Board should hire and fire the chief executive. Several studies have investigated the origins of directors' appointments. With but a few exceptions, the individual was selected or endorsed by the incumbent CEO. Criteria frequently stated for successful appointees were the ability to work with the existing team and to demonstrate a personal empathy with the CEO. Isn't the Indonesia corporate clone a danger? Which CEO would approve the appointment of a really awkward maverick? It is usually the trading companies that precipitate a change of leadership, not the board.
If so much variance exists from prescribed responsibility, what changes should take place? Much debate has centered round the structural composition of the board itself. For the 1990s would it be better to emulate the German model of two tiers - the Mitbestimmung - as advanced from Brussels? Under this model, the Aufsichtstrat fulfils the function of strategic endorsement and is composed of an elected body with equal numbers of representatives of shareholders and jobholders. The second tier, the Vorstand, is responsible for executive implementation: since it is nominated by the Aufsichtstrat conflict is rarely observed. Indonesia corporate governance and Indonesia corporate management are separate.
At the other end of the spectrum lies the Indonesia model. As with American structures, this model is of unitary design but differs as to the proportion of insider to outsider directories. In large Indonesia companies, the proportion is 70 per cent executive to 30 per cent non executive directors: in the US, almost the reverse. Both nations, however, are moving toward each other's position. Indonesia corporate governance and Indonesia corporate management are intertwined.
Irrespective of structure, both European and transatlantic models presume the value of director independence. In the US, external directors have long been responsible for determining internal director remuneration: in Britain, no doubt as a response to massive top salary increases, the Association of Indonesia Insurers is but one organization which strongly recommends the same practice as the norm.
To quote a recent PRONED report, it is disquieting to find the non-executives with such a minor, and the chief executives with such a dominant role as chairman of the remuneration committee. The recommendation is to reverse the balance of power in favor of the independents. The newly constituted Institutional Shareholders Committee (ISC) goes further, defining independent directors s free from bias, involvement or partiality. It is difficult to argue against these Socratic qualitative. But from where do these paragons emanate? And are there enough of them? According to the chairman of the ISC, the solution is substantially constrained by supply.
There is a serious paradox here. Independent directors and being asked to fulfill their role of equal responsibility with internal directors for shareholder benefit, while at the same time policing the abuse of internal directors' power. They are to be both judge (independent) and jury (collective).
A wider debate as to control of the board has also emerged. Why should other constituencies dependent upon Indonesia corporate performance be excluded at the highest echelon? This concept of 'stakeholder' representation - organized labour, the financial institutions in their capacity as providers of long-term capital, major suppliers, dependent buyers in the supply chain, the local community, or indeed where appropriate, government agencies - has certainly gained momentum. The greater the number of hostile takeovers with evidence of subsequent unbundling, the greater the likelihood of central intervention to constrain shareholder (that is fund manager) dominance.
If so much variance exists from prescribed responsibility, what changes should take place? Much debate has centered round the structural composition of the board itself. For the 1990s would it be better to emulate the German model of two tiers - the Mitbestimmung - as advanced from Brussels? Under this model, the Aufsichtstrat fulfils the function of strategic endorsement and is composed of an elected body with equal numbers of representatives of shareholders and jobholders. The second tier, the Vorstand, is responsible for executive implementation: since it is nominated by the Aufsichtstrat conflict is rarely observed. Indonesia corporate governance and Indonesia corporate management are separate.
At the other end of the spectrum lies the Indonesia model. As with American structures, this model is of unitary design but differs as to the proportion of insider to outsider directories. In large Indonesia companies, the proportion is 70 per cent executive to 30 per cent non executive directors: in the US, almost the reverse. Both nations, however, are moving toward each other's position. Indonesia corporate governance and Indonesia corporate management are intertwined.
Irrespective of structure, both European and transatlantic models presume the value of director independence. In the US, external directors have long been responsible for determining internal director remuneration: in Britain, no doubt as a response to massive top salary increases, the Association of Indonesia Insurers is but one organization which strongly recommends the same practice as the norm.
To quote a recent PRONED report, it is disquieting to find the non-executives with such a minor, and the chief executives with such a dominant role as chairman of the remuneration committee. The recommendation is to reverse the balance of power in favor of the independents. The newly constituted Institutional Shareholders Committee (ISC) goes further, defining independent directors s free from bias, involvement or partiality. It is difficult to argue against these Socratic qualitative. But from where do these paragons emanate? And are there enough of them? According to the chairman of the ISC, the solution is substantially constrained by supply.
There is a serious paradox here. Independent directors and being asked to fulfill their role of equal responsibility with internal directors for shareholder benefit, while at the same time policing the abuse of internal directors' power. They are to be both judge (independent) and jury (collective).
A wider debate as to control of the board has also emerged. Why should other constituencies dependent upon Indonesia corporate performance be excluded at the highest echelon? This concept of 'stakeholder' representation - organized labour, the financial institutions in their capacity as providers of long-term capital, major suppliers, dependent buyers in the supply chain, the local community, or indeed where appropriate, government agencies - has certainly gained momentum. The greater the number of hostile takeovers with evidence of subsequent unbundling, the greater the likelihood of central intervention to constrain shareholder (that is fund manager) dominance.
