THE 4TH PRINCIPLE

THE ROLE OF STAKEHOLDERS IN

CORPORATE GOVERNANCE

MELINDA VERONICA (023121202)

ORYZA ANGGREINI ISKANDAR (023121214)
Maria Juanita Fransisca (023121289)

Perspective of the Corporation

As reflected on the Corporate Governance
definition itself, a corporation must balance
the interests of their stakeholders, both
internal
and
external:
shareholders,
employees, customers, suppliers, investors,
communities in order to achieve long-term
sustained value.

The Role of Stakeholders in Corporate Governance:

Why Company Should Recognize the Interest of
Stakeholder.
Corporations should recognize that the contributions of stakeholders
constitute a valuable resource for building competitive and profitable
companies. It is, therefore, in the long-term interest of corporations to
foster wealth-creating cooperation among stakeholders. Corporate
governance is also concerned with finding ways to encourage the
various stakeholders in the firm to undertake economically optimal
levels of investment in firm-specific human and physical capital.
To achieve the basic perspective of corporation as explained before,
which is to balance the interests of company stakeholders, the rights of
stakeholders should be established by law or through mutual
agreements (between company and related stakeholders) to ensure that
the stakeholders are able to claim their right and to encourage active
co-operation between corporations and stakeholders in creating wealth,
jobs, and the sustainability of financially sound enterprises.

A. The rights of stakeholders that are established by law

or through mutual agreements are to be respected.

In

all OECD countries, the rights of

stakeholders are established by law or by
contractual relations, where each parties
might be regulated by different law or even .
Even in areas where stakeholder interests
are not legislated, many firms make
additional commitments/ mutual agreements
to stakeholders, and concern over corporate
reputation and corporate performance often
requires the recognition of broader interests.

A. The rights of stakeholders that are established by law

or through mutual agreements are to be respected.
Example :
The Company recruits and retains high potential and experienced employees with determination
to continuously develop and increase skills of employees as well as to encourage employees to
be successful and feel secure in their profession. The Company treats every employee equally,
provides employees with reasonable welfares and other benefits such as provident fund, health
and life insurance, etc.
In a juridical manner, Article 5 of the Act No. 13 of Year 2003 about Employment of Labor
provide protection where every worker is entitled and had the same opportunity to have jobs and
a viable livelihood without differentiating between the sexes, the tribe of, race, religious, and the
flow of political in accordance with their interests and the ability of labor concerned, including
equal treatment against the disabled. While Article 6 regulating the mandatory of business owner
to provide the employee right and obligation laborers without differentiating between the sexes,
the tribe of, race, religious, skin color, and political believes (Khakim, 2003).

B. Where stakeholder interests are protected by law, stakeholders

should have the opportunity to obtain effective redress for violation
of their rights.

The legal framework and process should be

transparent and not impede the ability of
stakeholders to communicate and to obtain
redress for the violation of rights.
Talking about stakeholder law protection
strongly related to the law enforcement in the
country itself. We might ever hear a saying that
says The law became blunter upward, sharply
downward, we might agree to those sayings.
This sayings also supported by Country Studies of
Corporate Governance in Developing Economies (McGee,
2009).

B. Where stakeholder interests are protected by law, stakeholders

should have the opportunity to obtain effective redress for violation
of their rights.

C. Performance-enhancing mechanisms for employee participation should be permitted to develop

Performance
enhancing
mechanisms
for
participation may benefit directly and indirectly
for companies in the context of corporate
governance. The example of mechanisms for
employee participation is like employee
representation on boards and governance
processes such as works councils that consider
employee viewpoints in certain key decisions.
With respect to performance enhancing
mechanisms, employee stock ownership plans
or other profit sharing mechanisms are to be
found in many countries

C. Performance-enhancing mechanisms
for employee participation should be
permitted to develop
Example:
Employee stock ownership plans or other profit
sharing mechanisms are to be found in many
countries. When the company take the
outstanding ordinary share to treasury share so
the company can sell it to their employees, PT
Perusahaan Gas Negara PT Perusahaan Gas
Negara Tbk (PGN) will implement treasury stock,
as recorded in the financial statements of the
company per September 30 2014 with a total of
1.85 million shares. That shares will be sold back
to employees. So the employees is more loyal
than before

D. Where stakeholders participate in the

corporate governance process, they
should have access to relevant, sufficient
and reliable information on a timely and
regular basis.

Where laws and practice of corporate

governance systems provide for
participation by stakeholders, it is
important that stakeholders have
access to information necessary to
fulfil their responsibilities.

D. Where stakeholders participate in the

corporate governance process, they should
have access to relevant, sufficient and
reliable information on a timely and regular
basis.

Example:
In the current capital market there is still some principles that have
not been implemented, among others, for example the provisions
governing has not been differences of opinion with the Board of
directors or Commissioners meeting which must be delivered in a
treatise written in the meeting, clarify the sense of the special
relationship transactions, rights of stakeholders to access company
information, adequate disclosure to shareholders and the public,
transparency and reliability of financial reporting
The obligation to disclose the financial information disclosure also
apply to securities company as set forth in the regulations of
Bapepam Number X.E. 1 about the obligation of delivery periodic
reports by securities companies and rule number V.D.5 about MKBD
Reports

E. Stakeholders, including individual employees and their representative

bodies, should be able to freely communicate their concerns about illegal
or unethical practices to the board and their rights should not be
compromisedfordoingthis.

The company and its shareholders is responsible to

establish procedures and safeharbors for complaints by
employees,eitherpersonallyorthroughtheirrepresentative
bodies,andothersoutsidethecompany,concerningillegal
and unethical behavior. When there is an inadequate
responsetoacomplaintregardingcontraventionofthelaw,
the OECD Guidelines for Multinational Enterprises
encourage them to report their bona fide complaint to the
competent public authorities. The company should refrain
from discriminatory or disciplinary actions against such
employeesorbodies.

E.Stakeholders,includingindividualemployeesandtheirrepresentative
bodies,shouldbeabletofreelycommunicatetheirconcernsaboutillegal
orunethicalpracticestotheboardandtheirrightsshouldnotbe
compromisedfordoingthis.

Example :
Unlike other stakeholders, employees are stakeholders in
the company. However, because the employee is
responsible to the Board of Directors, to oversee the
company's policies carried out by the Board of Directors,
the company must provide a mechanism that ensures
the implementation of the rights of employees in
carrying out the oversight function.
Pertaining to the role of employees in supervision , the
law no.13 year 2006 on the protection of witnesses and
victims, so every rapporteur will get protection including
their rights as employees .

F.Thecorporategovernanceframeworkshouldbecomplemented
by an effective, efficient insolvency framework and by effective
enforcement
of
creditor
rights.
Creditors are a key stakeholder and the terms, volume and type of
creditextendedtofirmswilldependimportantlyontheirrightsandon
their enforceability. Companies with a good corporate governance
record are often able to borrow larger sums and on more favorable
termsthanthosewithpoorrecordsorwhichoperateinnontransparent
markets. Insolvency procedures usually require efficient mechanisms
for reconciling the interests of different classes of creditors. In many
jurisdictions provision is made for special rights such as through
debtor in possession financing which provides incentives/protection
fornewfundsmadeavailabletotheenterpriseinbankruptcy.

F.Thecorporategovernanceframeworkshouldbecomplemented
byaneffective,efficientinsolvencyframeworkandbyeffective
enforcementofcreditorrights.
Example:
Generally, Bapepam has set the problem of protection
of the rights of the creditors related to the problem of
financial difficulty. The regulations essentially States
that in the event of financial difficulties of a company,
then the rights of creditors must be considered and
given priority in comparison with shareholders.