tony silitonga indonesian institute for corporate directorship (iicd)

Tony SilitongaTony SilitongaIndonesian Institute for Corporate Directorship (IICD)Indonesian Institute for Corporate Directorship (IICD)

Tony Silitonga - 2006Tony Silitonga - 2006

Ten Boardroom ChallengesTen Boardroom Challenges

1. Board Mandate2. Management Oversight – Selecting, Supervising, Evaluating,

Compensating, and Replacing Management3. Corporate Strategy & Risk – Challenging management assumptions

about opportunities & Risks; consensus about strategic direction; monitoring achievement or strategic goals

4. Disclosure – Overseeing audit processes, accounting policies and disclosure requirements

5. Corporate Values – Establishing an appropriate “tone at the top”.6. An Effective Governance System – Developing and implementing a

governance system that makes efficient and effective use of limited resources.

7. Independent-Minded Board – Ensuring board objectivity.8. Fiduciary Governance – Understanding and meeting the expectations of

shareholders and regulators.9. Informing the Board – Identifying the board’s information needs and

ensuring the board has access to that information.10. Responding to Crises – Responding quickly and responsibly to

corporate problems.


Half of the Fortune 500 companies in 1987 are not Fortune 500 companies today. Many of these companies have FAILED AND CLOSED THEIR DOORS FOREVER. Reasons cited are numerous (“Failures of Vision”, “Identity Crisis”, “Anybody Out There”, “The Glue Sticks, and Sticks”, “Enemies Within”).

Escalating challenge of CEO survival (Within 2 years, 57% of the largest 367 companies in USA REMOVED their CEOs )

There are CHANGES in nature of the business, investment, and investors (3 most obvious ones: Constituent Demands are Greater, Expectations are Higher, Competition is Tougher)

To influence the Boardroom guidelines and Best Practices that build on OECD Principles


NOT AVAILABLE / NOT CLEAR

OperationalExcellence


NATURALRESOURCES

TECHNOLOGY

LEGALPOLITICAL

ECONOMIC

SOCIAL

NEW ENTRANTS

SUBSTITUTE

SUPPLIER RIVALRYBUYER


McKINSEY’S INTERNATIONAL INSTITUTIONAL INVESTORS’ SURVEY CONFIRMS McKINSEY’S INTERNATIONAL INSTITUTIONAL INVESTORS’ SURVEY CONFIRMS IMPORTANCE OF GOOD CORPORATE GOVERNANCE IN INDONESIAIMPORTANCE OF GOOD CORPORATE GOVERNANCE IN INDONESIA

Source:McKinsey survey of 250 institutional investors with aggregate assets under management of USD3.2 trillion

• “In evaluating Asian companies for potential investment, how important is the quality of board practices relative to financial issues?”


Tob

in’s

Q

Corporate Governance Scorecard

67.37

1.00 49.18%

High

Low

Low High

36.07%

Low Commitment

High Commitmen

t

Low Commitment/

Over Performers

High Commitment/

Under Performers13.11%

1.64%

Tobin’s Q: Lowest = 0.73; Highest = 7.25 CG Score: Lowest = 52.04; Highest = 82.83

Expected

Distributio

n


67.37

1.00

Tobin

’s Q

High

Low

Low High


TRUTHSTRUTHS about about FRAUDFRAUD

• Fraud is recognised as a significant threat facing businesses, big or small, all over the world.

• Some frauds arise because of too much trust being placed on one individual with no effective segregation of duties.

• Employees can commit fraud at any time and for whatever reason.

ACRONYM FOR FRAUD : F ALSER EALITIESA PPEARINGU NDERD ECEPTION

Tan Chen Leong CFEIICD-Marcus Evans Forum for Directors16-17 Jan. 2006 – Mulia Hotel, Jakarta


FRAUD RISK ???FRAUD RISK ???

Losses from fraud are likely to be grossly misleading because only a fraction of fraud is reported. Statistically:

• One out of every four persons will steal whenever they can.

• Two out of four persons will steal when they think they can get away with it.

• In total, 75% of all persons are potential fraud perpetrators.

Tan Chen Leong CFEIICD-Marcus Evans Forum for Directors16-17 Jan. 2006 – Mulia Hotel, Jakarta


To face the challenges ? Board needs

the right people, the right culture, the right issues, the right information, the right process and the right follow-through


ForForThe Board to Consider !!!The Board to Consider !!!



1. An Effective Governance System – Developing and implementing a governance system that makes efficient and effective use of limited resources.

2. Board Mandate3. Corporate Values – Establishing an appropriate “tone at the top”.4. Corporate Strategy & Risk – Challenging management assumptions

about opportunities & Risks; consensus about strategic direction; monitoring achievement or strategic goals

5. Disclosure – Overseeing audit processes, accounting policies and disclosure requirements

6. Fiduciary Governance – Understanding and meeting the expectations of shareholders and regulators.

7. mAnagement Oversight – Selecting, Supervising, Evaluating, Compensating, and Replacing Management

8. Independent-Minded Board – Ensuring board objectivity.9. Informing the Board – Identifying the board’s information needs and

ensuring the board has access to that information.10. Responding to Crises – Responding quickly and responsibly to

corporate problems.



1. Implementation2. Time Concern (2 X)?3. Interdependent but Accountable4. Advanced Training5. Maximum Board Seat6. Insurance

tony silitonga indonesian institute for corporate directorship (iicd)

Documents

tobin s q high low high

expected distribution

performers high commitment

board mandate

board objectivity

fraud fraud

board s information

corporate values