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

As negotiators know from experience, any successful deal that requires tough bargaining boils down to a number of variables that are crucial in reaching a fair deal – overcoming potential conflicts of interest and institutional weaknesses. What alternatives does one have to materialize the desired transaction? How much information (how good corporate governance processes can prevent potential conflicts of interest) do they have that is crucial to make an informed decision? What is the status (ethical reputation or cultural norms) of the two negotiating partners that may give advantage to the most reputable one? How strong is the social capital of the negotiator that may affect the transaction, especially when government officials are involved, reducing the competitive alternatives?

Living less dangerously

Mastery of industry, understanding the sociopolitical context and assessing business opportunities that can be translated into a superb strategy may not be enough to survive in the long term in an Asian environment. Additional pitfalls and voids loom and need to be incorporated in a board’s thinking and analysis to decide about scarce tangible and intangible resources in those emerging markets. To be successful in Indonesia and other similar members of the Association of Southeast Asian Nations, companies may want to safeguard their reputations and investments – whether in operations or equity – by taking these potential unique pitfalls seriously.

First, the organizational potential for conflicts of interest because of the biased interests of family businesses and publicly listed state-owned enterprises requires a profound knowledge of the family or government culture and values.

Mere compliance with corporate governance rules does not safeguard minority shareholders’ rights, whereas encountering obtrusive relationship building often glides into nepotism and even outright corruption if not managed carefully. Addressing the potential abuse of power by major shareholders and/or conflicts of interest in an Indonesian business context may be best served by putting in place a highly ethical organizational foundation, based on the “good” character of the leadership, be it through implementation of ethics programs, codes of conduct and ethical values in the operational activities of the firm, or by enhancing the integrity of the firm’s leadership.

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