THE CONCEPT OF
STATE-OWNED CORPORATION SUBSIDIARY GOVERNANCE INCOMPATIBLE WITH THE CORE
BUSINESS
Rahmadi Indra Tektona*, Edi Wahjuni
Faculty of Law, Universitas
Jember, Indonesia
Email: [email protected]*
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Article
Information |
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ABSTRACT |
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Received:
January 18, 2023 Revised:
January 30, 2023 Approved: February 17, 2023 Online: February 23, 2023 |
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Company management based on Good Corporate
Governance (GCG) principles is an effort to make GCG a rule and guideline for
company managers in carrying out their business activities. Corporate
governance is also an essential element of driving performance; many studies
have proven that corporate governance affects the company’s performance.
Implementing the principles of GCG in the management of the company is very
important because it guides the company to make decisions appropriately and
responsibly and the management of the company to be healthier, thereby
increasing the company’s value. This study aimed to analyze corporate governance in
Subsidiaries State owned subsidiaries that are incompatible with the core
business by using normative juridical research methods, with the data source
being secondary data obtained by library research. In secondary data used
primary legal material in the form of statutory regulations, secondary legal
material in the form of literature related to this research. Based on the research results, the concept of
governance of Subsidiaries State owned subsidiaries that do not suit the core
business, in general, has not been going well due to the establishment of a
subsidiary to pursue profit. If the Good Corporate Governance mechanism does
not function properly in the company, this can reduce the company’s value and
lead to poor company performance and even loss. If the principles of Good
Corporate Governance are appropriately implemented in subsidiaries that do
not suit the core business. ·
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Keywords |
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Good corporate governance;
Subsidiaries State owned Enterprise; Good Corporate
Governance |
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INTRODUCTION
Companies play an essential role
in developing the business world and advancing the economy of a country. Every
company’s main goal is to try to survive and get a profit (Putri, 2012). The
company’s ability to achieve what the company aims to establish shows its
performance or work performance. Businesses that vastly grow and develop so
they need to solve them according to business classifications. The need for a
business solution, each of which will become an independent Limited Liability
Company. The business fractions are still in the same ownership with the
control, which is still centralized to a certain extent so that the company’s
fractions will have a special relationship with an independent company.
Companies that own part or all of the shares in one or several other companies
to control or participate in controlling these companies are known as holding
companies (Chairan, 2010).
The Holding Company is a central
company that owns shares in other companies to regulate these other companies (Chairan, 2010). As the central leader of the holding company
who controls and coordinates, the holding and subsidiary companies have a
management unit for creating a group company as an economic unit. If several
SOEs in similar sectors will be united in one company group and the management
optimization is good, there will be a share of support in these companies (Judhanto, 2018). The
establishment of a subsidiary company must be following the holding company’s
business or its core business so that there is continuity of business being
carried out. Some holding of subsidiaries that manage businesses that do not
suit the core business has suffered losses. Therefore, it is necessary to have
arrangements related to these companies. The arrangement of Subsidiaries State owned subsidiaries
refers to the Decree of the Minister of Subsidiaries State Owned
No.SK-315/MBU/12/2019 concerning the Arrangement of Subsidiaries or Joint
Ventures in Subsidiaries State owned Environment
that the issuance of the Decree considers several things, one of which is the
existence of subsidiaries and joint ventures that have the same business field
or business focus, it needs to be consolidated to management effectiveness.
The reason for structuring the
subsidiary is that the company’s management refers to the principles of Good
Corporate Governance (GCG), which is to focus on the core business, sustainable
efficiency, and the company must be in a healthy condition. Consolidation
of Subsidiaries State owned subsidiaries
is carried out because many Subsidiaries State Owned subsidiaries whose
businesses are not following their focus to providing added value to the
holding company. The government is aware that not only private companies
implement Good Corporate Governance (GCG); therefore, Subsidiaries
State owned companies that have a crucial role in the national economy can
also improve their image by promoting excellent and transparent corporate
governance. In general, corporate governance is a structure that is implemented
to develop and continue to improve its performance based on laws and ethical
values. One way to improve the company’s performance is by implementing Good
Corporate Governance (GCG) (Frediawan, 2008).
The Principles of Governance based
on the Decree of the State Minister for State-Owned Enterprises Number:
Kep-117/M-MBU/2002 are sound corporate principles applied in company management
carried out independently - in the interest of the company to achieve the
company’s goals and objectives (Putri, 2012). If
Corporate Governance does not function properly within the company, this can
reduce the company’s value and lead to poor company performance. The general
explanation of Law Number 19 of 2003 concerning State-Owned Enterprises number
IV is written that to optimize its role and be able to maintain it in an
increasingly open and competitive world economic development, Subsidiaries
State Owned need to foster a corporate culture and professionalism, among
others, through improving its management and supervision. The management and
supervision of Subsidiaries State Owned must be carried out based on the
principles of good corporate governance. Based on the description above, the
research question in the study is: What is the Concept of Corporate Governance
in State-Owned Enterprise Subsidiaries Incompatible with the Core Business?
METHODS
This study used a normative legal
research methodology. The data studied were sourced from documents or
literature, especially in primary and secondary legal materials. The main legal
materials used refer to several laws concerning or related to Limited Liability
Companies. Apart from referring to primary legal materials, the arguments in
this study’s analysis were built based on the opinions of legal experts
obtained from their papers.
RESULTS
Aside
from being subject to the Subsidiaries
State owned Law, the company is also subject to the PT Law, so the
company’s establishment must pay attention to the two laws. The Persero duty
implementation is carried out by Persero organs, assigned according to their
respective duties and functions. Law Number 40 of 2007 concerning Limited
Liability Companies are regulated in detail regarding company organs. The
company’s rights and obligations must be carried out with the assistance of the
company’s organs, which is useful for moving the company so that the legal
entity can run according to its objectives. The limited liability company
organs consist of the General Meeting of Shareholders (GMS), the Board of
Directors, and the Board of Commissioners. As a legal entity, the company has
its assets that are separate from the management’s assets, in which the capital
of PT the company consists of shares. The word limited refers to the responsibility
of shareholders whose extent is limited to the nominal value of all shares they
own. The definition of a Limited
Liability Company in Article 1 of the Company Law, it can be concluded that the
characteristics of a Limited Liability Company are as follows (Sinaga,
2018):
a. In the
form of a legal entity.
An entity that exists due to law
and its existence is necessary so that it is called a legal entity. Thus, a
limited liability company is also called an artificial person or man-made, or a
person in law or legal person.
b. Established
by agreement.
Each company is established based
on an agreement. This establishment means that the founders are entitled to
receive shares in the Company and at the same time they are required to make
full payments for the shares they have taken.
c. Doing
business activities.
Activities in the field of
business that aim to gain and/or profit.
d. Authorized
capital is divided into shares.
Every company must have capital;
Capital must be divided into shares; This authorized capital is also called
statutory capital; Authorized capital is the assets of a limited liability
company (legal entity) separate from the personal assets of the founder,
company organs, and shareholders.
e. Meets
statutory requirements.
Closed system; Requirements start
from the establishment, operation, and end; There are absolute conditions such
as; Deed of establishment in front of a notary and must be approved by the
minister.
After
obtaining approval from the Minister of Law and Human Rights (HAM), the Limited
Liability Company has become a legal entity and becomes itself and can enter
into agreements and company assets separate from the owner’s assets. Since a
Limited Liability Company has a legal entity’s status, since then, the law
treats the Shareholders and management (Directors) separately from the Limited
Liability Company itself, known as: “separate legal personality,” namely as an
independent individual. Thus, shareholders who do not have an interest in the
Limited Liability Company’s assets are also not responsible for the company’s
debts.
A
holding company is a holding company aiming to own shares in one or more other
companies and/or controlling, managing, and managing one or more of these other
companies. Munir Fuady believes that a holding company is a company that aims
to own one or more shares in another company and/or regulate one or more of
these other companies (Fuady,
2004).
Holding company is a company that is already large and growing, then forming
several companies as subsidiaries, so the large company becomes the holding
company (Murjiyanto,
2002).
Moreover, a holding company is the
creation of a company that is specially prepared to hold shares of other
companies for investment purposes either without or with actual control (Tobing,
2020).
The concept of
a holding company in implementing the process of forming a holding company can
be carried out through three procedures, namely (Sipayung et al., 2013):
a. Residue
Procedure. The fragmented company has become an independent company, while the
residue (residue) from the original company is converted into a holding
company, which also holds shares in the fractional company and other companies
if any.
b. Full
Procedure. In this case, what becomes a holding company is not the remainder of
the original company as in the residual process, but a full and independent
company.
c. Programmed
Procedures At times, business people have been aware of the importance of
holding companies from the start. So that the beginning of a business start, it
was thought to form a holding company. Therefore, the company that was first
established in the group was a holding company. Then for every business that is
carried out, another company will be formed or acquired, where the holding
company as a shareholder is usually together with other parties as business
partners.
The
strengths and weaknesses of a holding company can be grouped into three. The
grouping is in terms of company control, company operation, and legal
separation, namely (Ma’ruf,
2020):
a. In
terms of company control, to control or influence other companies, a holding
company needs to have shares in the company between 20% and 50%.
b. In
terms of operating a company, a holding company is legally separate between the
subsidiary and the company
c. In
terms of legal separation, it means that several similar companies can be
formed under one holding company. For example, insurance companies, banks, and
other financial institutions
Under
the company’s legal designation as a regulatory framework for a single company,
company law only regulates the relationship between holding and subsidiary
companies in constructing a group company as a special relationship between
independent legal entities. A single company approach allows laws and
regulations to maintain juridical recognition of holding and subsidiary legal
entities’ status as independent legal subjects. The association between the
holding and the subsidiary in the construction of a group company does not
eliminate the juridical independence of the holding and subsidiary legal
entities’ status as independent legal subjects, even though the subsidiary is
under the control of the holding company (Sulistiowati,
2010). In
Article 4 number 1 letter a and article 4 point 2, the formation of a new
company or company must be based on the laws and regulations in the field of
limited liability companies, so that the establishment of Subsidiaries State owned subsidiaries still refers to Article 7 of
Law Number 40 of 2007 concerning Limited Liability Companies. In connection
with the incomplete legal provisions in Indonesia that regulate specific
business groups, the subsidiary’s legal basis still adheres to Law Number 40 of
2007 concerning Limited Liability Companies.
Law
Number 40 of 2007 concerning Limited Liability Companies does not contain any
company or company born as a subsidiary. In contrast to the previous Limited
Liability Company Law, namely Law Number 1 of 1995 has contained the power of
birth of the relationship between holding and subsidiary. This provision is
contained in the Elucidation of Article 29 of Law No. 1 of 1995. Subsidiaries
are companies that have special relationships with other companies that occur
because: 1) More than 50% (fifty percent) of its shares are owned by the
holding company; 2) the holding company controls more than 50% (fifty percent)
of the votes in the GMS; 3) control over the running of the company, the appointment,
and dismissal of directors and commissioners is strongly recommended by the
holding company. Meanwhile, according to the Dictionary of the Central Bank of
the Republic of Indonesia, a subsidiary is a subsidiary, namely a company that
is part of or controlled by another company because most or all of its capital
is owned by another company or the holding company (KBBI
Online, 2022).
Juridically,
the holding company contributes to the subsidiary’s orders. When the holding
company contributes as a founder, the holding company is obliged to take a
share of the shares when the subsidiary is established. The holding company’s
role in the subsidiary is a shareholder, either an intern or a minority
shareholder (Natun,
2018). The
subsidiary is under the control of the holding because the subsidiary owns the
subsidiary company, so in carrying out its activities, the subsidiary carries
out from the holding company. Directors and Commissioners of subsidiaries in
several group companies are the same as Directors and Commissioners of the
holding company or, in other words, Directors and Commissioners concurrently.
However, there are also Directors and Commissioners of a subsidiary that are
different from the holding company. It happens because the holding company very
much develops the appointment and dismissal of directors and commissioners.
Moreover, the holding company is the shareholder of a subsidiary who gets
protection in the form of limited liability because in Indonesia, the single
company approach is still used, which is implemented by Law No. 40 of 2007 on
Limited Liability Companies.
The
establishment of a subsidiary is intended as a separation of the company. The
formation of group companies does occur nationally and internationally and does
not only involve large and multinational companies. A small company may break
itself into smaller units, and these companies become subsidiary companies that
are located under the auspices of protection of a holding company or, in this
situation, known as a holding company to carry out its business. The reasons
for this breakdown of the firm may also lie in the possibility of dealing with
or sharing the risk. Construction of a holding company and subsidiary company
can alleviate the problems faced by an aging company. The establishment of a
new company (in this case, a subsidiary) whose shares are held by the old
company is a way out of a problem because the new company will carry out
business activities such as trade transactions, inventory, invoices, and
accounts payable.
The Concept of Governance of
Subsidiaries in Indonesia
State owned enterprises carrying out their duties
require several improvements - improvements to the management system to improve
their performance. The repair tools include creating system controls. The
Subsidiaries State owned paradigm can be changed, including the management
mindset, employees, and the technology system that must be improved. Companies,
especially Subsidiaries State owned, cannot be separated from the problem of
corporate social responsibility for their environment in the development of their
business. The environment includes not only the internal environment but also
the external environment. This external environment is the environment outside
the company, so the company must also pay attention to the community and the
surrounding environment to run in a balanced manner. Every corporate
organization, both private and government, certainly has assets that have long
term economic value, which the company owns to carry out operations to support
the company in achieving its goals. Because of its function as company support,
every asset it owns must be managed effectively and efficiently so that these
assets can provide the highest benefit for the company (Ginting, 2020).
Companies in Indonesia are better known as Limited
Liability Companies in that the company must be preceded by the phrase “Limited
Liability Company” or abbreviated as “PT.” In contrast, for publicly listed
companies, the company name must be preceded by the phrase “Limited Liability
Company,” but at the end, the company name is added to the abbreviated phrase
“Tbk.” Limited Liability Companies have capital consisting of shares which can
be traced back to the provisions of Article 1 number 1 of Law No. 40 of 2007
that “Limited Liability Company, hereinafter referred to as a company, is a
legal entity which is a capital partnership, established by an agreement,
conducting business activities with authorized capital wholly divided into shares
and fulfilling the requirements stipulated in this law and its implementing
regulations.” Several companies in Indonesia have expanded their business by
establishing new companies to form group companies or groups. New companies
that are included in the group company are often referred to as subsidiaries.
Subsidiaries are independent Limited Liability Companies that are still in the
same ownership with centralized control within certain limits and have a
special relationship because they are controlled by an independent company,
also known as the holding company.
The holding company of Subsidiaries State Owned subsidiaries are
independent business entities and are two different legal entities that have
their obligations and responsibilities for the management of company assets as
adopted by the Constitutional Court Decision 01/2019 based on the following (Yulwansyah, 2020):
a. Regarding
the authority of the Minister as the GMS and Shareholders
Based on Article 14 paragraph (1)
of the Subsidiaries State owned Law, the Minister (State Minister for
Subsidiaries State Owned) acts as the GMS in the case that all shares of the
Persero are owned by the state and acts as a shareholder in Persero and limited
liability companies if not all of its shares are owned by the State. If the
Minister acts as the GMS, then by referring to Article 15 jo. 27 Subsidiaries
State Owned, the Minister has the authority to appoint and dismiss Directors
and appoint and dismiss Commissioners. However, this authority is not found in
PP 44/2005 in conjunction with PP 72/2016. Even in Article 2 paragraph (2)
Permeneg Subsidiaries State Owned 3/2012 it states: "The appointment of
members of the Board of Directors and members of the Board of Commissioners of
a Subsidiary is carried out by the GMS of the Subsidiary. the person concerned
goes through the nomination process based on the guidelines set out in this
Ministerial Regulation. "Based on the above, it can be seen that the
Minister of Subsidiaries State owned only has authority over Subsidiaries State
owned, while Subsidiaries State owned subsidiaries are categorized as
independent business entities to which the provisions of the Company Law apply.
b. Regarding
capital or shares included in Subsidiaries State owned subsidiaries
Article 1 of the Subsidiaries
State owned Law defines that Subsidiaries State owned is a business entity
whose capital is wholly or partly owned by the state through direct
participation originating from separated state assets. However, following the
provisions of Article 2A paragraph (3) and (4) PP 72/2016, it can be seen that
state assets in Subsidiaries State owned which are used as capital
participation in Subsidiaries State owned subsidiaries are transformed into
shares/capital and become assets of the Subsidiaries State owned or Limited
Liability Company. Thus, it can be seen that the assets of Subsidiaries State
owned subsidiaries are Subsidiaries State owned assets that have been separated
and become independent assets of the Subsidiaries State owned subsidiaries
Company
management based on Good Corporate Governance (GCG) principles is an attempt to
make GCG a rule and guideline for company managers in carrying out their
business activities. Corporate governance is also a vital element of driving
performance. Many studies have proven that corporate governance affects
performance. The implementation of corporate governance in Subsidiaries State
owned to improve company performance. The Regulation of the State Minister for
State-Owned Enterprises Number: PER-01/MBU/2011 concerning the Implementation
of Good Corporate Governance in State-Owned Enterprises indicates the
government’s commitment to implementing corporate governance in Subsidiaries
State owned. Corporate governance was first stipulated in the Decree of the
Minister of Subsidiaries State owned number Kep-117/M-MBU/2002 regarding
implementing acceptable corporate governance practices in State-Owned
Enterprises (Subsidiaries State Owned). Article 2 PER-01/MBU/2011 states that
Subsidiaries State owned is obliged to implement good corporate governance
consistently and/or make good corporate governance the basis of its operations
so that this decision requires that all activities of Subsidiaries State
Owned and the company’s joints be
carried out based on good corporate governance (Muslih
& Rahadi, 2019). The form of a group company/group
in which the holding company establishes a subsidiary company where the holding
company becomes the central leader and controls the subsidiary company.
Government Regulation Number 45 of 2005 concerning Establishment, Management,
Supervision, and Disbanding of State-Owned Enterprises Article 4 states that:
a. Establishment
of Subsidiaries State Owned includes:
b. The formation
of a new Perum or Persero;
c. Changing
the form of a government agency unit into a Subsidiaries
State owned;
d. Change
in the form of a Subsidiaries State owned
legal entity; or
e. The formation
of Subsidiaries State owned as a
result of the merger of Persero and Perum.
f. The
establishment of a Persero is carried out based on the provisions of laws and
regulations in the field of limited liability companies.
The
principles of Good Corporate Governance or often abbreviated as GCG in
Indonesia, are regulated through the Decree of the Minister of Subsidiaries State owned No.117/M-BU/2002
dated July 31, 2012, concerning the Implementation of Good Corporate Governance
Practices in Subsidiaries State owned,
which were later refined through the Regulation of the Minister of Subsidiaries State owned Number
Per-01/MBU/2011 concerning the Implementation of Good Corporate Governance
(Good Corporate Governance). The principles of Good Corporate Governance (GCG)
based on the Regulation of the Minister of Subsidiaries
State owned Number Per-01/MBU/2011 are as follows (Ardianti,
2014):
a. Transparency,
namely openness in carrying out the decision-making process and openness in
presenting relevant information about the company.
b. Accountability,
namely clarity of functions, implementation and accountability of the
organization so that company management can be carried out effectively.
c. Responsibility,
namely the compliance in the management of the company with the prevailing laws
and regulations and sound corporate principles.
d. Independency,
which is a condition in which the company is managed professionally without
conflict of interest and influence/ pressure from any party that is not by laws
and regulations and sound corporate principles.
e. Fairness,
namely justice and equality in fulfilling the rights of stakeholders arising
from agreements and laws and regulations.
One of
the objectives of implementing the principles of Good Corporate Governance
(GCG) is to maximize the company’s value by increasing the application of the
principles of transparency, accountability, responsibility, independence, and
fairness in the implementation of company activities. The implementation of
Good Corporate Governance is one of the solutions used to improve
government-owned or private companies’ performance and competitiveness.
Sugiyarso and Winarni stated that the error was the company’s result or goal,
the level of the company’s mission error, the level of the report on the
implementation of the task, and the exit from the company mission. According to
the Management Study Guide, the implementation of good governance will provide
benefits for companies, including:
a. Good
corporate governance (Good corporate governance) ensures company growth and
economic growth.
b. Strong
corporate governance maintains investor confidence, as a result, companies can
raise capital efficiently and effectively.
c. Corporate
governance will reduce the cost of capital from the company, this is because
creditors have a better level of trust in companies that implement good
governance so that it will lower their risk profile which in turn reduces the
level of costs.
d. Positive
impact on share prices. With a high level of public confidence in companies
that implement good governance, it will increase investor demand for the
company’s shares, this will encourage demand which in turn will increase the
share price.
e. Governance
will provide the right incentive for owners and managers to achieve goals among
shareholders and the organization.
f. Good
corporate governance is also a victim of corruption, risk, and mismanagement.
g. Governance
helps in the context of needs and development.
h. Governance
ensures the organization is managed in a manner consistent with the best
interests of all.
Principles
of Good Corporate Governance (GCG) are needed to survive and be resilient in
facing increasingly fierce competition. Good Corporate Governance (GCG) is
expected to be a means to better guard the achievement of the company’s vision,
mission, and goals. The company realizes that if GCG principles are applied
consistently well, it will be able to increase accountability and create
shareholder value in the long term without neglecting other stakeholders’
interests. For this reason, the company needs to prepare a Code of Corporate
Governance (COCG) so that the principles of Good Corporate Governance (GCG) are
consistently applied so that all the values held by the parties with interest
in the company (stakeholders) can be utilized optimally and produce a mutually
beneficial economic relationship pattern. Code of Corporate Governance (COCG)
is a crystallization of GCG principles, applicable laws and regulations,
cultural values adopted, vision and mission, and GCG best practices. The
Corporate Governance Guidelines have been compiled to become a reference for
shareholders, the Board of Commissioners, Directors, Employees, and other
stakeholders in dealing with the company. Given the dynamic and evolving
business environment, the COCG prepared by the company is always adjusted to
existing internal or external conditions. Continuous assessment is always
carried out to achieve the best work standards for the company (Office of Chief Legal Counsel &
Compliance, 2020).
The
existence of a group company to date can be called a long term among experts.
This difference extends to the realm of the definition of a group company. The
difference of opinion occurs because there is no juridical recognition of a
legal entity’s status in group companies. Even Law No. 40 of 2007 regarding
Companies is not concretely disputed about group companies’ existence. It is
addressed by the various views of group company lawyers who state that there is
no common understanding of group companies until now. The meaning of group
companies in Indonesian regulations can be found in the Regulation of the State
Minister for Agrarian Affairs/Head of the National Land Agency Number. 2 of
1999 concerning Location Permits article 1 paragraph (3), which reads “Group
companies are two or more business entities whose shares are partly owned by
one person or by the same legal entity either directly or through another legal
entity, with the number or nature of ownership in such a way that through the
ownership of share, through directly or indirectly the organization or netting
of a business entity.”
The
structure of a group company is that there are holding company and a subsidiary
where the holding company is a company that carries out the central leadership
of the company to control and coordinate the subsidiary, so it is not limited
to share ownership in the subsidiary. Subsidiaries are part of a group company
which is a company under the holding company that is in the construction of the
group company to implement policies or policies of the central management (Sulistiowati,
2010). Then
in the explanation of article 29 of Law No. 1 of 1995 regarding the previous
Limited Liability Company, the definition of a subsidiary is a company that has
a special relationship with another company that occurs because of the control
of more than 50% of the shares owned by the holding company, control of more
than 50% of the votes in the GMS controlled by the holding company, control for
the company’s net.
Group
companies are multi-business companies whose results from all companies are
contained in the group, even if a holding company can harm the subsidiaries in
one business group. Mismatch of the relationship between the holding company
and the subsidiary company will cause the holding company to fail in carrying
out guidance and development properly, resulting in growth for the subsidiary
company’s growth. Subsidiaries cannot use the business group’s advantages,
subsidiaries also cannot take advantage of the competency advantages possessed
by the holding company, and subsidiaries cannot use shared resources owned by
the business group. In some cases, this can be detrimental to the subsidiary,
creating problems for the SOE (Munir,
2010). The
problem of empty sections will eventually cause problems for Subsidiaries State
Owned. Some of the problems with Subsidiaries State owned include (Marni,
2020):
a. Subsidiaries
State Owned habit to penetrate all business sectors. This is a bad habit
because not all business fields are following the Subsidiaries State owned main
activities. In this case, a Subsidiaries State Owned should be focused and
maximally in the business sector which is its main activity. Behavior that is
not focused and penetrates all areas of business, without a mature strategy can
be the cause of Subsidiaries State owned bankruptcy;
b. The
condition when SOEs become cash cows, Subsidiaries State owned must indeed
contribute to the country’s economic growth. The Subsidiaries State owned
obligations must be adjusted to the conditions so as not to undermine the
Subsidiaries State owned’s financial condition; and
c. Becoming
an object of collective exploitation, this situation occurs when one or a group
of people tries to get personal gain from any Subsidiaries State owned
activity. This condition will be very detrimental to Subsidiaries State owned
because the profits that should be donated to the community are enjoyed by only
a few people.
One of
the problems mentioned above already has a solution with the enactment of the
Circular of the Minister for State-Owned Enterprises Number: SE-7/MBU/12/2019
concerning Compliance with the Provisions of Laws and Regulations in the
Context of the Implementation of Good Corporate Governance (GCG), which in
section it states that the Board of Directors, the Board of Commissioners, and
the Supervisory Board are required to: (1) Always comply with every provision
of laws and regulations as a form of implementing the principles of good
corporate governance in managing and supervising the company; and (2) Act
cooperatively and be responsible for any legal problems that occur, including
among other things fulfilling every summons by law enforcement officials in the
event of a legal problem in each Subsidiaries State owned (Marni, 2020).
Increasing
the role of groups or groups of State-Owned Enterprises as development agencies
in their fields must distinguish between state losses and business risks so
that the holding company and subsidiary companies can unify the corporate
culture which is carried out naturally and gradually and a healthy Subsidiaries
State owned holding company does not have to always support the subsidiary the
sick and the losers. Subsidiaries State Owned Minister Erick Thohir is
seriously tidying up the performance of State-Owned Enterprises. He also issued
a moratorium regulation. Subsidiaries and joint ventures for state-owned
companies as stipulated in SOE Minister Decree NUMBER SK-315/MBU/12/2019. It is
known because the Minister of Subsidiaries State owned wants to learn from all
the children, grandchildren, and great-grandchildren of Subsidiaries State
owned because there are many children, grandchildren, and even
great-grandchildren of Subsidiaries State owned businesses whose performance is
not healthy and even tends to burden their holding company (Tim
Redaksi Vo.id., 2020).
Governance Subsidiaries State
owned Enterprise That does not Suit with The Core Business
In
general, the principles of good corporate governance have positive values in
action towards better performance. Implementing the principles of good
corporate governance can help the management accountable for the company’s
management, including its obligations to stakeholders. The application of good
corporate governance principles will be practical if the principles of daily
business activities are adhered to. Compliance is first initiated and
implemented by the management and then followed by all managers because
consistent, firm, and continuous implementation of all business actors must be
needed. Good Corporate Governance (GCG) is generally known as a good system and
structure for managing the company to increase shareholder value and
accommodate various parties with interest in the company (stakeholders), such
as creditors, suppliers, business associations, consumers, workers, government,
and the wider community or in other words a system that controls the company (Melia,
2015).
Good
corporate governance is a structure in which stakeholders, shareholders,
commissioners, and managers define company goals and methods to achieve these
goals and monitor performance. Good Corporate Governance is a system (input,
process, output) and a set of regulations that regulate the relationship
between various interested parties (stakeholders), especially in the narrow
sense of the relationship between shareholders, the board of commissioners, and
the board of directors that are formed in order to achieve company goals. Good
corporate governance principles are integrated to regulate these relationships
and prevent significant mistakes in the company’s strategy and ensure that the
errors that occur can be corrected immediately, resulting in good corporate
governance and achieving corporate goals. Besides, Good Corporate Governance is
a system. input and output processes, with the system then existing errors can
be processed and resolved (Andypratama,
2013).
The
implementation of Good Corporate Governance (GCG) in company management is
critical because it directly provides clear instructions for the company to
make decisions appropriately and responsibly and enables safer management of
the company, thereby increasing company value and business partners’ trust. The
problems of corporate bankruptcy are closely related to business people’s
problems, the weakness or absence of a good corporate governance system. The
absence of an excellent Good Corporate Governance mechanism in the company can
cause company management to provide information that positively impacts stock
prices and can encourage companies to account by presenting certain information
to avoid the decline in stock prices. The implementation of Good Corporate
Governance is considered capable of providing progress towards the company’s
performance in improving the quality of financial reports and reducing
managers’ actions to manipulate financial statements (Suwandi
et al., 2019).
The
Ministry of Subsidiaries State owned began to introduce Good Corporate
Governance through the Decree of the Minister of Subsidiaries State owned No.
Kep117/M-MBU/2002 dated 1 August 2002 concerning the Implementation of GCG
Practices in State-Owned Enterprises. This regulation emphasizes the obligation
for SOEs to implement GCG consistently and/or make GCG principles the
foundation that aims to increase the company’s success while still paying
attention to the interests of other stakeholders, based on laws and regulations
and ethical values. subsidiaries state owned companies are the main target of
the Indonesian government to apply the principles of good corporate governance
or GCG. However, many companies in Indonesia have not implemented good
corporate governance principles, and many Subsidiaries State Owned subsidiaries
who manage the business are not following the business core, which resulted in
losses, thus burdening the holding company. State Owned Enterprises Minister
Erick Thohir made an official decision to reorganize all subsidiaries and joint
ventures owned by (State-Owned Enterprises). Decree of the Minister of
Subsidiaries State Owned No SK-315/MBU/12/2019 concerning the Structuring of
Companies or Joint Ventures in Subsidiaries State Owned, it is stated that the
reason for this arrangement is to optimize the existence of subsidiaries and
joint ventures so that they focus on the same business, it needs to be consolidated
in order to manage them effectively. Subsidiaries State Owned companies’
arrangement refers to GCG (good corporate and governance), focusing on the core
business, sustainable efficiency, and the company must be in a healthy
condition. The rationalization and consolidation of Subsidiaries State
Owned subsidiaries are carried out
because many Subsidiaries State Owned
subsidiaries have the same portfolio and are also not optimal in
providing added value for their holding company (Harijanto,
2020a).
In the
initial stage of structuring Subsidiaries State Owned, the Ministry of
Subsidiaries State Owned trimming the children and grandchildren of
Subsidiaries State Owned businesses, namely by using a merger, liquidation, or
divestment scheme. Subsidiaries State Owned Minister Erick Thohir initiated the
arrangement of Subsidiaries State Owned and its subsidiaries as at this time,
the previous Minister of Subsidiaries State Owned, Rini Sumarno, was aware of
the inefficiency and losses in 600 Subsidiaries State Owned subsidiaries.
Subsidiaries State Owned Minister Rini M Soemarno said that he would
immediately fix around 600 state-owned subsidiaries because many were
considered inefficient and even losing money. He further said that the concept
of reforming the Subsidiaries State Owned subsidiary was carried out following
the conditions and focus of the company. “Subsidiaries engaged in the same
business can be merged or merged, so there is efficiency and does not burden
the holding company (Harijanto,
2020b).
Corporate governance can be defined as a system built to direct and control the
company so that a good, fair, and transparent relationship is created between
the various parties who have interests in the company. With the creation and
implementation of good corporate governance, company managers will act fairly
by safeguarding all related parties’ interests so that no party is
disadvantaged, especially shareholders. Company managers will not act in a more
self-interested manner, even though they have the opportunity to do so that
shareholders’ interests will be maintained (Lumempouw,
2015).
There
is no specific ownership arrangement that addresses holding companies in Indonesian
companies. Law Number 40 of 2007 regarding Limited Liability Companies only
regulates and explains mergers. The definition of a merger in Law Number 40 of
2007 concerning Limited Liability Companies is a legal action carried out by
one or more companies to merge with another existing company, which results in
the assets and liabilities of the merging company being transferred due to law
to the recipient. The merger and subsequently, the legal entity status of the
merging companies is ended because of the law. Law Number 40 of 2007 concerning
Limited Liability Companies does not specify in detail the meaning and
arrangement of the holding itself, so that the government is complicated in
cooperating with several Subsidiaries State Owned companies. Mergers can take
the form of mergers, acquisitions, and consolidations due to the absence of an
arrangement that addresses explicitly holding arrangements that will impact the
rights and obligations between the subsidiary and the holding company. The
rights and obligations of the subsidiary and the holding company, when viewed
from the practices that develop in daily practice, only from management
(financial) and financial perspective, it is not clear what rights and
obligations the holding company has towards the subsidiary (Sipayung
et al., 2013).
According
to Subekti, a legal entity’s theory is an entity or association that can have
rights and carry out its actions as a human being, and have its assets, can be
sued or sued before a judge. This explanation explains that a legal entity’s
position is the same as a person who can have rights, obligations,
responsibilities, assets, and a position before the law. Thus, a rechts person or legal entity is created
by law and capable of performing legal actions within the company environment.
The theory of legal entities applies in Limited Liability Companies because
every company must run a good corporate governance system. Subsidiaries in
group companies are also required to apply good corporate governance
principles, namely good corporate governance, so that corporate governance is
good and in line with company objectives. Group companies that establish
Subsidiaries must follow their core business, based on the Decree of the
Minister of Subsidiaries State Owned No. SK-315/MBU/12/2019 concerning Company
or Joint Venture Arrangements in Subsidiaries State Owned stated the reasons
for this arrangement is to optimize the existence of subsidiaries and joint
ventures. In order to focus on the same business, consolidation is needed to be
effective in its management.
The
reason for structuring the subsidiary is that the company’s management refers
to the principles of Good Corporate Governance (GCG), which is to focus on the
core business, sustainable efficiency, and the company must be in a healthy
condition. Principles of Corporate Governance based on the Decree of the State
Minister for State-Owned Enterprises Number: Kep-117 / M-MBU / 2002 are sound
corporate principles that need to be applied in company management, which is
implemented solely for the benefit of the company in order to achieve the
company’s goals and objectives. If the Corporate Governance mechanism does not
function properly in the company, this can reduce the company’s value and lead
to poor company performance and even loss. Related to that, to optimize the
performance of Subsidiaries State Owned and make structures better, the
government will carry out programs to improve the Subsidiaries State Owned
system in Indonesia through restructuring and privatization. In the
restructuring program, there is one of the main focuses of the Ministry of
Subsidiaries State Owned is developing Subsidiaries State Owned, namely through
the rightsizing program. The Subsidiaries State Owned rightsizing program is
the Subsidiaries State Owned restructuring program’s main program by means of a
sharper mapping and regrouping/consolidation to achieve an ideal number and
scale of Subsidiaries State Owned businesses.
CONCLUSION
Every company must implement a
good corporate governance system. In Indonesia, the principles of Good
Corporate Governance (GCG) are regulated through the Decree of the Minister of
Subsidiaries State Owned No.117/M-BU/2002 concerning the Implementation of GCG
Practices in Subsidiaries State Owned, which was later refined through the
Minister of Subsidiaries State Owned Regulation Number Per-01/MBU/2011
concerning the Implementation of Good Corporate Governance. Article 2
PER-01/MBU/2011 states that Subsidiaries State Owned is obliged to implement
good corporate governance consistently and/or make good corporate governance
the basis for its operations so that this decision requires that all activities
of Subsidiaries State Owned and the company’s joints be carried out based on
good corporate governance. Subsidiaries of State-Owned Enterprises in Indonesia
must apply good corporate governance principles so that corporate governance is
good and in line with company objectives. Decree of the Minister of
Subsidiaries State Owned No SK-315/MBU/12/2019 concerning the Structuring of
Companies or Joint Ventures in Subsidiaries State Owned, it is stated that the
reason for this arrangement is to optimize the existence of subsidiaries and
joint ventures so that they focus on the same business, it needs to be
consolidated in order to manage them effectively. The reason for structuring
the subsidiary is that the company’s management refers to the principles of
Good Corporate Governance (GCG), which is to focus on the core business,
sustainable efficiency, and the company must be in a healthy condition.
Principles of Corporate Governance based on the Decree of the State Minister
for State-Owned Enterprises Number: Kep-117/M-MBU/2002 are sound corporate
principles that need to be applied in company management, which is implemented
solely for the benefit of the company in order to achieve the company’s goals
and objectives. If the Corporate Governance mechanism does not function
properly in the company, this can reduce the company’s value and lead to poor
company performance and even loss.
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