5 Principles of Corporate Governance You Must Know

The principles of Corporate governance or also called Good Corporate Governance (GCG) are built with the aim of creating trust from shareholders or stakeholders in a company. As the name implies, this principle is taken from good, clean, and transparent governance.

The reference in this principle is not binding legal rules, but ethics in conducting business properly. By having this GCG principle, it is hoped that it can encourage healthy competition and a conducive business climate. It also supports economic growth and stability.

There are 3 main pillars in the principles of GCG, namely the state as law enforcer and makers of laws and regulations, the business world which acts as a market player that implements GCG, and the community as users of products and services. The principles consist of 5, which are explained as follows.

1. Transparency

A company must be transparent in providing relevant information so that stakeholders can access and understand it easily. The guidelines are as follows.

The information must be presented in a timely, accurate, clear, adequate, accessible, and comparable manner by stakeholders.

Stakeholders have the right to know company information such as vision and mission, company strategy, financial condition, share ownership, risk management system, GCG implementation system, monitoring system, and internal control, including important events that can affect the company’s condition.

However, it is hoped that the principle of transparency will not reduce the obligation to comply with the provisions of company confidentiality in accordance with laws and regulations, personal rights, and job confidentiality.

Company policies must be communicated proportionally to stakeholders in written form.

2. Accountability

The next ethical principle of corporate governance is accountability or accountability. Where the company must be accountable for its performance in a transparent and fair manner so that its management in addition to achieving organizational goals is also taking into account the interests of stakeholders. The guidelines are:

By determining the details of the duties and responsibilities of all employees and every organ of the company, and believing that all employees and organs of the company have the ability according to their duties, roles, and responsibilities in implementing GCG.

Ensure that in the management of the company there is an effective internal control system.

Everyone in the company must adhere to the agreed business ethics and code of conduct.

3. Responsibility

Companies must also carry out community and environmental responsibilities, and comply with laws and regulations in support of long-term business sustainability. This principle of responsibility will also give recognition to the company as a good corporate citizen with the following guidelines.

Carrying out social responsibility includes concern for the community and environmental sustainability around the company.

Adhering to the precautionary principle, ensuring that the company is run in compliance with laws and regulations, company regulations, and articles of association.

4. Independence

The management of the company should be carried out independently, so as not to dominate each other or be interfered with by other parties. In this way, GCG can be implemented based on the following 2 things.

Avoid mutual domination between each company organ, free from conflict of interest, not influenced by certain interests, and free from all pressures and influences so that decision making is guaranteed objectively.

Do not throw away each other’s responsibility for each organ of the company, and are obliged to carry out their functions and duties in accordance with the laws and regulations and the articles of association.

5. Fairness and Equality

Good corporate governance also applies the principles of fairness and equality to pay attention to the interests of stakeholders in carrying out their activities. This principle is guided by:

Stakeholders are given the opportunity to provide input and opinions for the benefit of the company.

Treating stakeholders fairly and equally according to their contributions and benefits to the company.

Provide equal opportunities in employee recruitment regardless of tribe, race, physical condition, or gender.

Rachel Maria

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