Good Corporate Governance

Transcription

1 288 Good Corporate Governance Company sustainability is important in creating value for stakeholders. Company sustainability has been achieved through a commitment to exercise Good Corporate Governance in accordance with provisions and best practices applied in the financial industry and capital markets, sourced both domestically and internationally. The Company implements Good Corporate Governance (GCG) and Prudential Banking principles in managing the Company s risks. The Company continuously assesses the implementation of GCG, both by independent parties and through self-assessment.

2 289 Good Corporate Governance Execution and Implementation FOUNDATION OF GOOD CORPORATE GOVERNANCE EXECUTION GCG implementation refers to several regulations and provisions of the Financial Services Authority (OJK), Bank Indonesia, and the Ministry of SOEs as well as other prevailing laws and regulations for banking industry in particular and public companies in general. To adjust GCG implementation with the updated situation, references prevailing best practices in industry in general as well as in the banking industry. Several principles for s references are: Principles of Corporate Governance by Organization for Economic Cooperation and Development (OECD), ASEAN Corporate Governance Scorecard, CGC Indonesia Guidelines by National Governance Policy Committee (KNKG). As a company which has been operating more than 120 years and in its attempt to become a world-class living company, continuously implements basic GCG principles in order to support financial and business sustainability, among others are: Good Corporate Governance Principles 1 Transparency Transparency in the disclosure of Information and decision making. 2 3 Responsibility Compliance by bank management with regulation and principles of sound banking management. Accountability Clearly defined functions and implementation of responsibilities of the bank organs. GCG Principles 4 Independency Professional bank management without conflict of interest or influence or pressure. 5 Fairness Fairness and equality in fulfilling stakeholders rights.

3 Transparency, promoting openness in the decisionmaking process and willingness to disclose material and relevant information regarding the Bank. 2. Accountability, promoting clarity of functions, implementation and accountability of the organs to ensure the Company s effective management. 3. Responsibility, highlighting the consistency between the Company s management practices and the prevailing laws and regulations whereby the Company is professionally managed, free from conflict of interests and influence of pressure from any parties that is inconsistent with prevailing laws and regulations and sound corporate principles. 4. Independency, a condition whereby the Bank is professionally managed, free from conflict of interests and influence/pressure from any parties that is inconsistent with prevailing laws and regulations and sound corporate principles. 5. Fairness, namely fair and equal treatment in fulfilling the rights of stakeholders arising from agreements and applicable laws and regulations. OBJECTIVES OF GOOD CORPORATE GOVERNANCE IMPLEMENTATION The implementation of sustainable and consistent governance is aiming to: Support achieving the Bank s Vision and Mission Support Bank goals through significant performance improvement, Maximize Company value, Improve shareholders and stakeholders trust toward the Company, Guarantee the sustainability of the Bank s health and progress, Support efficient and effective management of Bank resources, Optimize consistent risk-return relationship with business strategy, Support the creation of decision making by all Bank s personnel based on GCG principles to achieve good corporate citizenship. GOOD CORPORATE GOVERNANCE IMPLEMENTATION ROADMAP The Company s roadmap of GCG implementation began in 2001 with the Joint Decision of the Board of Directors and Board of Commissioners regarding Good Corporate Governance principles, updated most recently in In 2015, the Company issued an integrated governance policy and, in 2016, strengthen the implementation of GCG in accordance with ASEAN Corporate Governance Scorecard. In the future, the Company will strengthen the implementation of GCG by referring to international standards governance principles. Roadmap Good Corporate Governance Strengthening GCG Sosialization & Review GCG Establish Integrated Governance (TKT) Optimalize TKT & ASEAN CG Scorecard Achievement 2017 Become the leading Commercial Bank that applies international GCG principles

4 291 GOOD CORPORATE GOVERNANCE IMPLEMENTATION In order to improve the quality of GCG implementation, implements GCG through four phases: Formulation, Implementation, Monitoring & Evaluation, and Objectives, aligned in achieving the expected result of the GCG Roadmap: that of Excellent GCG. Implementation in General Meeting of Shareholders (GMS) The GMS was conducted according to procedures and guidelines based on the Articles of Association and prevailing provisions. One of the efforts to maintain the independency of the GMS is to use electronic tools for voting as well as to involve an independent party. 2. Reporting LHKPN To improve the quality of GCG implementation, complies with the State Officials Asset Declaration (LHKPN) in accordance to the Corruption Eradication Commission s (KPK) provision. Officials Requiring LHKPN As a concrete form to improve transparency, corruption prevention and support operations clear from a corruption, collusion and nepotism culture, the members of Board of Directors and Board of Commissioners, SEVP and echelon 2 officials are required to report their assets in accordance to Board of Directors Letter No.B.193-DIR/ KPS/03/2015 dated 31 March 2015 and Board of Directors Letter No.B.815-DIR/KPS/11/2015 dated 23 November The data reported consists of assets prior and after serving a position. Provisions on reporting LHKPN are being updated regularly to comply with prevailing regulations. Coordinator for Reporting LHKPN The coordinator for LHKPN reporting appointed by to manage and monitor the process of LHKPN reporting is the Head of Secretariat and Protocol and the Head of Policy and Human Resources Development Division. According to s current organization structure, there are 264 employees (outside Directors, Board of Commissioners and Subsidiaries) who are required to report their assets to KPK. The majority from these positions have reported their assets in accordance to LKHPN reporting requirement. LHKPN Reporting No. Work Unit Total LHKPN Subject Total Subject that has Reported Total Subject that has not Reported Total % Total % 1 Board of Commissioners Board of Directors Employee Subsidiaries Total

5 292 The Implementation of GCG Tools in Company Business and Operational Activities In implementing corporate governance, utilizes the following tools and systems: 1. Know Your Employee The implementation of the Know Your Employee principle is to prevent fraud through internal human resources monitoring. 2. Know Your Customer has implemented the Know Your Customer policy as an effort to identify, verify, and monitor to ensure each transaction is matched with the customer s profile. 3. Anti-Money Laundering (AML) and Counter Terrorist Funding The implementation of Anti-Money Laundering and Counter Terrorist Funding (APU & PPT) on Customer Due Diligence is carried out across all business units in order to minimize risks and for the implementation of prudential principle. 4. Cash Transaction Report submits Cash Transaction Reports (CTR) to PPATK online as one of the requirements on identifying any indicated banking fraud transaction. 5. Suspicious Transaction Report submits Suspicious Transaction Reports (STR) to PPATK online as one of the requirements on identifying any indicated bank fraud transaction. 6. Operation Risk Assessor (OPRA) The Incident Management Module Information system on incident management (risk and near misses incident) is implemented in all business units, thus each risk and near-miss incident is documented in an accurate and responsible manner. 7. Knowledge Management System implements KMS to facilitate the accumulated management expertise of each employee; hence, minimize dependence on only one employee, ease transfer of knowledge among employees, and improve transparency on various internal and external polices which influence Bank operations. 8. Management Information System s financial performance is managed by MIS under the Directorate of Finance. The data presented by MIS is accessible in all business units hence creating equal information access on Bank performance. With this equal access, related business units are expected to continuously improve data accuracy. 9. Balanced Score Card (BSC) In 2016, implemented BSC-based performance evaluations. This BSC is a revision of the Performance Management System (SMK) and is being implemented and expected to increase fairness in each performance evaluation. The Most Trusted Company Leadership in Corporate Governance

6 293 GCG ASSESSMENT To facilitate the identification process, the harmonization and updating of GCG policies with the Bank s operational policies as well as updating the best practices and maintaining relationship with stakeholders, corporate governance is implemented in a directional, systematic, and measurable manner. In exercising the harmonization and updating, periodically assesses the Company s GCG implementation. The assessment is carried out by two evaluation methods: self-assessment and external assessment. Legal Basis of GCG Assessment External Regulations a. POJK No. 4/POJK/03/2016 dated 26 January 2016 on Health-Level Assessment of Commercial Banks b. POJK No. 55/POJK/03/2016 on Implementation of Governance for Commercial Banks c. SE BI No. 15/15/DPNP dated 29 April 2013 on the Implementation of GCG for Commercial Banks d. SE BI No.13/24/DPNP dated 25 October 2011 on Health- Level Assessment on Commercial Banks. Internal a. Joint Decision of the Board of Commissioners and Board of Directors of No.05-KOM//12/2013 and Nokep: S.64-DIR/DPK/12/2013 dated 16 December 2013 on PT Bank Rakyat Indonesia (Persero) Tbk GCG Policy. b. Circular Letter No S.18-DIR/DMR/07/2015 dated 22 July 2015 on Guideline Health-Level Assessment on Risk Based Banks (Risk Based Bank Rating) PT Bank Rakyat Indonesia (Persero) Tbk. GCG Assessment Result Assessment by Independent Party 1. Corporate Governance Perception Index (CGPI) 2016 One of the assessments on GCG implementation was through the Company s participation in the CGPI in CGPI asses the quality of GCG implementation on 13 aspects, including: 1. Commitment 8. Capability 2. Transparency 9. Strategy 3. Accountability 10. Risk 4. Responsibilities 11. Ethics 5. Independency 12. Culture 6. Fairness 13. Sustainability 7. Leadership GCG Assessment by Corporate Governance Perception Index (CGPI) This assessment program consists of 4 phases: Self- Assessment, Documentation System, Written Policy and Observation, with the assessment result below: No Phase Self Assessment Documents Assessment Paper Assessment Observation Total With the total score of 87.74, is in the Most Trusted Company category. has maintained this rating since Recommendation from Assessment Follow-Up Action Status needs to update the policies and guidelines related to description of duties and responsibilities of different organ and the management. A review has been conducted, and published in the same year, concerning the Board Manual for the Board of Directors in Completed 2. ASEAN Corporate Governance Scorecard 2016 In the ASEAN CG Scorecard (ACGS) assessment 2016 by Corporate Governance Experts, secured Leadership in Corporate Governance Award with the total score above average of 100 public companies and 15 banking companies. The award was a result of assessment of these components: a. Rights of Shareholders b. Equitable Treatment of Shareholders

7 294 c. Role of Stakeholders d. Disclosure and Transparency e. Responsibilities of the Board. According to ASEAN CG Scorecard in 2016, was above the average score of 100 listed companies with the details as follow: GCG Score by ACGS 2016 ACGS Score 102,05 (Leadership In Corporate Governance) SA Score of GCG According to OJK Period Result * Semester I ,17 (PK-1) 1,18 (PK-1) Semester II ,00 (PK-2) 2,00 (PK-2) *) OJK has not sent GCG score 2. Self-Assessment on Integrated Governance according to OJK Criteria According to OJK assessment guidelines, the result of s integrated governance as parent company for 2016 is Very Good with general conclusions as follows: 2015 ACGS Score 88,56 Point (Good) Period Semester I 2016 Semester II 2016 RESULT 1 (PK-1) 1 (PK-1) Details of score based on ACGS: Principles Shareholders Rights 7,60 8,80 Equal Treatment for Shareholders 10,83 12,50 Role of Stakeholders 9,05 9,52 Disclosure and Transparency 22,56 24,39 Responsibility of BoC and BoD 33,51 37,84 Bonuses 7,00 9,00 Penalties (2,00) - Total 88,55 102,05 Self Assessment 1. GCG Self-assessment According to Bank Indonesia s Criteria Several elements considered in this consolidated GCG implementation assessment are: assessment on GCG implementation which only involves the implementation of GCG in Subsidiaries considered having significant influence on s GCG: Syariah and Argo. Calculation of assessment share on Subsidiaries GCG is carried out according to assets managed. According to those assessment guidelines, the result of the GCG self-assessment for 2016 is Good with general conclusion as follows: 3. Self-Assessment according to the Ministry of SOE Criteria: Superior Performance Assessment Criteria The Ministry of SOE undertakes assessment of Directors performance through Superior Performance Assessment Criteria (KPKU) in line with the Ministry of SOE Letter No. S-153/5. MBU/2012 dated 19 July 2012 on Performance Report based on Superior Performance Assessment Criteria Approach. The Performance Assessment for SOEs is carried out by an independent external assessor team. The result of the implementation according to KPKU SOE 2016, is in Industry Leader category. This assessment consists of 6 process categories of process and 1 results category: a. Leadership process b. Strategic Planning process c. Customer Focus process d. Measurement, Analysis and Knowledge Management process e. Employment process f. Operation Focus process g. Result. With assessment stages as follows: 1. KPKU self-assessment implementation carried out by the Company according to the criteria imposed by the Ministry of SOE 2. Assessor team then conducts off-site and on-site reviews and gives score and feedback on selfassessment report of the Company.

8 315 Risk Management Certification Refreshment In 2016, the Board of Commissioners who followed the Banking risk management refreshment level 5 were: 1. Adhyaksa Dault, in IBI LSPP Jakarta 2. Ahmad Fuad, in BARa Jakarta 3. Jeffry J. Wurangian, in Bara Jakarta DISMISSAL OF MEMBERS OF THE BOARD OF COMMISSIONERS Member of the Board of Commissioners shall be dismissed if: a) He/she dies; b) His/her work tenure expires; c) Dismissed by the GMS, due to a reason deemed to be relevant by the General Meeting of Shareholders for the sake of the Company s interests and objectives. d) Declared bankrupt by the Commercial Court with permanent legal force or placed under guardianship based on a court decision; e) According to the Articles of Association of and other legislations, he/she no longer meets the requirements as a member of the Board of Commissioners, among others having prohibited dual position, as well as resignation. A member of the Board of Commissioners is entitled to resign by giving written notification of his/her intention to and is obliged to call on a General Meeting of Shareholders to decide on the resignation of the board member within the period of 60 (sixty) days after the receipt of resignation letter. BOARD CHARTER AND CODE OF CONDUCT OF THE BOARD OF COMMISSIONERS The Board Charter or the Board of Commissioners Work Handbook contains among others: The tasks, authorities, duties, responsibilities, division of work, work time, work ethics, procedures for meetings and decision-making, and the prohibitions for members of the Board of Commissioners. The duties and responsibilities of the Board of Commissioners organs, namely the Audit Committee, Risk Management Monitoring Committee, Nomination and Remuneration Committee, Integrated Governance Committee and the BoC Secretariat. ASSESSMENT ON THE PERFORMANCE OF THE COMMITTEES ASSISTING THE BOARD OF COMMISSIONERS In 2016, the Committees under the Board of Commissioners, namely the Audit Committee, Risk Management Monitoring Committee, Nomination and Remuneration Committee, and Integrated Governance Committee applied its respective roles and responsibilities well and provided significant support to the implementation of the tasks and oversight responsibilities of the Board of Commissioners. Audit Committee The role of the Audit Committee is reflected in ensuring the adequacy of internal control, including the adequacy of the financial reporting process. The Audit Committee evaluates the effectiveness and appropriateness of the audit by the Public Accounting Firm and examines the financial statements and other financial information in order to ensure compliance to the accounting standards and regulations. Risk Management Monitoring Committee s ability to manage risk is inseparable from the success of the Risk Management Monitoring Committee which works together with the Directorate of Compliance in carrying out its duties and responsibilities to review and monitor the implementation of risk management at. The Bank s Low to Moderate level of risk profile, good quality credit portfolio and the decreasing percentage of non-performing loans in 2016 are the tangible results of the synergy of good risk management. Nomination and Remuneration Committee The Nomination and Remuneration Committee provided great contribution, particularly in terms of evaluating the policies related to worker and employment remuneration, the remuneration of Directors and Commissioners, as well as the overall management of human resources. In addition, the Nomination and Remuneration Committee also provides constructive advice and feedback on the system and procedure to select and/or replace members of the Board of Directors, Board of Commissioners, independent party, as well as members of Board of Commissioners Committees. Integrated Governance Committee In accordance with the provisions of the Financial Services Authority, in early 2015 the Board of Commissioners established the Integrated Governance Committee which comprises representatives of members of the Board of Commissioners of, members of the Board of Commissioners of Bank Agro, as well as members of the Board of Commissioners and the Bank Supervisory Board of Bank Syariah. In 2016, the Integrated Governance Committee has provided input to the Board of Commissioners on the implementation of Integrated Risk Management Policy.

9 325 In 2016, members of the Board of Directors who have followed the refreshment of Banking risk management level 5 are: 1. Asmawi Syam, in Stockholm, Sweden. 2. Sunarso, in Zurich & Basel. BOARD CHARTER AND THE CODE OF CONDUCT OF BOD Guidelines and work rules of the Board of Directors or Board Charter contains rules and guidelines on working procedures of the Board of Directors which include instructions for the implementation of the work of each member of the Board of Directors in detail, structured and informative to be a standard for all members of the Board of Directors in carrying out their respective duties according to the vision and missions to be achieved by the Company. The guidelines are one of the supports for the application of the principles of GCG, so that the Board of Directors may carry out its tasks in an integrated manner. The Board Charter or The Code of Conduct and Work Rules of the Board of Directors, among others, contains an explanation of: 1. The general provision of members of the Board of Directors 2. The duties and authorities of the Board of Directors 3. The rights and obligations of the Board of Directors 4. The division of duties and authorities of the Board of Directors 5. Implementation of the Company management by the Board of Directors 6. The principles of decision-making of the Board of Directors 7. Board of Directors meetings 8. Corporate Secretary 9. Relationships with subsidiaries. ASSESSMENT OF THE PERFORMANCE OF COMMITTEES SUPPORTING THE IMPLEMENTATION OF THE BOARD OF DIRECTORS DUTIES Asset and Liability Committee ALCO (Asset-Liability Committee) assists the Board of Directors in the management of the Company s assets and liabilities including the determination of strategies and policies on assets and liabilities management by considering the existing risks in order to obtain optimal yields. Risk Management Committee The Risk Management Committee conducts monitoring and supervision of s risk profile, capital analysis and stress test (Liquidity, Capital and Enterprise), s risk issue as well as the recommendations and decision of the RMC. In addition to the RMC, the Integrated RMC forum also exists to monitor and supervise the risks of the subsidiaries ( Syariah, Agro, Remittance, Finance, Life) within the conglomeration covering the integrated risk profile, capital analysis and stress test (Liquidity, Capital, Enterprise) and the discussion of risk issues in the respective subsidiary entity as well as the recommendations and decision of the Integrated RMC. Capital and Investment Committee The Capital Investment Committee assists the Board of Directors in making decisions on corporate actions based on the results of the comprehensive study and analysis. In addition, the committee also plays an active role in the management of the Company s subsidiaries. Credit Policy Committee (KKP) The Credit Policy Committee (KKP) formulates policies, monitors the implementation of policies, monitors the progress and condition of credit portfolio and provides suggestions on improvements. Credit Committee The Credit Committee assists the Board of Directors in the evaluation of/decision on credit applications for the amount and type of credit previously determined by the Board of Directors. The tasks of the Credit Committee among others include approving or rejecting credit based on the applicable regulations and coordination with ALCO in the funding for credit with a certain amount set by ALCO. IT Steering Committee The Information Technology Steering Committee (ITSC) assists the Board of Directors in providing directions and recommendations on the policies, development, and operations related to IT. In practice, ITSC has two main roles, namely providing direction of the IT policy and management in the long term (five years) and short term (annual) with reference to the IT strategic plan; and control the implementation and development of IT that is and will be conducted with reference to the IT strategic plan. Project Management Office Steering Committee The duty of the PMO Steering Committee is to provide guidance and strategic decisions related to project management, among others determine the priority projects, provide strategic decisions related to a project, and provide instructions related to the results of evaluation conducted after the project is implemented.