Indonesia Corporate Governance Roadmap

Corporate governance in Indonesia has evolved rapidly over the past two decades, driven by regulatory reforms, market pressures, and the growing awareness of the role good governance plays in attracting investment and sustaining economic growth. The Indonesia Corporate Governance Roadmap is a strategic blueprint that outlines the milestones, policies, and bestpractice guidelines that corporations, regulators, and stakeholders must follow to create transparent, accountable, and responsible enterprises.

Why a Roadmap Matters

Indonesias economy is diverse, ranging from stateowned enterprises (SOEs) and large familyowned conglomerates to fastgrowing startups. This heterogeneity brings challenges such as:

• Varying degrees of board independence and expertise.
• Inconsistent disclosure standards across sectors.
• Limited enforcement of existing regulations.
• Pressure from international investors for higher ESG (EnvironmentalSocialGovernance) standards.

The roadmap addresses these issues by setting clear, timebound objectives that align Indonesias corporate governance framework with global best practices while respecting local business realities.

Key Pillars of the Roadmap

1. Strengthening Legal and Regulatory Foundations

The foundation of any governance system is the legal framework. The roadmap emphasizes:

• Revision of the Company Law (UU No. 40/2007) to incorporate explicit duties for independent directors and audit committees.
• Alignment of the Financial Services Authority (OJK) regulations with International Financial Reporting Standards (IFRS) and the ASEAN Corporate Governance Scorecard.
• Introduction of a mandatory corporate governance code for listed companies, with a comply or explain approach for nonlisted firms.

2. Enhancing Board Effectiveness

Boards are the heart of governance. The roadmap calls for:

• At least 30% independent directors on the board of listed companies by 2026.
• Separate roles of Chairman and CEO for all public enterprises to avoid concentration of power.
• Continuous professional development programs for directors, focusing on risk management, sustainability, and digital transformation.

3. Promoting Transparency and Disclosure

Investors need reliable information. The roadmap outlines:

• Quarterly financial reporting in line with IFRS, with a focus on materiality and forwardlooking statements.
• Mandatory ESG reporting for companies with market capitalisation over IDR 1 trillion, using the Global Reporting Initiative (GRI) framework.
• Creation of an online public database for corporate governance disclosures, accessible to all stakeholders.

4. Strengthening Shareholder Rights

Effective governance requires empowered shareholders. The roadmap introduces:

• Electronic voting for all general meetings, ensuring wider participation.
• Protection mechanisms for minority shareholders, including a presson right to call extraordinary general meetings.
• Clear procedures for dispute resolution through the Indonesian Financial Services Authoritys mediation unit.

5. Embedding Risk Management and Internal Controls

Companies must anticipate and mitigate risks. The roadmap mandates:

• Enterprise Risk Management (ERM) frameworks for all public companies, overseen by an independent risk committee.
• Annual internal audit plans aligned with the Committee of Sponsoring Organizations of the Treadway Commission (COSO) standards.
• Regular stresstesting for financial, operational, and ESGrelated risks.

6. Fostering a Culture of Ethics and Sustainability

Governance is not only about rules but also about values. The roadmap encourages:

• Adoption of a corporate code of ethics that includes anticorruption, antibribery, and whistleblower protections.
• Integration of Sustainable Development Goals (SDGs) into corporate strategies, with measurable targets.
• Engagement programs with local communities and NGOs to assess social impact.

Implementation Timeline

Roles and Responsibilities

The roadmaps success hinges on collaboration among several key actors:

• Regulators (OJK, Financial Services Authority): Draft and enforce regulations, monitor compliance, and provide guidance.
• Company Boards: Implement governance standards, ensure proper risk oversight, and foster a culture of accountability.
• Investors and Shareholders: Exercise voting rights, demand transparent reporting, and engage in constructive dialogue.
• Auditors and Consultants: Provide independent assurance on financial statements and governance practices.
• Academia and NGOs: Conduct research, develop bestpractice toolkits, and monitor progress.

Measuring Progress

To keep the roadmap on track, a set of quantitative and qualitative indicators will be published annually:

• Percentage of listed companies with independent directors.
• Number of firms submitting ESG reports in line with GRI.
• Average time to publish quarterly financial statements.
• Incidence of governancerelated disputes resolved through mediation.
• Stakeholder satisfaction scores collected via the governance portal.

Challenges and Mitigation Strategies

While the roadmap is ambitious, several challenges are anticipated:

• Resistance from familyowned businesses: Offer incentives such as reduced listing fees for those that adopt independent directors.
• Limited expertise in ESG reporting: Partner with international organisations to provide training and templates.
• Enforcement capacity: Strengthen OJKs audit teams and leverage technologybased monitoring tools.

Future Outlook

By 2030, Indonesia aims to be recognised as a regional leader in corporate governance, offering a stable, transparent, and sustainable environment for domestic and foreign investors. The roadmap not only aligns the nation with global standards but also positions Indonesian enterprises to tackle emerging risks such as climate change, digital disruption, and geopolitical uncertainty.

For more detailed guidance, download the full Indonesia Corporate Governance Roadmap and explore the OJKs resource hub.