Introducing - KPMG · 2020. 7. 4. · No. 32 BAPEPAM Reg BAPEPAM Reg No. X.K.6 BAPEPAM Reg No....

Introducing

The KPMG

Indonesia Board

Governance

Toolkit

9 November 2015

1 © 2015 KPMG Siddharta Advisory, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with

KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved

AGENDA

1. Global CG

Landscape

2. Indonesian CG

Landscape

5. Key Topics of the

Toolkit

4. Navigating the Board Governance Toolkit

3. Introducing the Board Governance Toolkit



1. Global CG Landscape



OECD CG Principles and Changes

I. Ensuring the Basis for an Effective Corporate Governance Framework

II. The Rights of Shareholders and Key Ownership Functions

III. The Equitable Treatment of Shareholders

IV. The Role of Stakeholders in Corporate Governance

V. Disclosure and Transparency

VI. The Responsibilities of the Board

I. Ensuring the Basis for an Effective Corporate Governance Framework

II. The Rights and Equitable Treatment of Shareholders and Key Ownership Functions

III. Institutional Investors, Stock Markets, and Other Intermediaries

IV. The Role of Stakeholders in Corporate Governance

V. Disclosure and Transparency

VI. The Responsibilities of the Board

2015 Moderate

Moderate

Significant

Minimal

Moderate

Significant

2004 2015



CG Framework should promote transparent and fair markets and

efficient allocation of resources

Balance of legislation v “comply or explain”

Where appropriate, consider the size of the company (big v small)

Support effective supervision and enforcement (avoid conflicts of

interest in enforcement)

Stock market needs to actively support CG

Cross-border cooperation should be enhanced

Ensuring the

Basis for an

Effective CG

Framework

The Updated OECD Principles 2015

CG Framework should protect and facilitate the exercise of

shareholders’ rights

It should ensure the equitable treatment of all including minority

and foreign shareholders

All shareholders should have ability to obtain effective redress for

violation of their rights

Improved processes for shareholder voting rights (notices, location,

electronic voting)

Disclosures required for board members and key executives (and

remuneration policy) – “Say on Pay”

Disclosure and approval of related party transactions

Moderate

The Rights and

Equitable

Treatment of

Shareholders

and Key

Ownership

Functions

Moderate



The Updated OECD Principles 2015 (Cont’d)

A new section in the 2015’s OECD

Provide sound incentives throughout the investment chain and

provide for the effective functioning of stock markets

Institutional investors to disclose voting policies and records

Votes should be cast by custodians or nominees in line with the

directions of the beneficial share owner

It highlights the role of market participants to minimize conflicts of

interest

New issue on cross-listings (criteria and procedure for primary

listing requirements)

Institutional

Investors, Stock

Markets and

Other

Intermediaries

The recognition of stakeholder rights and encouragement of active

cooperation between corporations and stakeholders

Stakeholders include investors, employees, creditors, customers,

suppliers and other stakeholders

Mechanisms for employee participation include employees on

boards, work councils to consider employee views

Stakeholders should be able to communicate their concerns freely to

the board and competent public authorities (protection by law of

those reporting concerns)

Role of

Stakeholders in

Corporate

Governance

Minimal

Significant



The Board’s role in risk is greater – oversight of company’s risk

management (beyond risk policy). This involves oversight of the

accountabilities and responsibilities for managing risks. Should

cover financial, operational, compliance and risk management.

The Board’s role in determining sufficiency of tax payments (“tax

morality”)

Need to consider remuneration claw back provisions

Nomination Committee – identify potential candidates

Separation of Chairman and CEO positioned as generally good

practice (previously only cited as ‘maybe’ good practice)

Separate meetings of independent directors encouraged

Board should consider setting up specialized committees (e.g.

nomination, compensation, risk)

Board evaluations should be conducted

The

Responsibilities

of the Board

Material information is not just about omission but also as information

that a reasonable investor would consider important in investing or

voting

New issues for a stronger disclosure regime on non financial

information (e.g. social issues, human rights, political donations, staff

turnover etc), remuneration, related party transactions, etc.

Disclosure should include beneficial owners (not just major share

ownership and voting rights)

Disclose shareholdings of directors (including NEDs)

Role of the auditor (review of CG, independence, reporting lines to

AC or equivalent, fixed tenure for auditors)

On-going disclosure (periodic and continuous) disclosure

Disclosure and

Transparency

The Updated OECD Principles 2015 (Cont’d)

Significant

Moderate



2. Indonesian CG Landscape



1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 1998 1997 1996 1995

Law 8/1995

on Capital

Market

Law 13/2003

on Manpower

Law 40/2007 on Limited

Liability Company Law 21/2011 on

Financial Services

OJK Reg

No.17 &

No.18

Revised IDX Listing Rules

GCG

Launched GCG

Revised GCG Code

Revised

Good Public

Governance

Sharia

Business Good

Governance

GCG Code

Revised

Audit

Committee

Manual

Whistle

Blowing

Manual

Risk Management

Manual

Business Ethics

Manual

IFC CG

Manual

OJK Reg

No. 34

OJK Reg No. 8

OJK Reg

No. 33

OJK Reg

No. 35

OJK Reg

No. 32

BAPEPAM Reg

No. X.K.I

BAPEPAM

Reg No.

X.K.6

BAPEPAM Reg No. X.K.2

BAPEPAM Reg

No. X.M.I BAPEPAM Reg No. IX.I.7

BAPEPAM Reg

No. IX.I.6 BAPEPAM

Reg No.

IX.I.5

BAPEPAM Reg No. IX.E.1

BAPEPAM Reg No. IX.E.2

Indonesian CG Requirements

Laws General CG Codes Better Practice Guidelines Regulations



PROTECTION OF

SHAREHOLDERS

ROLE OF

STAKEHOLDERS

TRANSPARENCY OF

INFORMATION

CORPORATE

GOVERNANCE

FRAMEWORK

ROLES AND

RESPONSIBILITIES OF

BOC AND BOD

Newly Issued OJK Regulations 2014-2015

GMS Planning and

Implementation for

Public Companies

Corporate Secretary

of Issuers and Public

Companies

Website of Issuers

and Public Companies

BoC and BoD of

Issuers and Public

Companies

Nomination and

Remuneration

Committee of

Issuers and Public

Companies

Indonesia’s CG

Code 2006

Indonesia CG

Roadmap 2013

OJK Roadmap – 33 Recommendations



3. Introducing the Board Governance Toolkit



The KPMG Indonesia Board Governance Toolkit



Introducing the Board Governance Toolkit

One-stop shop, practical reference guide designed to capture

current and emerging governance requirements

and practices

- Real-time updates of evolving CG requirements

- Cutting through the complexity of the regulatory environment

- BoC and BoD of Issuers and Public Companies across all sectors

- CG practitioners

- Other key stakeholders

Incorporate into BoC/BoD/Committee

meetings and leverage key insights to enhance

oversight



The KPMG Directors’ Toolkits Around the World

No one size fits all. Corporate governance requirements are unique to each country; its

implementation therefore requires a tailored approach and contextualized insights.



3. Navigating the Board Governance Toolkit



Navigating the Board Governance Toolkit

Easy topic

navigation

Click on chapter

title to take you

directly to a topic

of interest



Navigating the Board Governance Toolkit (Cont’d)

Questions to

ask?

We have provided

for key boardroom

topics questions to

ask to prompt right

discussions




Red flags

Every chapter

includes a list of

warning signs of

potential issues of

concern for

company directors




Example better practice templates

Board committee

charter builder Induction Framework BoC and BoD charter

builder

Commissioners and

Directors Liabilities

Audit Committee

annual agendas




Real time updates

The Toolkit will be

updated to reflect the

changing CG

requirements and new

topics will be added

from time to time



4. Key Topics of the Toolkit



State of the World – Trust Deficit and Relentless Change



BoC/BoD Roles and Responsibilities

Greater clarity of BoC/BoD’s duties and responsibility

• To act in good faith

• To act prudently

• To act with full responsibility

Duty of Care

• Conflict of interest

• Affiliated transactions

• Confidentiality of information Duty of Loyalty

Summary of Commissioner and Director

Potential Liabilities

Fiduciary Duties



BoC/BoD Roles and Responsibilities (Cont’d)

Requirement to have a complete code of conduct that specifies the BoC/BoD’s fiduciary

duties.

(CGC Code for Issuers and Public Companies 2015)

Overall BoC/BoD Responsibilities

BoC/BoD charter builder

Board of Commissioners

• Oversight and supervision

• Advisory

Board of Directors

• Day-to-day management

• Risk management and internal controls

• Public relations

• Social responsibility

coming



BoC/BoD Diversity

88.40%

11.60%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%

Men Women

Pe

rce

nta

ge

of D

ire

cto

rs

Gender diversity in IDX-listed companies

Board Diversity

Source: NUS Business School – Indonesia Boardroom Diversity Report 2012

Female Footprints in IDX-listed Companies



BoC/BoD Diversity (Cont’d)

Women were better

represented in the Board

of Directors at 13.1%, as

compared to the Board

of Commissioners

(9.9%).

The Toolkit provides

OECD recommendation

to improve Board

composition and

effectiveness.

Issuers and Public Companies are required to develop a diversity and anti-discrimination

policy for members of the BoC/BoD.


Although Indonesia leads

the way in boardroom

gender diversity in Asia,

there’s no regulation that

governs diversity issues in

BoC/BoD.

Board Diversity

Source: NUS Business School – Indonesia Boardroom Diversity Report 2012 Female Footprints

in IDX-listed Companies

coming



BoC Committees

BoC Committee charter builder



BoC Committees – Audit Committee

The 2014 Global Audit Committee Survey:

<50%

to oversee major risks

[cyber risk and IT, risk management processes, and global compliance]

in addition to implementing the committee’s core responsibilities.

Source: KPMG’s Audit Committee Institute – 2014 Global Audit Committee’s Survey

The Toolkit provides insights into the critical role of the AC, which is mandatory for Issuers and

Public Companies. It elaborates on AC size and composition, appointment and dismissal, duties

and responsibilities, as well as meetings.

“increasingly difficult”

of AC members indicate that it is

Sample AC Annual Agenda



BoC Committees – Nomination and Remuneration Committee

NOMINATION

- Provide recommendations regarding Board structure, size and composition; as well as the nomination process and performance evaluation for members of the BoC and the BoD

- Assess the independence of Commissioners and Directors

REMUNERATION

- Provide recommendations regarding remuneration structure and policy for members of the BoC and the BoD

A new requirement

mandated by OJK

No.34/POJK.O4/2014

Only 25% of Issuers and Public

Companies have an NRC and

disclosed it in their 2012 Annual

Reports. Source: Indonesia Corporate

Governance Roadmap, OJK, 2013

The NRC should comprise at

least three members

and be chaired by an

independent

commissioner



General Meeting of Shareholders

Areas that will be further strengthened:

Issuers and Public Companies are required to submit AGMS agenda to the OJK within five

business days prior to its announcement and in detailed and complete manner. They are

also required to publish the GMS results on the company’s website. (December 2014)

Key Issues

Protecting the rights of minority

shareholders

Encouraging shareholders

participation in the GMS

Voting procedure

to accommodate

the one share-

one vote

principle Dividend

payments

period

Share ownership

disclosure up to

individual

shareholder Disclosure of

Independent

Commissioner

criteria

new



Governing Instruments and Internal Regulations

Critical to ensure alignment and consistency across these instruments

Internal Regulations

Company Codes of CG

Delegation of Authority

BoC and BoD Charters

Code of Ethics/Conduct



Performance and Value Add

Diversity Independence

BoC and BoD Composition and Performance

Pillars of Board Effectiveness

of Issuers and Public Companies disclosed the relationship between performance and remuneration of the BoD in their annual reports. Source: Indonesia Corporate Governance Roadmap, OJK, 2013 75%

OJK issued a regulation

governing the BoC and the BoD of

Issuers and Public Companies

(December 2014)

1. Procedures for nomination of

BoC/BoD members

2. Requirements for BoC/BoD

candidates

3. BoC/BoD meeting requirements

4. Concurrent positions

5. Limitation of tenure for

Independent Commissioner

6. Requirement to establish Board

charters and Code of Ethics

However, there is no regulatory provision requiring the

BoC/BoD to conduct regular performance evaluation and its

disclosure in the annual report.

new



BoC and BoD Composition and Performance (Cont’d)

General attributes

Leadership

Strategic assessment, development and execution

skills

People skills

Crisis response

Communication skills

Technical skills

Risk Management and Assurance

Industry experience

Financial Literacy

Human Resources

Major Transactions

Major Projects

Legal/ IP

Behavior attributes

Time Commitment and professionalism

Making an impact and accountability

Performance Assessment Criteria for Commissioners and Directors



The Corporate Secretary

“There is increasing recognition of the need to elevate the position

and function of company secretaries to allow them to take on a

stronger role in promoting governance within companies.”

Source: Suruhanjaya Sekuriti, 2011 as published in Indonesia Corporate Governance Roadmap

71% of Issuers and Public Companies have disclosed

the corporate secretary’s job description in their

annual reports. Source: Indonesia Corporate Governance Roadmap, OJK, 2013

OJK issued a regulation strengthening the qualifications, functions, authorities and

responsibilities of Corporate Secretary for Issuers and Public Companies.

(December 2014)

The Toolkit provides insight into productive meeting protocols (e.g. agenda, attendance,

frequency and duration).

new



Insightful Strategy

In what areas has the Board’s involvement in strategy increased

over the past 2 to 3 years?

Formulation of strategy alternatives/consideration of

strategic alternatives

Monitoring execution

Recalibrating strategy

Devoting more time to technology issues, including cyber risk

Testing the ongoing validity of assumptions

GLOBAL INDONESIA

53%

35%

47%

33%

24%

41%

72%

25%

13%

9% Source: ACI Global Pulse Survey: Indonesia Edition – 2015



of Indonesian respondents said the

board has deepened its involvement over the

past two to three years – particularly in

monitoring the execution of strategy.

Boards need to devote more time to:

Formulating strategic alternatives

Considering technology issues, such

as cyber security

Source: ACI Global Pulse Survey: Indonesia Edition – 2015

Insightful Strategy (Cont’d)

%

72

The Toolkit provides insight on how to utilize the balanced

scorecard to get a more accurate picture of the business

from different perspectives.



of Issuers and Public Companies

have had and disclosed their

whistle-blowing systems.

Source: Indonesia Corporate Governance Roadmap, OJK, 2013

Ethical Culture

29%

The OJK Roadmap: Existing provisions need to be strengthened to require Issuers and

Public Companies to have whistle-blowing systems, anti-corruption policy and disclosure,

and financial crime policy.


O

N

L

Y

The Toolkit provides insight on how to establish and implement Code of Ethics/Conduct.

coming



Risk Management

1. The Board of Directors shall establish and implement a

sound risk management within the company

covering all aspects of the company’s activities

2. Each strategic decision taken, including the

creation of new products or services, shall carefully

consider its risk exposures, ensuring appropriate

balance between the benefit and risk

3. To ensure proper implementation of the risk management,

the company shall have a work unit or a person in

charge for such function 1

1 CG Code Part IV.D.3.2



Internal Control

1. The Board of Directors shall establish and maintain a sound

internal control system to safeguard company’s assets

and performance and its compliance with laws and regulations;

2. Shall have an internal control function or unit

3. The internal control function or unit shall to assist the Board of

Directors in ensuring the attainment of objectives and business

sustainability by:

(i) evaluating the implementation of the company’s program;

(ii) providing recommendations to improve the effectiveness of the

risk management process;

(iii) evaluating the company’s compliance with company’s

regulations, implementation of GCG and the laws and regulations;

and

(iv) facilitating sound coordination with external auditor;

4. The internal control unit or the head of an internal control function

shall be responsible to the President Director or to the Director in

charge for the internal control function. The internal control unit has

a functional relation with the Board of Commissioners through the

Audit Committee 2

1 Applicable to publicly listed companies, state-owned enterprises, province and region-owned companies, companies that raise and manage

public funds, companies of which products or services are widely used by public, and companies with extensive influence on environment 2 CG Code Part IV.D.3.3



Review and Disclosure of

Risk Management and Internal Control

Audit Committee

(i) financial reports are

presented appropriately in

accordance with the

generally accepted

accounting principles;

(ii) internal control

structure is

adequate and

effective (iii) internal and external audits

are conducted in accordance

with applicable audit

standards

(iv) audit findings are followed up

by the management

(v) review candidates for

external auditors including

remuneration1

Risk Policy

Committee

(i) assist the Board of

Commissioners in

reviewing the risk

management

system established by

the Board of Directors and

evaluating the

company’s risk

tolerance 2

1 CG Code Part IV 4.1.a. and 4.1.b 2 CG Code Part IV 4.3 and CG Regulations, Article 15.1

Listed companies are required to provide:

– Appropriate information disclosure and

transparency, as well as an effective system of

risk management and internal

control.

– Board of Director’s report, which shall include a

statement on the effectiveness of the

internal control system including risk

management, control system and internal audit.

Review Disclosure



Risk Management and Internal Control

What would most improve the company’s risk-related decision making?

Source: ACI Global Pulse Survey: Indonesia Edition – 2015



41

Risk Management and Internal Control (Cont’d)

KPMG Board Assurance Framework



Receiving Assurance

Adequacy vs. Effectiveness



Reporting and Disclosures

• Summary of financial highlights

• Report of the BoC

• Report of the BoD

• Company profile

• Management analysis and discussion

• Corporate governance implementation

• Corporate social responsibility

• Audited financial statements

• Statement of responsibility by the BoC and the BoD

Annual Report disclosures:

Accurate

Relevant

Timely

Complete



Other Governance Requirements

Given the number and mandates of regulators, it is no longer enough to adopt a

reactive approach to compliance. Companies must take an integrated approach

rather than reacting to a specific regulation in isolation.

USA

Australia

UK

India

Japan China

Korea

Singapore

The Toolkit provides an overview of governance requirements covering

major markets around the world.



Stakeholder Engagement

A good reputation is a prized corporate asset. Companies that can

mobilise their stakeholder base are able to present a positive public

image and reap the rewards that follow.

Plan • Profile and map stakeholders

• Conduct risk assessment and set priorities

• Set roles and accountabilities

• Establish monitoring indicators

• Prepare training where appropriate

Engage • Initiate contact with board-

level stakeholders

• Focus on the issues that matter

• Proactive not reactive

• Drive mutual relationships and outcomes

Review • Monitor and respond to risk

on an ongoing basis

• Evaluate performance

• Report progress through a formal annual report statement



Private Equity

Private equity (PE) dealings attract regulatory scrutiny

Plan

• Pre-emptively discuss the board’s plan for PE approaches, establishing the response process for future dealings

Evaluate

• Rigorously evaluate any PE approaches, conducting thorough due diligence activities and utilising independent advice as necessary

Communicate & Respond

• Continue to comply with continuous disclosure requirements and respond in the best interests of the shareholders



Board Governance Toolkit Update

BGF will send out regular announcements to all of its members

highlighting new content and resources. (When you attend our event, you are automatically registered as a BGF member. You

can unsubscribe anytime.)

How to get

these

updates?

To register to become a member of the KPMG Board Governance Forum, please send an email

to Liana Lim ([email protected])

Financial Services

State-Owned Enterprises

Family Conglomerates

Work Health and Safety

Corporate Sustainability

mailto:[email protected]



Board Governance Forum Website

© 2015 KPMG Siddharta Advisory, an Indonesian limited liability company and a member firm of the KPMG network of independent member firms affiliated with KPMG

International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Relevant

and recent

thought

leadership

Upcoming

events

Related

links

Key

contacts

Registration

KPMG Siddharta Advisory

35th Floor Wisma GKBI

Jl. Jendral Sudirman Kav. 28

Jakarta 10210, Indonesia Presenter Contact Details

Irving Low Partner

Head of Risk Consulting

KPMG Singapore and Indonesia Email: [email protected]

© 2015 KPMG Siddharta Advisory, an Indonesian limited liability

company and a member firm of the KPMG network of independent

member firms affiliated with KPMG International Cooperative (“KPMG

International”), a Swiss entity. All rights reserved.

C:/Program Files/TurningPoint/2003/Questions.html

Introducing - KPMG · 2020. 7. 4. · No. 32 BAPEPAM Reg BAPEPAM Reg No. X.K.6 BAPEPAM Reg No....

Documents

Transcript of Introducing - KPMG · 2020. 7. 4. · No. 32 BAPEPAM Reg BAPEPAM Reg No. X.K.6 BAPEPAM Reg No....