This paper, which is divided into five parts, describes the current status of corporate governance in Indonesia. The first part, The State of Corporate Governance in Indonesia, discusses the ownership structure in Indonesia, which is largely dominated by families or a few shareholders. It also discusses the two-board system in the country and the ineffectiveness of such a system in many of the boards. The rest of part I describes the role of audit committees in Indonesia, unfair practices found in business community, lack of transparency and disclosure and lack of risk management practices.
The second part is about efforts being conducted to introduce and implement corporate governance in Indonesia. Such efforts include, developing a national strategy for corporate governance reform, conducting educational events on corporate governance for the public, conducting pilot projects to implement corporate governance principles in the industries, carrying out regulatory reform within the capital market, establishing the Forum of Corporate Governance in Indonesia, and managing technical assistance from the international community.
Part three of the paper deals with Indonesian accounting standards, in particular the history of accounting standards in Indonesia, the standards setting process, the initiatives to harmonize with the international standards, and challenges encountered in implementing the standards.
Part four addresses the auditing standards and the audit profession in Indonesia. It starts with the historical background of the standards and proceeds to the harmonization process, the challenges found in implementing the standards, and the mechanism that exists within the profession to ensure that auditors reach a certain level of competence and fulfill their professional responsibility.
Part five discusses disclosure practices in Indonesia. It elaborates the legal foundation of disclosures in Indonesia, and some disclosure items such as capital structures, ownership of the companies, voting rights, information on the boards, related party transactions, risks, mergers and acquisitions and environment reporting.
Full paper download: Kurniawan&Indriantoro_Corporate Governance in Indonesia (.pdf 125kb)