Corporate Governance of Large PLCs in Indonesia: Evidence based

on ASEAN CG Scorecard

IAI ACCA ConferenceFebruary 26 2013

Jakarta

Prof. Sidharta Utama, PhD CFAIAI

Indonesian Institute for Corporate Directorship

ASEAN Corporate Governance ranking - Background

Objectives

Raise CG standards and practices of ASEAN Showcase and enhance visibility and investability of well-governed ASEAN PLCs Complement other ACMF initiatives and promote ASEAN as an asset class

Approach

ACMF: Create a universal CG Scorecard containing key elements of good CG Devise a scoring methodology Validate and publish ASEAN CG Scorecard Assess ASEAN PLCs identifying top 50 PLCs in each jurisdiction and top 50

PLCs regionally

Progress

ASEAN CG Scorecard released to public in March 2012 Assessment of 100 PLCs in 6 ASEAN Countries, July Oct 2012 Release of domestic top 50 PLCs in Feb 2013 Submit top 50 PLCs regionally to regulators in March 2013 Release of top 50 PLCs regionally in year 2015

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Raising CG Practices with ASEAN CG Scorecard

ASEAN CG Scorecard

Enhancing CG Rules/Standards

Improving Compliance with Rules/Standards

Encouraging Voluntary Adoption

of CG Practices

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ASEAN CG Scorecard

Globally Based

OECD CG Principles

Other International and Regional Standards

Regionally Developed

Six participating countries

Move beyond local rules/standards

Public Information

English Easily

Accessible

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5Level 1Has five major sections that corresponds to the OECD Principles

Part A: Right of Shareholders (26)Part B: Equitable Treatment (17)Part C: Role of Stakeholders (21)Part D: Disclosure & Transparency (42)Part E: Responsibilities of the Board (79)

Total no of items/ descriptors (185)

Level 2Two additional Sections

Bonus & Penalty

(11) Bonus items for companies that go beyond minimum standards

(23) Penalty items for companies with poor practices

Total bonus and penalty items (34)

There are two levels to the ASEAN CG Scorecard

STRUCTURE OF THE ASEAN CG SCORECARD

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Summary of CG Score Indonesia and ASEAN countries

0

10

20

30

40

50

60

70

80

90

100

Indonesia Malaysia, Singapore, Thailand

AverageMaximumMinimum

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CG Scorecard: Results for Indonesia

0

20

40

60

80

100

120

MaximumAverageMinimum

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Disclosure of Audit and Non-Audit Fees in Annual Report

0102030405060708090

100

D.5.1 D.5.2 D.5.3

YesNoN/A

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Question:D.5.1. Are audit fees disclosed?D.5.2. Are the non-audit fees disclosed?D.5.3. Does the non-audit fees exceed the audit fees?

Timely Release of Audited Financial Report

0102030405060708090

100

D.7.1 D.7.2 D.7.3

YesNo

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QuestionD.7.1. Is the audited annual/financial report released within 120 days from the financial year end?D.7.2. Is the audited annual/financial report released within 90 days from the financial year end?D.7.3. Is the audited annual/financial report released within 60 days from the financial year end?

Timely Release of Financial Report

87

70

24

96

10

27

73

1

D.7.1 D.7.2 D.7.3 D.7.4

YN

QuestionD.7.1. Is the audited annual/financial report released within 120 days from the financial year end?D.7.2. Is the audited annual/financial report released within 90 days from the financial year end?D.7.3. Is the audited annual/financial report released within 60 days from the financial year end?D.7.4. Is the true and fairness/fair representation of the annual financial statement/reports affirmed by the board of

directors/commissioners and/or the relevant officers of the company?

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Audit Committee93

82

74

4

15

23

E.19.4 E.19.5 E.19.6

YN

QuestionE.19.4. Does the company disclose the terms of reference/governance structure/charter of the Audit Committee?E.19.5. Does the Annual Report disclose the profile or qualifications of the Audit Committee members?E.19.6. Does at least one of the independent directors/commissioners of the committee have accounting

expertise (accounting qualification or experience)?

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Audit Committee89

7781

78

1916

90

E.19.7 E.19.8 E.19.9 E.19.10

YNN/A

QuestionE.19.7. Does the Annual Report disclose the number of Audit Committee meetings held?E.19.8. Did the Audit Committee meet at least four times during the year?E.19.9. Is the attendance of members at Audit Committee meetings disclosed?E.19.10. Does the Audit Committee have primary responsibility for recommendation on the

appointment, re-appointment and removal of the external auditor?

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THANK YOU

Corporate Governance of Large PLCs in Indonesia: Evidence based on ASEAN CG ScorecardSlide Number 2Raising CG Practices with ASEAN CG ScorecardASEAN CG ScorecardSlide Number 5Summary of CG Score Indonesia and ASEAN countriesCG Scorecard: Results for IndonesiaDisclosure of Audit and Non-Audit Fees in Annual ReportTimely Release of Audited Financial ReportTimely Release of Financial ReportAudit CommitteeAudit CommitteeTHANK YOU