ABSTRACT
The 1997/1998 Asian financial crisis has become a major impetus for urgent reform of corporate governance in Asia, including Indonesia. After the crisis, many changes have taken place, including changes in relevant laws and regulation as well as many initiatives taken by regulators and other entities to improve corporate governance implementation in Indonesia. However, based on corporate governance assessment in Indonesia by the World Bank (2010, 2014) and the Asian Development Bank (ADB) in partnership with ASEAN Capital Market Forum (ACMF), there are still several corporate governance implementation weaknesses in Indonesia, including those related to the responsibilities of the board. There are several factors affecting board effectiveness, such as board size, board independence, board directorship, board meetings, board tenure, board nomination and remuneration, board removal, board qualification, board training, board performance assessment, and board committees. Several essential corporate governance requirements with regard to board mechanisms are already addressed in Indonesia’s Company Law. The Indonesia Financial Services Authority (Otoritas Jasa Keuangan/OJK) and Indonesia Stock Exchange (IDX) have also issued regulations that regulate essential requirements to enhance board effectiveness. However, there are several areas for improvement. For example, regulators may stipulate more stringent rules on independent commissioners’ tenure, AGM invitations should include sufficient information about board candidates’ qualifications, etc. Enhancing board effectiveness cannot be achieved by only issuing regulations, but also entail socialisation, education and training, as well as strong law and regulation enforcement. All of these require a strong commitment from all interested parties, including regulators as well as issuers and public companies.
