48 GlobeAsia August 2012

Indonesia’s corporate elite

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Who runs Indonesia’s listed companies? An analysis by the Centre for Governance, Institutions and Organisations (CGIO) at NUS Business School in Singapore sheds more light on the shape of the Indonesian corporate elite and dispels the myth that Indonesia’s boards are run by a cozy group of busy board members controlling the private sector.

conomists agree that sustained economic growth is only possible if a country can also achieve a proportional improve-ment in the quality of its governance, both in the public and the private sector. Indonesia’s private sector is known to be characterized by concentrated family ownership in which a

limited number of wealthy families control a large percentage of the Indone-sia Stock Exchange (IDX) market capitalization. According to a recent report by Credit Suisse, Indonesia’s family businesses form 61% of the total number of listed companies with market capitalization above US$50 million. 1 Are Indonesian listed company boards also showing a concentration of power in the hands of a limited few?

Listed companies in Indonesia follow a two-tier board structure consisting of the board of directors and the board of commissioners. According to Indonesia’s Code of Good Corpo-rate Governance, listed company directors are collegially responsible for the management of the company. On the other hand, the board of commissioners is prohibited from participating in any operational decision making since they are responsible for overseeing the board of directors and ensuring the company implements the Code of Good Corporate Governance. Therefore, the quality of corporate governance in listed compa-nies depends on the individuals making up the board of directors and the board of commission-ers, as well as their capacity to adequately dedi-cate sufficient time on the affairs of the company and in discharging their responsibilities.

How busy are Indonesia’s board members?As at May 2012, Indonesia’s 443 listed companies consisted of 1,946 directors, 1,586 commis-sioners, in addition to 1,143 audit committee members. Indonesian companies consisted of an average of five directors – the smallest board had just one director and the largest board had 13 directors. Furthermore, companies on average had four commissioners – the smallest board of commissioners consisted of one person and the largest consisted of 22 persons (see page 50).

How busy are these board members? For directorships, which are typically full time jobs, one would expect these directors to sit on only one board. The CGIO study showed that out of the 443 companies listed on the IDX, 67 compa-nies (15.1%) had “busy” directors sitting on their boards – “busy” defined as holding more than one directorship simultaneously. Of these 67,

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August 2012 GlobeAsia 49

Most Powerful Board Members

RAnkBOARD MEMBER

nAME

TOTAL nuMBER OF

BOARD sEATs

nuMBER OF DIREcTOR

pOsITIOns

nuMBER OF cOMMIssIOnER

pOsITIOns

Held more than five board seats

1 Ciputra 7 0 7

1 Cosmas Batubara 7 0 7

3 Benny Setiawan 6 1 5

Held more than five board seats

4 Hary Tanoesoedibjo 5 3 2

4 Erry Firmansyah 5 0 5

4 Franky Widjaja 5 0 5

4 Nalinkant Amratlal 5 0 5

4 Tjan Soen Eng 5 0 5

Held more than five board seats

9 Candra Ciputra 4 3 1

9 Paulus Moleonoto 4 3 1

9 Tjhie Tje Fie 4 3 1

9 Axton Salim 4 2 2

9 Gunawan G 4 1 3

9 Ivan Setiawan Budiono 4 1 3

9 Ketut Budi Wijaya 4 1 3

9 Simon Collier Dixon 4 1 3

9 Suwirjo Josowidjojo 4 1 3

9 Hiskak Secakusuma 4 0 4

9 I Nyoman Tjager 4 0 4

9 Jonathan Parapak 4 0 4

9 Mu’ Min Ali Gunawan 4 0 4

9 Muktar Widjaja 4 0 4

9 Mustofa 4 0 4

9 Susiyati B. Hirawan 4 0 4

9 Theo L. Sambuaga 4 0 4

9 Wahjudi Prakarsa 4 0 4

Held more than five board seats

27 Budiarsa Sastrawinata 3 3 0

27 Cakra Ciputra 3 3 0

27 Gwie Gunadi G. 3 3 0

27 Harun Hajadi 3 3 0

27 R. Soeparmadi 3 3 0

27 Suwadi Bing Andi 3 3 0

27 Budi Dharma W. 3 2 1

27 Garibaldi Thohir 3 2 1

27 Gwie Gunato G. 3 2 1

27 Michael J.P. Widjaja 3 2 1

27 Trisna Muliadi 3 2 1

27 Werianty Setiawan 3 2 1

27 Widya Wiryawan 3 2 1

27 Yohannes H. Wijaya 3 2 1

27 Budijanto Tirtawisata 3 1 2

27 Enggan Nursanti 3 1 2

27 Franciscus Welirang 3 1 2

27 Gafur Sulistyo Umar 3 1 2

27 Hary Djaja 3 1 2

RAnkBOARD MEMBER

nAME

TOTAL nuMBER OF

BOARD sEATs

nuMBER OF DIREcTOR

pOsITIOns

nuMBER OF cOMMIssIOnER

pOsITIOns

27 M. Budi Rustanto 3 1 2

27 Prijono Sugiarto 3 1 2

27 Rosano Barack 3 1 2

27 Anugerah Pekerti 3 0 3

27 Arief Tarunakarya S. 3 0 3

27 Bacelius Ruru 3 0 3

27 Bambang R. Tanoe 3 0 3

27 Bing Hartono P. 3 0 3

27 Chiew Sin Cheok 3 0 3

27 D. Nyoman Adnyana 3 0 3

27 Dibyo Widodo 3 0 3

27 Edmund Eddy Sutisna 3 0 3

27 Gandi Sulistiyanto S. 3 0 3

27 Ganesh Chander G. 3 0 3

27 Harijanto 3 0 3

27 Ibrahim Risjad 3 0 3

27 Ievan D. Sumampow 3 0 3

27 Isnandar Rachmat Ali 3 0 3

27 Jialipto Jiaravanon 3 0 3

27 John A. Prasetio 3 0 3

27 Jonathan Tahir 3 0 3

27 Kanaka Puradiredja 3 0 3

27 Marzuki Usman 3 0 3

27 Pranata Hajadi 3 0 3

27 Ramelan 3 0 3

27 Soekrisman 3 0 3

27 Syamsir Siregar 3 0 3

27 Teddy Pawitra 3 0 3

27 Yugi Prayanto 3 0 3

Total Count: 74 board members

there were eight companies which had six “busy” directors on their boards.”

Many of such companies belong to the large conglomerates such as the Sinar Mas Group, the Salim Group and the Ciputra Group, where a similar set of directors sat on multiple group company boards.

The CGIO study indicates that there are no signs of un-healthy concentration of power in the hands of a few directors. The average number of positions a director held was 1.04. Out of a total 1,946 directors, only 69 directors (3.5%) had more than one directorship and 10 directors (0.5%) held the maxi-mum of three directorships simultaneously.

The situation for commissioners, which is not a full time position, differs only slightly. The average number of posi-tions a commissioner occupied was 1.16. Out of a total 1,586

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50 GlobeAsia August 2012

commissioners, 175 individuals (11.0%) had more than one commissioner position in IDX-listed companies. Additionally, seven individuals sat as a commissioner on five or more boards. Among these seven individuals, only two commissioners held more than five commissioner positions each (see page 49). By comparison, a study done by CGIO on Singapore Exchange (SGX) listed firms in 2011 revealed that 41 people held more than 5 board positions and the highest number was 11 board positions.

Dr. Marleen Dieleman, Associate Director of the CGIO, stated that: “In international governance discussions, holding five non-executive board memberships simultaneously is often considered a recommended maximum. The CGIO study shows extremely few excessively busy commissioners and directors in Indonesia. The concentration of power on the boards of listed companies is not very high, especially if compared with other countries. This is a positive feature of the corporate governance landscape in Indonesia”.

Combining Indonesia’s board of directors and board of commissioners, the study found that the most powerful board members of IDX-listed com-panies, who held the most number of board seats, were Dr. Ir. Ciputra and Dr. Cosmas Batubara. Each of them occupied seven board seats as commis-sioner. These people each symbolize a broader trend amongst commission-ers where elder entrepreneurs and retired government officials frequently act as commissioners and impart their wealth of experience in a supervisory role in what can be seen as a “second career”.

As noted at the beginning, most of Indonesia’s listed companies are fam-

ily businesses. From the findings of the CGIO study, we observed that owning families design their company boards in different ways. On one end of the spectrum are those family firms e.g. Ciputra Group, which reserve many of the board seats for family members, thereby controlling for the number and influence of outside profession-als on boards. However, at the other end of the spectrum we also find family firm boards that are mainly – or even only – made up of professional board members e.g. Lippo Group.

In summary, an analysis of the corporate elite in Indonesia shows that while ownership of the private sector may be concentrated, the group of board members of IDX-listed com-panies is not. The CGIO study revealed that as of May 2012, directors held an average of 1.04 seats and commissioners 1.16 seats. With only 3.5% of IDX listed company directors holding more than one directorship and 11% of com-missioners holding more than one commis-sioner position, the task of establishing good governance of listed firms is in the hands of a large and varied group of professionals and family firm owners. It is this group that holds the key to further improving the management and oversight of Indonesia’s listed companies, in addition to playing an important role in Indone-sia’s economic progress.

*End NoteThe study and analysis discussed above was based on board composition data collected from the IDX website as of May 2012. The board composition of the companies listed on the IDX may vary with the appointments and resignations of board members, in between the period of data collection and the publication date of this article.

About CGIOThe Centre for Governance, Institutions and Organisations (CGIO) was established by NUS Business School in 2010 and aims at promot-ing relevant and impactful research on gover-nance issues that are relevant to Asia, including corporate governance, governance of family firms, state-linked companies, business groups, and institutions. CGIO promotes research and organizes events such as public lectures, industry roundtables and academic conferences on topics related to governance.

Commissioners in IDX-listed companies

ToTal number

1,586 commissioners

average number

4 commissioners

minimum number

1 commissioner

maximum number

22 commissioners

Directors in IDX-listed companies

ToTal number

1,946 directors

average number

5 directors

minimum number

1 director

maximum number

13 directors

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