Board Remuneration and Good Corporate Governance in Indonesian State-owned Enterprises

Synthia Atas Sari · Tjia Fie Tjoe

27 citations0/0 files storedGlobal Business Review

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Corporate Finance and Governance Gender Diversity and Inequality Corporate Governance and Financial Management

Abstract

The ideal board remuneration issue has always been a challenge in many countries. The reason for looking at ideal board remuneration is that the ideal remuneration should have an impact on the board performance and, in turn, lead to board effectiveness. However, the development of ideal board remuneration in Indonesian state-owned enterprises (SOE) has been based on relatively little research. Considering the relative importance attached by boards to a variety of governance tasks in SOEs, the primary aim of this article is to shed light on the extent of board remuneration impact performance of the board in implementing good corporate governance in Indonesian SOEs. The exploratory nature of this study led to the adoption of a qualitative research methodology that uses semi-structured interviews and publically available documents to collect a range of data pertaining board remuneration and the work of boards. Interviews were conducted with six informants from four Indonesian SOEs and Ministry of SOEs. The findings of this research demonstrate that the current Indonesian SOEs’ board remuneration system is not adequate as well as has a negative impact on the performance of the board. This was due to demotivation of active members and conflict of interest among members of the board, peculiarities to the performance of individual members of the board of commissioners. This study makes a significant contribution to both the board and the corporate governance field by addressing the basic research gaps of board remuneration issues in SOEs. The gap is addressed by providing a more coherent framework for effective board remuneration system that reflects more clearly the real experiences of those involved at the board level.

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References

1992A Modest Proposal for Improved Corporate Governance 2012Corporate Governance: Principles, Policies, and Practices 2005The OECD principles of corporate governance 2009Performance Implications of Ties to the Government and SOEs: A Political Embeddedness Perspective 2004Theories of corporate governance : the philosophical foundations of corporate governance 2005Inside the Boardroom: How Boards Really Work and the Coming Revolution in Corporate Governance 2010The effectiveness of non‐executive directors in Chinese state‐owned enterprises 2002Board Remuneration, Company Performance, and Ownership Concentration: Evidence from Publicly Listed Malaysian Companies

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