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 Propositions
 Governance; Implementation Stage
 Enterprise Governance
 Essence and Future of Governance
 Challenges of Implementation

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The Governance Challenge is not
simply to keep pace with regulators
and ensure compliance with the
rulebook. Confidence stems from
competence, not compliance”
Chris Lucas (PricewaterhouseCoopers) 2005

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 “ .....compliance with the rules and
regulations, including “ the code” or best
practices is a necessary condition, but not a
sufficient criterion to achieve sound
corporate governance implementation” .
 “ ….unfortunately, good governance is
often limited to compliance. The two are
not the same” (Shaw, 2003, p. 34).

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Tahapan Pertama; conformance
Penekanan terhadap rules driven (as opposed to
ethics driven); comply or explain principle!
“ Compliance-based” on regulation (tidak diikuti
oleh “any voluntary conformity”).
Rules and regulations driven per-se (tick boxing)
tidak mencukupi (not sufficient) untuk menutup
“gaps” dalam upaya mengimplementasikan
konsepsi CG secara substantif

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Tahapan Kedua; performance
Penekanan terhadap “ substance over form”
dalam implementasi CG; from conformance to
performance!
Compliance as necessary condition followed by
voluntary conformity towards enhancing
corporate performance
Compliance (on rules & regulations) +
competence = confidence in implementing CG
 towards “high-trust society”
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 Background; particular focus to consider why corporate
governance often fails in companies and, more
importantly, what must be done to ensure that things go
right.
 Definition; “the set of responsibilities and practices
exercised by the board and executive management with
the goal of providing strategic direction, ensuring that
objectives are achieved, ascertaining that risks are
managed appropriately and verifying that the organisatio
n’s resources are used responsibly” (Information Systems
Audit and Control Foundation, 2001).
IFAC (2009)
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 Enterprise governance constitutes the entire
accountability framework of the organization.
 There are two dimensions of enterprise governance
– conformance and performance, that need to be
in balance (next figure illustrates the reach of
enterprise governance).
 In general, the conformance dimension takes an
historic view while the performance view is
forward-looking. It makes it clear that good
corporate governance is only part of the story –
strategy is also important.

IFAC (2009)
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The Enterprise Governance
Framework
Enterprise Governance

Corporate Governance Business Governance

i.e. Conformance i.e. Performance

Accountability Value Creation

Assurance Resource Allocation

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 Conformance is also called “ corporate governance” ; It covers issues
such as board structures and roles and executive remuneration.
 Recent high-profile cases of corporate failure (such as Enron, HIH,
Tyco, Vivendi, Royal Ahold and, most recently, Parmalat), have
brought corporate governance to the top of the business and political
agenda.
 This has led to a number of reviews at national and international level.
 Codes and/or standards can generally address this dimension with
compliance being subject to assurance/audit.
 There are also well-established oversight mechanisms for the board to
use to ensure that good corporate governance processes are effective
eg, audit committees.

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 The performance dimension focuses on strategy and value
creation.
 The focus is on helping the board to: make strategic decisions;
understand its appetite for risk and its key drivers of performance,
and; identify its key points of decision making.
 This dimension does not lend itself easily to a regime of standards
and audit. Instead, it is desirable to develop a range of best
practice tools and techniques, such as scorecards and strategic
enterprise systems, that can be applied intelligently within
different types of organization.
 These can help boards to focus on strategic direction and its
implications for all areas of the business. But these are not often
dealt with as a coherent whole by the board, what we would term
an “ oversight gap” .

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 At the heart of enterprise governance is the
argument that good corporate governance on its
own cannot make a company successful.
 Achieving a panacea of good corporate governance
that is linked strategically with performance
management will enable companies to focus on the
key drivers that move their business forward.
 This is both a challenge and an opportunity.

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 “ to do the right (good) things and to do things
right (well)”
 ..CG should be implemented through decent,
fair, and reliable direction
 ..should follows “ professional & independent”
principles through attitude, actions and
professional judgments
 Needed “trust” towards sound governance
implementation!

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 Moving from a shareholder model to a
stakeholder model (ie. the movement of
Corporate Social Responsibility regim)
 Greater organizational-level accountability
 Greater general support for corporate governance
 Governments are playing a more significant role
(?)
 Simultaneous development of Corporate
Governance & Public Sector Governance

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 Governance concept as work in progress and
dynamic depending on environmental development
 We need to develop our own (tailor-made)
governance model best suited to our (organizational)
needs
 The model need to be compatible to our own system,
structure, culture and societal values
 Konsekuensi CG dari sudut pandang open system &
dynamic environment

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 It should also consider other internal factors
specific to Indonesia & adaptive to
international standards (external factors)
 Successful implementation requires
commitment from all of the parties within
organization, especially the Top
Management Groups as a governance
champions within an organization

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Governance Structure
 Internal Governance Mechanism + trust
 External Governance Mechanism
(the essence of legal framework & who
control whom within the organization?)
 Governance System
 Compatibility between current organizational
systems and CG system

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 Awareness  sosialisasi
 Understanding  komunikasi
 Interest pemahaman konseptual & praktikal
 Desire  willingness to adopt & change
 Action  implementation “just do it!”
 Assessment  improvement ... In search of
approriate CG model & system (pathway to the
next stage)

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Stages of Implementation; The GRP
Adoption Model

Initial CG Best Practice

Assessment

Choice of Communication
CG model

Awareness Understanding Interest

Conceptual & Practical

Socialization Understanding

Assessment Action Desire

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Implementation & Willingness to 26
Evaluation Change
 Enhanced moral & cultural values within
organization  trust building
 Strong commitment to implement CG
 Change, change & change!
(mindsets, attitude, behaviors etc.)
 Strong leadership to facilitate changes &
enhanced commitment
.....the importance of people

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 Comply with rules, laws & regulations, code of
conduct (as the first stage) on pathways to
achived performance!
 Adaptive to organizational dynamism imposed
by external factors (consequences of open
system approach)
 Governance Champion in every unit of
organization (e.g. CG initiative taskforce)
 CG as work in progress  dynamism

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