Issue of Good Corporate Governance becomes an interesting discussion over the last several years. Along with the increasing business competition at the global level, principles of Good Corporate Governance have to be applied by each business entity with the hope that the company's strategic objectives can be achieved effectively and efficiently. There are two things of great urgency emphasized in this concept: First, shareholders deserve to receive accurate, punctual and transparent information. And second, the company is obliged to honestly and openly provide information regarding the company to all units of the company with the aim to achieve good and efficient corporate governance.

1. BUSINESS ETHICS & GOOD GOVERNANCE
EFFECTIVE AND EFFICIENT CONCEPT IN ORDER TO ESTABLISH
GOOD CORPORATE GOVERNANCE
Lecturer:
Prof. Dr. Ir. Hapzi Ali, MM, CMA.
Name : Heru Eko Septian
Student ID : 55116120219
GRADUATE SCHOOL – MAGISTER OF MANAGEMENT
UNIVERSITY OF MERCU BUANA
JAKARTA 2017
ABSTRACT
Issue of Good Corporate Governance becomes an interesting discussion over the last several
years. Along with the increasing business competition at the global level, principles of Good Corporate
Governance have to be applied by each business entity with the hope that the company's strategic
objectives can be achieved effectively and efficiently. There are two things of great urgency emphasized
in this concept: First, shareholders deserve to receive accurate, punctual and transparent information.
And second, the company is obliged to honestly and openly provide information regarding the company
to all units of the company with the aim to achieve good and efficient corporate governance.
Keywords: Good Corporate Governance, principles of Good Corporate Governance
1. INTRODUCTION
In an era where the increasing global economic competition occurs for the last few decades,
every company or organization is absolutely required to perform effective and efficient corporate
governance. Therefore, vision and mission of the company that has been set since the beginning can be
maximally implemented. In general, the concept of Good Corporate Governance can be described as a
form of the implementation of responsibilities between the company or organization as a legal entity,
the board of directors as well as commissioners as the management and the shareholders.
Briefly, an effective and efficient concept to achieve good corporate governance is required
through an implementation of the principles of Good Corporate Governance within the corporate
culture, such as transparency, independence, accountability, responsibility, and fairness.
Therefore, through the implementation of the five principles above, the objectives of the
company are expected to be realized which include maximizing the value of the company, realization of
good corporate governance, decision-making by all units of the company which is based on moral values
and norms of applicable legislation, the implementation of social responsibility to the shareholders and
the most important is the improvement of conducive national investment climate.

2. 2. LITERATURE REVIEW
2.1 Good Corporate Governance
There are two main theories that intersect with the issue of Good Corporate Governance, those
are stewardship theory and agency theory (Chinn, 2000; Shaw, 2003). Stewardship theory actually
explains about a human with characteristics of reliable, has high integrity and responsible for others.
Hence, this theory basically sees management as something that can be trusted to act in the best
possible way for the benefit of the public and shareholders.
The second discussion is about the agency theory which was developed by Michael Johnsson
and defines that management is an agent for shareholders and will act in a wise, fair and wise way to
shareholders. Agency theory continues to be developed and is responded very well with a very high
enthusiasm. Various thoughts on the implementation of Good Corporate Governance mostly refer to
this theory of which good corporate governance is implemented with full responsibility and in
compliance with laws and regulations. In his book, Corporate Governance, Robert A.G. Monks explicitly
defined Good Corporate Governance as a system that regulates and controls companies which create
value added to all stakeholders (Monks, 2003).
2.2 Principles of Good Corporate Governance
Generally, there are five principles that become the basis for the implementations of Good
Corporate Governance which are listed as follows:
1. Transparency, that is openness in the decision making process and openness in expressing
material and relevant information regarding the company.
2. Accountability, that is the clarity of function, structure, and system concerning the
implementation and accountability of the organization; thus, the management of the company
is effectively implemented.
3. Independency, that is a condition where the company is professionally managed without
creating any conflicts of interest and influence/pressure from the management which do not
comply with the applicable regulation and legislation and also the principles of healthy
corporate.
4. Responsibility, that is compliance in the management of the company towards the principles of
healthy corporate as well as applicable legislation.
5. Fairness, that is justice and equality in fulfilling the rights of stakeholders arising under the
agreement and applicable legislation.
3. IMPLEMENTATION OF EFFECTIVE AND EFFICIENT GOOD CORPORATE GOVERNANCE
3.1 Objectives of the Implementation of Good Corporate Governance
Today, along with the increasing business competition, every company is required to implement
the principles of Good Corporate Governance so that companies will still exist in the global competition.
It is still remembered in our minds about the financial crisis of 1998 which hit Indonesia and ASEAN in
general that resulted in the condition where many companies went bankrupt since the concept of Good
Corporate Governance was not the main focus of the company at that time.

3. In his book titled Good Corporate Governance - Healthy Corporate Governance, Sutojo, and
Aldridge (2008, h.5) explained that Good Corporate Governance has five strategic objectives. Those five
objectives are as follows:
1. Protect the rights and interests of shareholders.
2. Protect the rights and interests of the members of non-shareholder stakeholders.
3. Increase the value of the company and shareholders.
4. Improve the efficiency and effectiveness of the Board of Directors and the management of the
company.
5. Improve the quality of the relationship between the Board of Directors and senior management
of the company.
The implementation of the basic principles of Good Corporate Governance in all lines of the
company is required so that the objective of the company can be achieved well. The implementation of
effective Good Corporate Governance is possible to improve the economic climate and of course to
avoid the monetary crisis that hit the country's economy in the past.
3.2 Good Corporate Governance Approach in Indonesia
Approach and implementation of Good Corporate Governance in Indonesia began around 1997
when the economic crisis hit the world, including Indonesia. As an effect, companies had to close down
their business due to their inability to survive the crisis storm at that time. According to experts, poor
implementation of Good Corporate Governance was the main cause of the problem.
Considering the situation continues to be worsened, the government through the Ministry of
State Owned Enterprises began to introduce the concept of Good Corporate Governance to the state
owned companies. Through the Decree of the Minister of State Owned Enterprises No. Kep.117/M-
MBU/2002 dated August 1, 2012 on the implementation of Good Corporate Governance practices in
state owned companies, the obligation for “red-plate” companies to implement it by using the approach
of Good Corporate Governance principles in business is explained. That effort is expected to be able to
realize the objectives of the company that is to improve the business success and accountability of the
company in order to achieve shareholder value by taking into account the interests of other
stakeholders, which is based on the applicable legal norms and regulations.
Moreover, practices of the implementation of Good Corporate Governance principles in
accordance with Indonesian culture are described below:
1. Transparency is a process of openness in decision-making process and openness in expressing
relevant information about the company that is needed by all stakeholders. This decision-
making process should be truly based on the value of honesty in accordance with Pancasila.
Openness in obtaining information for the entire unit of the company is important to avoid
misunderstanding and confusion in each unit, division, director and shareholder.
2. The principle of independency is basically a condition where the company is well and
professionally managed without creating any conflicts of interest and intimidation or pressure
from any party in accordance with the norms of Pancasila, the laws, and principles of healthy
corporate.

4. 3. The principle of accountability can be defined as a rule where the function, implementation, and
accountability of the management are regulated and described in a structured and systematic
way so that an effective and efficient corporate governance can be implemented. The principle
of accountability in the management of individual units (human resources) can be applied
through a reward and punishment system for the employees in accordance with applicable
legislation.
4. The principle of responsibility focuses on suitability in corporate governance processes towards
the legislation, legal norms and the values of Pancasila in accordance with Indonesian culture.
This principle is basically aimed to make companies to be careful and to obey the law in running
their business as a form of responsibility to society and shareholders.
5. The principle of equality and fairness is the principle where company upholds the principles of
justice and equality in fulfilling the rights of stakeholders arising as a result of the agreement
and applicable legislation. The principle of equality and fairness should be applied with full
fairness, accurately, punctually, and of course according to the legislation. In terms of human
resource management, companies are obliged to treat each individual unit as well as possible
and to maintain the workplace security and safety without discrimination.
4. CONCLUSION
Basically, Good Corporate Governance is a system that regulates and controls companies which
later creates value added to all shareholders (stakeholders). This theory states the two most principle
thing; the first in which the shareholders have the rights to obtain accurate, punctual and transparent
information. And second, the company is obliged to honestly and openly provide information about the
company to all units of the company with the aim to achieve a good and efficient corporate governance.
The main idea of the implementation of Good Corporate Governance, particularly in Indonesia is
to ensure that various parties involved in corporate governance can play their role, be responsible and
understand their authority in accordance with applicable legislation and norms of Pancasila. This is not
apart from the fact that the implementation of the vision and mission of the company that has been set
since the beginning can be achieved effectively and efficiently.
REFERENCES
Chinn, Richard. (2000). Corporate Governance Handbook. Gee Publishing Ltd. London.
Monks, Robert A.G, and Minow, N. (2003). Corporate Governance 3rd Edition. Blackwell Publishing.
Shaw, John. C. (2003). Corporate Governance and Risk: A System Approach. John Wiley & Sons, Inc, New
Jersey.
Sutojo dan Altridge, E. J. (2008) Good Corporate Governance: Tata Kelola Perusahaan yang Sehat.
Jakarta, Damar Mulia Pustaka.