The Role Of The Independent Director In Ensuring The Surgings Of The Principles Of Good Corporate Governance In Public Companies

The Role of the Independent Director in Ensuring the Sustainability of the Principle of Good Corporate Governance in Public Companies

In today's fast-paced and highly competitive business environment, public companies play a crucial role in managing public funds through securities supply. As entities responsible for public funds, public companies must adhere to the principles of Good Corporate Governance (GCG) to ensure transparency, accountability, and corporate social responsibility. One of the key elements in the application of the GCG principle is the existence of an independent director. In this article, we will discuss the regulation of the principles of GCG in the Limited Liability Company Law, the position of the Independent Director, and their important role in ensuring the sustainability of the GCG principles in public companies.

Setting the Principle of Good Corporate Governance

In Indonesia, the regulation of the principle of Good Corporate Governance is regulated in the Limited Liability Company Law (UUPT) Number 40 of 2007. The Law sets a framework for good corporate governance, emphasizing the importance of transparency, accountability, and corporate social responsibility. In this context, the presence of an independent director is very important as one way to protect the interests of minority shareholders. Although the UUPT provides space for independent directors to act, there are no provisions that specifically regulate their existence firmly.

The Importance of Independent Directors in Public Companies

Independent directors are individuals who do not have an affiliation with the company, so that they can provide an objective and non-biased point of view. This position is important in maintaining the balance of power in the company, preventing conflicts of interest, and protecting the rights of minority shareholders. Thus, the independent director has the responsibility to ensure that the decisions taken by the company are in line with the principles of GCG.

The Role of Independent Directors in Application of Good Corporate Governance

The duties and responsibilities of the independent director in implementing the GCG principles are very broad. They must play an active role in directors and commissioners meetings, provide constructive input, and oversee the operation of the company. Independent directors are also responsible for maintaining good communication between shareholders and company management. In good faith and full of responsibility, independent directors must be able to identify the risks faced by the company and propose appropriate mitigation steps.

Challenges Faced by Independent Directors

However, the challenge faced by the independent director is the lack of strong legal provisions regarding their existence. Although the UUPT mentions their role, supervision of the implementation of these tasks is often weak. Therefore, it is essential for the independent director to establish a solid relationship with other company organs. With good cooperation, the application of GCG principles in public companies can be maximized, so as to contribute to the sustainability and growth of the company.

Conclusion

In an increasingly high era of transparency and accountability, the role of the independent director in public companies becomes more vital. They not only function as supervisors but also as mediators who ensure the votes of minority shareholders are heard. To support this role, it is necessary to strengthen a clearer regulation related to the existence and responsibility of the independent director. Only thus, the principle of good corporate governance can be implemented properly, and public companies can operate on a sustainable manner, provide added value for all stakeholders.

Recommendations for Strengthening the Role of Independent Directors

To ensure the sustainability of the GCG principles in public companies, the following recommendations can be made:

• Strengthening the regulation: The government should strengthen the regulation related to the existence and responsibility of independent directors to ensure that they can play their role effectively.
• Improving the supervision: The supervision of the implementation of the tasks of independent directors should be improved to ensure that they can perform their duties properly.
• Establishing a solid relationship: Independent directors should establish a solid relationship with other company organs to ensure that they can work together effectively.
• Providing training and development: Independent directors should receive training and development to ensure that they have the necessary skills and knowledge to perform their duties effectively.

By implementing these recommendations, the role of independent directors in public companies can be strengthened, and the sustainability of the GCG principles can be ensured.
Frequently Asked Questions: The Role of Independent Directors in Ensuring the Sustainability of the Principle of Good Corporate Governance in Public Companies

In our previous article, we discussed the importance of independent directors in ensuring the sustainability of the principle of good corporate governance in public companies. In this article, we will answer some frequently asked questions related to the role of independent directors.

Q: What is the role of an independent director in a public company?

A: An independent director is an individual who does not have an affiliation with the company, so that they can provide an objective and non-biased point of view. Their role is to ensure that the decisions taken by the company are in line with the principles of good corporate governance.

Q: What are the duties and responsibilities of an independent director?

A: The duties and responsibilities of an independent director are very broad. They must play an active role in directors and commissioners meetings, provide constructive input, and oversee the operation of the company. They are also responsible for maintaining good communication between shareholders and company management.

Q: What are the challenges faced by independent directors?

A: The challenge faced by independent directors is the lack of strong legal provisions regarding their existence. Although the UUPT mentions their role, supervision of the implementation of these tasks is often weak. Therefore, it is essential for the independent director to establish a solid relationship with other company organs.

Q: How can the role of independent directors be strengthened?

A: To strengthen the role of independent directors, the following recommendations can be made:

• Strengthening the regulation: The government should strengthen the regulation related to the existence and responsibility of independent directors to ensure that they can play their role effectively.
• Improving the supervision: The supervision of the implementation of the tasks of independent directors should be improved to ensure that they can perform their duties properly.
• Establishing a solid relationship: Independent directors should establish a solid relationship with other company organs to ensure that they can work together effectively.
• Providing training and development: Independent directors should receive training and development to ensure that they have the necessary skills and knowledge to perform their duties effectively.

Q: What is the importance of independent directors in maintaining the balance of power in a company?

A: Independent directors are important in maintaining the balance of power in a company. They can prevent conflicts of interest and protect the rights of minority shareholders. By ensuring that the decisions taken by the company are in line with the principles of good corporate governance, independent directors can contribute to the sustainability and growth of the company.

Q: How can the role of independent directors be improved in terms of communication with shareholders and company management?

A: To improve the role of independent directors in terms of communication with shareholders and company management, the following recommendations can be made:

• Establishing a clear communication channel: Independent directors should establish a clear communication channel with shareholders and company management to ensure that they can communicate effectively.
• Providing regular updates: Independent directors should provide regular updates to shareholders and company management to ensure that they are informed about the company's performance and progress.
• Encouraging feedback: Independent directors should encourage feedback from shareholders and company management to ensure that they can improve their performance and contribute to the sustainability and growth of the company.

By answering these frequently asked questions, we hope to provide a better understanding of the role of independent directors in ensuring the sustainability of the principle of good corporate governance in public companies.