GOOD CORPORATE GOVERNANCE Good Corporate Governance (GCG) is bank governance which is applying transparency, accountability, responsibility, independency and fairness in implementing business activities. GCG indicates the pattern of relationship between the Management and the stakeholders, the Management and the Board of Commissioners and inter Management which is based on ethics and Corporate Culture Values as supported by a process of system, work guidelines and organization for achieving maximum performance. The aim and objective of GCG are: - Improving the seriousness of Management in applying the principles of transparency, accountability, responsibility, independency, fairness and prudency and Bank management. - Improving the Bank performance, efficiency and services to the stakeholders. - Attracting the interest and trust of the investors. - Complying with the interest of the shareholders for increasing the shareholder values. - Protecting the Bank from political intervention and lawsuit. 1. Principles of Good Corporate Governance. The principles in Good Corporate Governance include Transparency, Accountability, Responsibility, Independency, and Fairness. a. Transparency 1) The Bank shall disclose information in a timely, adequate, clear, accurate manner and it can be compared as well accessed by the stakeholders. 2) The Bank shall discloses information which includes but not limited to the vision, mission, business target, Bank strategy, Bank financial and non-financial condition, composition of Board of Directors and Board of Commissioners, shares ownership, remuneration and other facilities for the Board of Directors and the Board of Commissioners, majority shareholders, risk management, supervisory system and internal control, functional and compliance system and GCG implementation as well as material fact that may influence the decision of the financier.
3) The Bank policy must be in writing and communicated to the shareholders who are entitled to acquire information on such policy. 4) The principle of transparency shall remain observing the provisions on bank confidentiality and personal rights according to the prevailing regulations. b. Accountability 1) The Bank shall stipulate business target and strategy which are held responsible to the stakeholders. 2) The Bank shall stipulate clear duties and responsibilities for each organ of member of the Board of Commissioners, and the Board of Directors as well as the whole Ranks under their sub-ordination which are in harmony with the vision, mission, and values of the Company, business target and Bank strategy. 3) The Bank has to convince that each member of the Board of Commissioners and the Board of Directors as well as the whole Ranks under their sub-ordination have the competency according to their responsibility and understanding their role in GCG implementation. 4) The Bank shall stipulate check and balance system in the Bank management. 5) The Bank shall own performance measure from all the Bank Ranks based on the measure as agreed upon consistently with Corporate Culture Values, business target and Bank strategy as well as possessing rewards and punishment system. c. Responsibility 1) The Bank shall hold on the principle of prudential banking practices and guarantee the compliance to the prevailing regulations. 2) Bank as a good corporate citizen shall care for the environment and implement social responsibility properly. d. Independency 1) Bank shall avoid the occurrence of inappropriate domination by any stakeholders whatsoever and not being influenced by unilateral interest from any conflict of interest. 2) The Bank shall make objective decision and free from any pressures from any parties whatsoever. e. Fairness
1) The Bank shall observe the interest of the whole stakeholders based on the principle of equal treatment. 2) The Bank shall provide opportunity to the whole shareholders for providing inputs and submit opinions for the interest of the Bank as well as opening access to any information according to the principle of transparency. 2. Corporate Governance Structure The structure in the Corporate Governance consists of the Shareholders and the General Meeting of Shareholders (RUPS), the Board of Commissioners, the Committees under the Board of Commissioners, the Board of Directors, the Committees under the Board of Directors which subordinate the Function of Compliance and Corporate Secretary. a. Shareholder and RUPS (General Meeting of Shareholders) 1) Shareholder The whole Bank Shareholders have equality in acquiring and exercising their rights according to the provisions as regulated in the Law and the Bank Articles of Association. Each Bank Shareholder according to the law has to comply with the Bank Articles of Association and resolutions as adopted legitimately in the RUPS (General Meeting of Shareholders) as well as abide by the laws and regulations. a) The Bank Shareholder is grouped into 2 (two) categories, namely: - Shareholder of A Series is the State of the Republic of Indonesia which has Dwi Warna A Series with special right in the form of:
Amending the Articles of Association Changing the capital. Appointing and/or discharging the member of Board of Directors and/or the member of Board of Commissioners. Conducting merger, amalgamation, acquisition, separation or change of legal entity form. Dissolving and liquidating the Company. - The Shareholder of B Series is he State of the Republic of Indonesia and the public (partner or entity) as acknowledged by the Company as shareholder. b) The Bank shall be responsible in exercising the rights of Bank Shareholder, namely: - The Bank has to organize the right of shareholder according to the laws and regulations and Bank Articles of Association. - The Bank has to organize the list of shareholders in an orderly manner and according to the laws and regulations. - The Bank has to provide information on the company in a timely, correct and regular manner for the shareholder, except for matters which are confidential in nature. - The Bank may not behave partially to certain shareholder by providing information which is not disclosed to the other shareholder. The information has to be provided to all shareholders without heeding the type and classification the share in his/her possession. - The Bank must be able to provide complete explanation and other accurate information on the organizing of RUPS General Meeting of Shareholders). 2) General Meeting of Shareholders (RUPS) The RUPS has an authority which is not given to the Board of Directors or the Board of Commissioners according to the provisions as regulated in the Law and Bank Articles of Association. The organizing of RUPS (General Meeting of Shareholders) shall be held and implemented according to the protocol of RUPS (General Meeting of Shareholders) based on the provisions as regulated in the Law and Bank Articles of Association. In the forum of RUPS (General Meeting of Shareholders), the Shareholder is entitled to acquire information relating to the Bank and/or the Bank Management, as long as it is
related with the agenda of RUPS (General Meeting of Shareholders) and not contradictory with the interest of the Bank. a) Each shareholder is entitled to acquire explanation and information which is completed and accurate concerning: - Summon for RUPS (General Meeting of Shareholders) which includes specification of agenda and its explanation. - Other agendas which will be provided prior to and or at the time of the RUPS (General Meeting of Shareholders) is ongoing. - RUPS resolutions as adopted through transparent and fair procedure. - Minutes of RUPS (General Meeting of Shareholders) for each Shareholder if requested which contains opinions, both which are favorable and unfavorable. - The system for determining the salary and facilities for each member of Board of Commissioners and Board of Directors as well as specification concerning salary and allowance as received by the members of Board of Commissioners and Board of Directors holding the position. - Financial information and others relating to the Bank as contained in the annual report and financial report. b) Procedure and implementation of RUPS (General Meeting of Shareholders) shall be conducted according to the prevailing regulations as well as Bank Articles of Association. c) Material transaction as conducted by the Bank has to obtain approval from RUPS (General Meeting of Shareholders) according to the prevailing regulations. b. Board of Commissioners 1) Election and Discharge of Members of Board of Commissioners a) Members of Board of Commissioner is elected and discharge by the RUPS through transparent process by the Remuneration Committee, and b) Nomination to recommend the candidate of member of Board of Commissioners according to the policy as stipulated by the Holder of Serial A Share. c) Member of the Board of Commissioner has to comply with the requirements and passing fit and proper test according to the prevailing regulations. 2) Responsibility and Obligation of Board of Commissioners a) The Board of Commissioners shall be responsible to the implementation of duties of Board of Commissioners as referred to in the Bank Articles of Associations as well as
maintaining the effectiveness of communication between the Board of Commissioners and the Board of Directors, external auditor and Bank/Capital Market Supervisory Authority. b) The Board of Commissioners shall be responsible in observing the prevailing regulations as well as monitoring the effectiveness of GCG practices. c) The Board of Commissioners is obligatory to conduct supervision against the follow-up on the result of examination and recommendation as provided by internal and external auditors, the result of supervision of Banking Authority and/or the result of other authority supervision. d) The Board of Commissioners has rules of order of Board of Commissioners which is binding and abides by all members of the Board of Commissioners. e) Member of Board of Commissioner is obligatory to disclose his/her share ownership to the Bank as well as to other company according to the regulation in the sector of Capital Market. f) Member of the Board of Commissioner is prohibited to utilize the Bank for his/her personal, family, and/or other parties interests which may adversely affect or reducing the Bank profit. g) The Board of Commissioners is obligatory to notify the Banking Authority in case of finding: - Violation to the laws and regulations in financial and banking sector, and - Situation or estimated situation which may endanger the sustainability of Bank business. c. Independent Commissioner The RUPS (General Meeting of Shareholders) shall stipulate independent commissioner with number and requirements as stipulated in the prevailing regulation. d. Committees under the Board of Commissioners In exercising their duties, the Board of Commissioners shall establish among others the committees as follows:
1) Audit Committee, which is established for assisting the Board of Commissioners in exercising the supervisory function to matters relating to financial information, internal control system and effectiveness of examination by external and internal auditors. 2) Committee for Risk Monitoring and Good Corporate Governance, which is established for assisting the Board of Commissioners in exercising the supervisory function relating to business risk policy as well as strengthening the implementation of GCG principles as exercised by the company for increasing shareholder values. 3) Remuneration and Nomination Committee, which is established for assisting the Board of Commissioners in exercising the supervisory function to matters relating to the policy on remuneration and nomination of members of Board of Commissioners and Board of Directors, the structure of membership, duties and authorities as well as rules of order of committee are regulated in the Decree of the Board of Commissioners. e. Board of Directors 1) Election and Discharge of Board of Board of Directors a) Member of the Board of Directors is elected and discharged by the RUPS (General Meeting of Shareholders) through transparent process. Through the consideration of the Committee of Remuneration and Nomination, the Board of Commissioner shall recommend candidate of member of Board of Directors according to the policy as stipulated by Holder of Serial A Share. b) The Board of Directors has to comply with the requirements and passing fit and proper test according to the prevailing regulations. 2) Responsibility and Obligation of Board of Directors a) The Board of Directors shall be responsible to the implementation of Bank management function according to Bank Articles of Association. b) The Board of Directors shall exercise the principle of sound banking, risk management and growing compliance culture as well as internal control system. c) The Board of Directors shall work transparently, accountably, responsibility, independently and fairly. d) The Board of Directors shall be responsible in complying with the prevailing regulations and implementing GCG practices. e) The Board of Directors has Rules of Order for Board of Directors which is binding and observed by all members of Board of Directors.
f) The member of Board of Directors is obligatory to disclose his/her share ownership to the bank as well as to the other company according to the regulation in capital market sector. g) The member of Board of Directors is prohibited to utilize the Bank for the interests of individual, family, and/or other party which may adversely affect or reducing bank profit. h) The Board of Directors is obligatory to be responsible for the implementation of its duties to the shareholders through general meeting of shareholders. f. Committees under the Board of Directors In exercising its duties, the Board of Directors shall established committees. The structure if membership, duties and authorities as well as rules of order of committee are regulated in the Decree of the Board of Directors. g. Relationship between the Board of Commissioners and Board of Directors 1) Work relationship between the Board of Commissioners and the Board of Directors is the relations of check and balance with final objective for the advancement and soundness of the Bank. 2) The Board of Commissioners and the Board of Directors according to their respective functions have responsibilities for safeguarding the Bank business sustainability in the long run as reflected in:
a) Safeguarding the soundness of the Bank according to the Principe of prudence and criteria as stipulated by the Banking authority. b) The implementation of risk management as well as internal control system properly. c) Achieving fair return for shareholders. d) Protecting of stakeholder interest fairly. e) Compliance of GCG implementation. f) Implementation of leadership succession and management continuity in all lines of organization. 3) For being able to complying with the responsibility and implementing check and balance according to the prevailing regulations, then the Board of Commissioners and the Board of Directors need to collectively agree with the matters as mentioned below: a) Vision, mission and corporate culture values. b) Business target, strategy, long term plan as well as work plan and annual budget. c) The policy in complying with regulation, bank articles of association and prudential banking practices including commitment for avoiding all forms of conflict of interest. d) Policy and method of evaluation of Bank performance. e) Organizational structure which is able to support the achievement of target of Bank business according to Bank Articles of Association. f) The form of communication between the Board of Commissioners and the Board of Directors. 4) The members of Board of Commissioners and Board of Directors who are entitled to acquire remuneration and other types of facilities according to the market condition. The process of stipulating the number of package of remuneration and other types of facilities are stipulated by RUPS (General Meeting of Shareholders) upon receiving the proposal from the Committee for Remuneration and Nomination. h. Director Subordinating the Function of Compliance 1) The assignment and discharge of Director subordinating the function of compliance is conducted by the President Director and the Board of Commissioners as well as it has to obtain prior approval from the Banking Authority. 2) For safeguarding the principle of independency, the Director subordinating the function of compliance is not allowed to hold the positions of President Director concurrently with another position as determined in the prevailing regulation.
3) The Director subordinating the function of compliance may become the member of each committee of the Board of Directors as established, but he/she has no vote right in voting unless it is stipulated otherwise. 4) Director subordinating the Function of compliance having reporting relation both to the President Director and the Board of Commissioner as well as Banking Authority. 5) The Bank shall establish work unit of compliance for assisting the implementation of duties and function of the Director subordinating the function of compliance. i. Corporate Secretary 1) The bank shall establish the function of Corporate Secretary according to the prevailing regulation in capital market sector. 2) The function of Corporate Secretary shall be implemented by one of the Directors or official who is specially appointed for running such function. 3) The appointment of Corporate Secretary shall be reported to the capital market and stock exchange authority as well as it is announced with mechanism according to the prevailing regulation.
4) Duties and responsibilities of Corporate Secretary according to the prevailing regulation in capital market sector. j. External Audit and Public Accountant Office 1) The appointment of external audit and public accountant office is stipulated by General Meeting of Shareholders based on the proposal from the Board of Commissioners upon recommendation from the Audit Committee. 2) The External Auditor and Public Accountant Office as appointed by the bank should have acquired license from the Ministry of Finance and registered in the capital market supervisor. 3) Public audit by External Auditor shall be conducted to provide statement of opinion concerning the fairness of Bank Financial Report according to the principle of accounting as generally applicable in Indonesia. 3. Information, Bank Confidentiality and Conflict of Interest In safeguarding bank governance, the Bank shall stipulate the matters relating to information, Bank confidentiality and conflict of interest. a. Information 1) The Bank shall submit to the capital market authority and announce to the public in a timely, accurate, clear and objective manner and the occurrence of event, information of material fact that possibly may influence the stock value or decision of financier investment according to the regulation Capital Market sector. 2) Annual Report containing the summary of important financial data, analysis and general discussion by the management, financial report which has been audited, management letter as well as other important information. 3) Annual Report shall also contain report on the activities of Audit Committee, Committee for Risk Monitoring and GCG, and Remuneration and Nomination Committee, as well as the disclosure of remuneration structure from each member of Board of Commissioners and Board of Directors. 4) Annual Report, events, information or material facts as well as other report as required by the prevailing regulation are also submitted through website which from time to time can be renewed by the Bank.
5) Prohibition on insider trading as referred to in the prevailing regulation in capital market sector will be regulated in a separate provision. b. Bank Confidentiality In conducting transparent information, the Bank shall remain holding to the provision concerning Bank confidentiality as stipulated in the prevailing regulation. c. Conflict of Interest 1) The Board of Commissioners, the Board of Directors and the Executive Official shall have the commitment of avoiding of all form of conflict of interest. 2) In case of the member of Board of Directors has personally interest in a transaction, contract or contract as proposed in which the Bank becomes one of the party, then it has to be declared the character of its interest in the meeting of Board of Directors and the relevant member of the Board of Directors is not entitled to take vote.
3) In case of member of the Board of Commissioners has personal interest in a transaction, contract or contract as proposed in which the bank becomes one of the party, then it has to be declared the character of conflict interest in the meeting of the Board of Commissioners and the relevant member of the Board of Commissioners is not entitled to take vote. 4) Periodically at least once in one year, each member of the Board of Commissioner, Board of Directors and Executive Official are obligatory to make statement concerning whether or not there is any conflict of interest with the Bank activities as conducted by him/her. 5) The member of the Board of Commissioners, Board of Directors and Executive Official may not concurrently hold the position as regulated in the prevailing regulation. 4. Policy of the Board of Directors Any policy of the Board of Directors shall reflect the principles as stipulated in this document. 5. Communication and Internalization of Good Corporate Governance The Bank Board of Directors is obligatory to communicate the application of GCG principles to the shareholders, shareholder candidate and stakeholder as well as internalizing it to the whole bank ranks. 6. Providing Fund to Related Party and Providing Big Fund a. In the framework of avoiding the failure of bank business as a result of concentration of fund provision and increasing the independency of Bank Management against potential intervention from the related party, the Bank is obligatory to apply the principle of prudence in providing fund among others by applying dissemination/diversification of portfolio for fund provision as given. b. The implementation of fund provision to the related party and/or the provision of big fund (large exposure) is obligatory to be guided with the provisions of regulator regarding maximum limit for providing credit or commercial bank.