SHAPING GOVERNANCE IN INDONESIAN FAMILY BUSINESSES
By Stefan S. Handoyo
The past economic crises have served as a constant reminder that the observance of modern corporate governance principles continues to be a clear reflection of corporate commitment to responsible citizenship. Both draw inspiration from the fundamental principles of fairness, transparency and accountability.
While the principles of, and the culture behind, corporate governance are fundamentally the same everywhere, the practices and approaches to improving those practices do vary from one country to another.
The traditional approach taken to raising the standards of corporate governance practice has been to empower the corporate board. Corporate governance therefore is about shaping the leadership of the corporate board.
Board empowerment has assumed a high priority in many industrialized countries, where there has been an “agency problem”. However, in many other emerging economies, including Indonesia, the corporate governance problem has not been a Western-style “agency problem.” Where controlling owners take on the prerogatives of the board as well as the reins of management there may not be much of an agency problem. The problem may well be one of checks and balances to prevent owners from self-dealing and related abuses. These problems have been more significant and wide-spread in countries where majority of businesses is owned and controlled by families or group of close friends.
Family-owned corporations are one of the foundations of the business community. Their creation, growth and longevity are critical to the success of the national and global economy. In Indonesia, more than 90% of businesses are family-owned and controlled corporations. Although facing many of the same day-to-day management issues as publicly-owned companies, they must also manage many issues specific to their status.
Many of these issues in family business are actually also issues...
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