Indonesia's Democratic Transition Supported by Strong Corporate Governance
Bali, Indonesia – Strong corporate governance is an especially pressing issue in Indonesia, a country with a post-independence history hindered by large-scale corruption at the highest levels of government and by collusion between political elites and state-run industrial conglomerates. CIPE’s work with the Indonesian Institute for Corporate Directorship (IICD) continues to make exceptional progress towards improving corporate governance in Indonesia.
In November 2010, nearly 200 corporate directors, government regulators and governance advocates met in Bali, Indonesia for the release of IICD’s latest Corporate Governance Scorecard, an annual initiative in which IICD scores all publicly-traded companies in Indonesia on their corporate governance standards and then ranks these companies on the basis of these scores. Companies are given a score of 0 percent to 100 percent on the following categories of corporate governance (which are based on the Organisation for Economic Co-operation and Development principles): Rights of Shareholders, Equitable Treatment of Shareholders, Role of Stakeholders, Disclosure and Transparency, and Board Responsibility.
At this Bali conference, IICD announced that the average score of its 2010 scorecard was 66.5 percent, up from the previous year’s 64.9 percent. These results marked the fourth consecutive annual increase, indicating that the quality of corporate governance is steadily improving in Indonesia. The top performer in IICD’s scorecard was Bank Mandiri, the largest bank in the country in terms of net assets. A senior official from the Central Bank who spoke at this event explained that stronger corporate governance practices are having tangible impacts on the country’s economy, citing stronger governance on the part of Indonesian banks as a major factor in their ability to weather the 2008-09 global financial crisis far better than the Asian financial crisis of the late 1990s.
Improving corporate governance will continue to help Indonesia as it moves beyond its restrictive past. In order for democracy to fully mature, the people of Indonesia must see how democracy is delivering for them. By strengthening governance, reducing corporate collusion and promoting transparency, IICD’s corporate governance scorecard is helping to make this happen.
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