approval of annual reports and payment of dividends.
Specific duties, together with the process for making decisions, are stipulated in each company\'s AOA.
This first appeared in Chambers Corporate Governance 2019, published by Chambers and Partners. You can find the full chapter here.
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