THE BOARD OF DIRECTORS
G. THE REMUNERATION AND REIMBURSEMENT OF THE BOARD OF DIRECTORS
1. Remuneration Policy
2. Employment Contracts for Directors
3. Severance Payments to the President Director and Board of Directors’ Members
205 206
207 208 210
212
182
The Board of Directors The Chairman’s Checklist
Does the company have a clear delineation and separation of authorities between shareholders, commissioners and directors? Has the company properly established a Board of Directors? Does the AoA or some other general act of the company clearly distinguish the powers of the President Director from those of the Board of Directors’ members?
Do the President Director and all Board of Directors’
members possess the knowledge and skills necessary to manage the company? Do they perform their functions on a full-time basis? Is there a transparent division of tasks among the Board of Directors’ members, such as finance, legal, marketing and operations?
Who elects members of the Board of Directors? Is the President Director sufficiently involved in the nomination process of other Board of Directors’ members?
Do the Board of Directors meet regularly to discuss the affairs of the company? Are these meetings well prepared, with an agenda and reference materials distributed in advance (in writing and/or electronically)?
Do the President Director and the Board of Directors’
members regularly and adequately inform the Board of Commissioners about all operations of the company? Do the Board of Directors provide all relevant information to the Board of Commissioners, the Committees of the Board and the External Auditor in a timely manner?
The Chairman’s Checklist
183
The Board of Directors The Chairman’s Checklist
Do all members of the Board of Directors clearly understand their duties to act reasonably and in good faith in the best interests of the company? Does the Board of Commissioners take measures to ensure that Directors who fail to act in accordance with these duties are held liable under civil, administrative, and/or criminal law?
Are thorough performance reviews of the Board of
Directors based on periodically conducted analysis of key performance indicators? Does the Board of Commissioners rigorously evaluate directors at least annually, if not more frequently? Does the Board of Commissioners clearly link performance and remuneration when deciding on directors’
remuneration?
Do all commissioners fully understand how stock options function? Are all commissioners and shareholders aware of the different methods of recording and reporting the cost of stock options? Has the Board of Commissioners critically examined the use of options as an incentive tool, ensured that option grants are not merely a management giveaway and communicated this fully and effectively to shareholders?
Is the shareholders meeting properly informed before the
shareholders decide to issue stock options or to delegate
that authority to the Board of Commissioners?
184
The Board of Directors The Chairman’s Checklist
This chapter describes the composition of “executive bodies” as they are often structured in practice, and the authorities, formation and working procedures of such executive bodies, as well as their interaction with the Board of Commissioners, their duties evaluation, liabilities and remuneration.
The executive body of a limited liability company in Indonesia is called the Board of Directors (BoD) and it is one of the three organs of a company.1 The ICL provides definition of the Board of Directors as the Company Organ with full authority and responsibility for the management of the Company in the interests of the Company in accordance with the Company’s purposes and objectives and to represent the Company in and out of court in accordance with the provisions of the AoA.2
As it is the central organ of a company, provisions on the Board of Directors, its structure, roles and responsibilities, authority, meetings, members’ nomination, appointment, and remuneration are stipulated in the ICL, CG Code as well as companies’ AoA.
1 ICL, Article 1 paragraph (2) 2 ICL, Article 1 paragraph (5)
185
The Board of Directors The Board of Directors and Their Authorities
Board of Directors is the Company Organ with full authority and responsibility for the management of the Company in the interests of the Company in accordance with the Company’s purposes and objectives and to represent the Company in and out of court in accordance with the provisions of the AoA.3
Furthermore, Article 92 paragraph (3) to (6) of the ICL stipulates that companies’
Boards of Directors shall consist of 1 (one) or more members of the Board of Directors.
Companies whose business is related to the collection of and/or management of the public’s funds, Companies which issue acknowledgements of indebtedness to the public, or Public Companies must have at least 2 (two) members of the Board of Directors. In the event that the Board of Directors consists of 2 (two) or more members of the Board of Directors, the division of management tasks and authority between the members of the Board of Directors shall be determined by a GMS resolution and in the event that the GMS does not make any determination, the division of the tasks and authority of the members of the Board of Directors shall be determined by a resolution of the Board of Directors.
While the CG Code regulated, each member of the Board of Directors can carry out its duty and take decisions in accordance with their respective assignments and authorities.
However, the execution of tasks by each member of the Board of Directors remains to be a collective responsibility. The position of each respective member of the Board of Directors including President Director is equal. The duty of the President Director as primus inter pares is to coordinate the activities of the Board of Directors.4