Good Corporate Governance Charter Chapter 1 Definition, Background and Benefit of GCG Article 100 Definition GCG is a relationship pattern between management with its stakeholders, management with board of commissioner and with members of management itself. This relationship is based on ethics, corporate culture and corporate value and supported by system, process, working procedures and organization in achieving maximum performance. Article 110 Background Both Boards of Commissioners and Directors are committed to build a healthy and strong banking system and turn Bank Mandiri into a widely recognized public-listed company (blue chip company) in Southeast Asia (Regional Champion Bank) by applying GCG principles in managing the bank. Strong application of GCG principles will increase investors trust and be an added value for other stakeholders. Bank Mandiri, as a listed SOE, in applying GCG principles refers to Act no. 1 1995 about Corporation, Act no. 19 2003 about SOE, Act no. 7 1992 as changed into Act no. 10 1998 about Banking, Act no. 8 1995 about Capital Market, SOE Minister s Decree no. Kep- 117/M-MBU/2002 about Implementation of GCG Practice in SOE, Regulation of Bank Indonesia, regulation in banking and capital market sectors, Indonesian Banking Sector Code, best practices and Articles of Association of Bank Mandiri. Article 120 Benefits of GCG Benefits of GCG: 1. Ensure management s commitment in applying principles of openness, accountability, responsibility, independence, fairness and prudence in managing bank. 2. Improve bank s performance, efficiency and services to stakeholders. 3. Ease cheaper and not rigid fund accumulation that will lead to improved shareholder s value. 4. Attract investors interest and trust. 5. Fulfill shareholders interest in improved shareholder s value and dividend. 6. Protect Bank Mandiri from political intervention and lawsuits. Chapter 2 Vision, Mission and Corporate Culture Article 200
Vision Bank Mandiri visions itself to be Your Trusted preferred Bank, with following elaboration: 1. To be a trusted and preferred bank that dominates market shares in all profitable business segments in Indonesia. 2. To be a widely recognized public-listed bank (blue chip company) in Southeast Asia (regional champion bank). Article 210 Mission 1. Orientate to fulfill market s needs. a. Prioritize customers interests. b. Serve professionally and friendly. c. Offer competitive and guaranteed products. 2. Develop professional human capital a. Give everybody an equal opportunity to work with. b. Recruit, train and develop human capital based on talent and capability. c. Appreciate and promote based on achievement and dedication. 3. Maximize returns to our stakeholders a. Give maximum profits to all stakeholders b. Assure continuous growth and profit improvement 4. Practice open management a. Demonstrate high working commitment b. Carry out open management and work together effectively 5. Concern for the community and the environment a. Demonstrate concern for community and environment in all decision making processes. Article 220 Corporate Culture Bank Mandiri develops corporate culture and value in line with its vision and mission. It also sets code of conduct and business ethic that resolve in separate policies. Chapter III GCG Principles Article 300 Transparency
1. Bank promptly, sufficiently, clearly and comparably discloses all information and can be accessed by all stakeholders according to their rights. 2. Bank discloses information that includes but not limited to vision, mission, business targets, strategies, financial condition, composition of management and its compensation, majority shareholders, cross shareholding, executives, risk management, internal supervision and control systems, compliant status, GCG system and implementation and all other material information and facts that might affect investors decision. 3. This principle still considers bank confidentiality regulation, confidentiality requirement for managerial position, personal rights according to laws and regulation. 4. Set policies in written and communicate them to stakeholders and others that might rightly need them. Article 310 Accountability 1. Bank sets out clear responsibilities for each bank organizational elements in line with its vision, mission, business targets and strategies. Bank also sets out competencies needed for each of those organizational elements. 2. Bank sets out check and balances system in managing the bank. 3. Bank utilizes performance measurement for each bank organizational elements based on parameters that in line with corporate values, business targets and strategies. This measurement must utilize rewards and punishment system. 4. Bank believes that all bank organizational elements are competence to their level of responsibilities and understand their roles in implementing GCG. Article 320 Responsibility 1. Bank commits to prudential banking practices and ensures compliance to regulation and laws. 2. Bank, as a good corporate citizen, concerns to its environment and carry out its responsibilities accordingly. Article 330 Independency 1. Bank avoids any irregular attempt by any stakeholders to dominate the bank and does not be affected by unbalanced and free of conflicted interests. 2. Bank decides objectively and free of all pressures from any one. Article 340 Fairness 1. Bank minds all stakeholders interests based on equal and fair treatment.
2. Bank allows all stakeholders to advise and opine for the sake of the bank. Bank also open access to information for all stakeholders based on its transparency principles. Chapter IV Corporate Governance Structure Article 400 Shareholders and Their General Meetings 1. Shareholders a. Bank equally concerns for shareholders rights within similar classification. b. Shareholders who represent one tenth of legitimate voting rights might propose General Meetings agenda to BOD. c. Shareholders could not interfere with bank s operational activities as regulation and Articles of Association of Bank Mandiri ruled out. These activities are responsibilities of BOD. d. Shareholder is prohibited to exploit bank for his or her personal, families, companies or group of businesses in a way that against banking bylaws and common practices as well as intervene with operational activities. e. Bank is required to propose to Bank Indonesia for approval of controlling shareholders. f. Bank must ensure that controlling shareholders has met all conditions and requirements as ruled out by laws, regulation, Bank Indonesia s regulation and other authorities. g. Controlling shareholders must satisfy bank s capital as required by regulation. Those shareholders must give up their shares to others who eligible and capable. 2. Shareholders General Meeting a. All shareholders are eligible for complete and accurate explanation and information about: 1. Invitation to General Meeting includes its detailed agenda and explanation as well as proposal for changes of BOD if any. 2. Other agenda that are distributed before and or during the meeting. 3. Meeting s resolution that are reached in a transparent and fair way. 4. Minutes of meetings that includes in favor of or opposing opinion. 5. Procedures for salary and benefit arrangement and details of salary and allowance for members of BOC and BOD. 6. Financial and other bank related information that include in Annual and Financial Reports. b. Bank sets procedures of and organizes meetings in accordance to regulation and articles of association. c. Bank must acquire approval from shareholders general meeting before engaging in material transactions. Article 410
Commissioners 1. Election and dismissal of Commissioners a. Shareholders General Meeting elects and dismisses members of BOC in a transparent manner. Nomination and Remuneration Committee recommends candidates according to conditions set by shareholders. b. Commissioners must meet conditions and pass fit and proper test as required by regulation. 2. Responsibilities and Duties of Commissioners a. Commissioners are responsible for their duties as ruled in Articles of Association. They are also responsible to manage effective communication with other commissioners, directors, external auditors and supervising bank / capital market authorities. b. Commissioners are responsible to conform to regulation and oversee effectiveness of GCG practice. c. Commissioners must follow up their findings and recommendation when they find any divergence toward regulation, articles of association and prudential banking practices. d. Commissioners employ their own orders that rule out among other meetings of shareholders. e. Commissioners must disclose their share ownership in any corporation as regulated. f. Commissioner are prohibited to exploit bank for their personal, families, companies or group of businesses in a way that against banking bylaws and common practices. 3. Independent Commissioners Shareholders general meeting appoints independent commissioner as required by regulation. One of independent commissioners becomes chairman of Audit Committee. Article 420 Committees under Commissioners In conducting their duties, BOC establishes following committees: 1. Audit Committee, to assist BOC in carrying out its supervising duty for financial related information, internal control system and audit effectiveness of audits by external or internal auditors. 2. Nomination and Remuneration Committee, to assist BOC in setting up qualification, nominating process and remunerating commissioners, directors and other executives. 3. Risk Policy Committee, to assist BOC in supervising of risk management. 4. GCG Committee, to assist commissioners in supervising implementation of GCG. Commissioners release Letter of Decrees to rule out duties, competencies and working mechanism for each committee.
Article 430 Directors 1. Election and dismissal of Directors a. Shareholders General Meeting elects and dismisses members of BOD in a transparent manner. Nomination and Remuneration Committee recommends candidates according to conditions set by shareholders. b. Directors must meet conditions and pass fit and proper test as required by regulation. 2. Responsibilities and Duties of Directors a. Directors are responsible for the operation of bank according to Articles of Association. b. Directors practice prudential banking principles, including but not limited to risk management and internal control system. c. Directors work transparently and independently toward controlling shareholders. d. Directors must comply with regulation and implement effectively GCG practices. e. Directors employ their own orders that rule out among other meetings of BOD. f. Directors must disclose their share ownership in any corporation as regulated. g. Directors are prohibited to exploit bank for their personal, families, companies or group of businesses in a way that against banking bylaws and common practices. Article 440 Committees under Directors In conducting their duties, BOD establishes committees. Directors release Letter of Decrees to rule out duties, competencies and working mechanism for each committee. Article 450 Relationship between Commissioners with Directors 1. Working relationship between commissioners with directors is check and balances and aiming for the bank health and growth. 2. Commissioners and directors are, according to their function, responsible for business continuity in long term that reflected in: a. Maintaining bank health according to prudential principles and other criteria set by Bank Indonesia. b. Implementing risk management and internal control system. c. Achieving normal returns for shareholders. d. Protecting stakeholders interest. e. Implementing GCG. f. Preparing leaders successors and ensuring management continuity at all lines of organization. 3. Commissioners and directors must, to fulfill their responsibility, agree to: a. Corporate vision, mission and values.
b. Business targets, strategies, long term planning and corporate working plan and annual budget. c. Policies, articles of association, prudential banking practices and commitment to prevent any conflict of interest. d. Policies and method of performance measurement of banking as a whole, units within it and its personnel. e. Executive level organization structure that could support target achievement. f. Arrange joint meeting between Commissioners and directors at least once every 3 months. 4. Commissioners and Directors are eligible for market rate remuneration. Remuneration package are resolved in shareholders general meetings after receiving opinion from nomination and remuneration committee. Article 460 Compliance Director 1. President Director appoints and dismisses compliance director upon approval from Bank Indonesia. 2. To be independent, compliance director could not designate as president director, manage loans, treasury, funding, other operational activities, accounting and/or internal control. 3. Compliance Director might become member of committees. However, for operational committee, compliance director has no voting right. 4. Compliance Director reports directly to Bank Indonesia, president director and BOC. 5. Bank set up compliance group to assist compliance director. Article 470 Corporate Secretary 1. Bank arranged corporate secretary as required by capital market regulation. 2. Bank appoints one of directors or executive as corporate secretary. 3. Bank reports this appointment to BAPEPAM and stock exchange where its shares listed and announces in national newspaper. 4. Corporate secretary s duties and responsibilities are according to capital market regulation. Article 480 External auditor and independent reviewer 1. Bank lists external auditor (public accountant) that is licensed by Ministry of Finance and registered with BAPEPAM. 2. Shareholders at general meeting appoint external auditor based on recommendation from BOC and or Audit Committee. 3. External auditor conducts audit to give opinion on the fairness of bank s financial report presentation based on Indonesian generally accepted accounting principles.
4. Minimum once in a year Bank is rated by independent/external reviewers for its GCG practices. Chapter V Information, Bank Confidentiality and Conflict of Interest Article 500 Information 1. Bank discloses to BAPEPAM and public all events, information or material facts that might influence values of securities or investors decision in a timely, accurate, clear and objective manner as required by capital market regulation. 2. Annual report includes summary of financial information, Management s discussion and analysis, audited financial report, management s report and other crucial information. 3. Annual report also conveys activities of Audit and GCG Committees and remuneration structures for each commissioners and directors. 4. Annual report, event, information, or material facts and other disclosures as required by regulation are uploaded into bank s website and updated from time to time. 5. Bank separately rules out insider trading as required by capital market regulation. 6. Bank values shareholders rights according to regulation. Article 510 Bank confidentiality Bank converges to bank confidentiality regulation in practicing transparency. Article 520 Conflict of Interest 1. Commissioners, directors and management executives are committed to prevent any conflict of interests. 2. In a circumstances that a director has personal interest in a transaction, contract or proposed contract where bank is engaged, that director must disclose this interest in a board meetings and he or she could not vote. 3. In a circumstances that a commissioner has personal interest in a transaction, contract or proposed contract where bank is engaged, that commissioner must disclose this interest in a board meetings and he or she could not vote. 4. Commissioners, directors and management executives periodically must assert any conflict between his or her interests with banking activities minimum once a year. 5. Commissioners, directors and management executives could not assume any responsibilities or position concurrently as per regulation. Chapter VI GCG Committee
Article 600 Foundation of GCG Committee Bank Mandiri s BOC formed GCG committee based on Commissioner s Decree no. 002/KEP/KOM/2005 dated July 18, 2005 aiming to assist BOC in supervising and strengthening implementation of GCG principles that at the end increase shareholder value. Article 610 Authorities of GCG Committee 1. Socializing and providing counseling for BOD and its executives in GCG implementation. 2. Communicate with BOD and its executives to get information, clarification and documentation as well as reports needed in implementing GCG principles. 3. Communicate with external parties/bodies in relation to GCG principles implementation upon approval from BOC. 4. Appoint third party (persons or bodies) to assist its duties upon approval from BOC. Article 620 Duties and Responsibilities of GCG Committee 1. Recommend direction and improvement of implementation of GCG principles to BOC. 2. Supervise effectiveness of GCG implementation by BOD in building corporate image and sense of complying of all members of Bank Mandiri totally (Total Quality Compliance TQC). It will improve business environment and provide more conducive working environment. 3. Recommend to BOC in relation to corporate liabilities to concern with and accommodate minority shareholders according to regulation. 4. Ensure that nominating process of commissioners, directors and management executives is based on a clear qualification, transparent selection process and adhere to regulation. 5. Ensure that bank utilize performance evaluation policies for commissioners, directors and management executives. This evaluation is conducted in a transparent manner and associated to remuneration structure. 6. Ensure that commissioners and directors are committed in avoiding conflict of interests, concurrent position and responsibilities and insider trading behavior as regulated by laws. 7. Keep all bank and document confidentialities. 8. Report GCG Committee activities in Bank Annual Report Article 630 Membership of GCG Committee
1. GCG committee at least consists of 4 persons from BOC, one external expert, one person from BOD and person as secretary to committee. 2. One commissioner chairs the committee. 3. Members of committee are elected and dismissed with decree of commissioners. 4. Service tenure for members effectively start since appointed by BOC and or elapse along with the end of their commissioning services. 5. When chairman of committee ends his or her commissioning service before end of its tenure, he or she will be replaced by other commissioner members of committee. 6. Committee member from external must meet following condition: a. Does not have any relationship with the bank. b. Does not have any family relationship with any directors, commissioners and controlling shareholders. c. Has sufficient integrity, capability, knowledge and experiences in his or her area of expertise as well as understanding in banking industry. Article 640 Meeting of GCG Committee 1. Meeting is arranged at least once for a month. 2. Two third of members and chairman must attend the meetings. 3. Meeting will resolve any decision when at least fifty per cent of attendances agree to it. 4. Secretary of committee does not have any voting rights, but may give opinion and suggestion. 5. Secretary to committee will release meeting invitation and material signed by chairman at least one day before the meeting. In an emergency situation, secretary might sign the invitation upon chairman s approval. For a pre-scheduled meeting based on previous committee meeting resolution, does not require any invitation. 6. Members of committee might propose meeting materials 3 days before the meeting and secretary to committee will distribute it as well. Article 650 Reporting Committee must report its duties and responsibilities realization to BOC at least once for every six month period. Chapter VII Other Issues Article 700 Director s Operational Policies Each director s operational policy must reflect GCG principles contained herein. Article 710
GCG Communication and Internalization Board of Director must communicate GCG principles implementation to shareholders, potential shareholders and other stakeholders as well as internalize to all members of Bank Mandiri. Chapter VIII Closings Article 800 1. This GCG charter is governed by applicable regulation. 2. This GCG charter is effective as signed by Members of GCG Committee and Board of Commissioners. 3. This GCG will be reviewed for any changes and / or any in-administrative issues upon approval by BOC. Jakarta, September 15, 2005 PT Bank Mandiri (Persero) Tbk. Good Corporate Governance Committee Muchayat Richard Claproth Yap Tjay Soen Anwar Isham Chairman Member Member Member Commissioners Edwin Gerungan Pradjoto Soedarjono Gunarni Soeworo Chairman Independent Commissioner Commissioner Independent Commissioner