Guidelines to `living less dangerously` in Indonesia
January-March 2018
By: Peter Verhezen, Ian O Williamson and Natalia Soebagjo

And, obviously, the independence of a fair and just judicial branch in Indonesia can also be seriously questioned. Hence, while using informal networks to reduce institutional uncertainty may not be ideal, from a practical business perspective it enables bringing different necessary parties together, similar to innovation that relies on collaborative teams within and between organizations.

Conflicts of interest

To prevent potential conflicts of interest that may surface between partners in the Indonesian market, or abuse of power by majority shareholders and their managers, we recommend that firms invest in two critical areas: implementation of appropriate corporate governance practices and the formation of a highly ethical culture through formal and informal organizational practices.

The first key to preventing conflicts of interest is the implementation of sound corporate governance. Good corporate governance occurs when practices are implemented that: first, clarify the duties and roles of the board members; second, ensure disclosure of information in a transparent and timely manner; third, secure proper oversight and monitoring; and fourth, install the right size and composition at the board level to steer and guide top executive decision-making. However, the achievement of these four objectives is complicated within an Indonesian setting by the fact that Indonesian firms have a dual-board system, in contrast to an Anglo-Saxon context that allegedly drives global corporate governance practices.

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