Astra International on Corporate Governance; Study Case

Before 1992 Soeryadjaya family was the majority shareholder of PT Astra International. The company applied corporate governance properly although the majority shareholdership concentrated in one family's hand, however it is admitted that the penalty was usually unenforceable because of the majority shareholder tolerance. Since 1984 PT Astra had introduced its corporate culture based on Catur Dharma (Four Attitudes) : To be an asset to the nation, to provide the best service to the customers, to respect the individual and develop teamwork, and to continually strive for excellence, with Operating Principles of Synergy, Trust, Agility, and Responsibility. It was followed up by the company with introducing the Astra's Business Ethic Guidelines in 1985 which guides the relationship between affiliated companies and relationship with competitors, suppliers, customers, markets, and the society. In 1999 PT Astra made the Corporation Aspects in order to implement good corporate governance which has to be complied by the Board of Commissioners and the Board of Directors. The Corporation Aspects is based on "Corporate Social Responsibility" that emphasizes the corporate management to be responsible to all stakeholders including its creditor and the society. There are four elements of corporate governance contained in the Corporation Aspects : Fairness, transparency, accountability, and responsibility.

During the Soeryadjaya period, in 1990 PT Astra was listed on the Jakarta Stock Exchange (JSE) and Surabaya Stock Exchange with JSE index at its highest and Astra share price at Rp 33,000 per share from an IPO price of Rp 14,850. The company received the Management Award "Operating Management" from the Asian Institute of Management in the same year. The Soeryadjaya released its share of PT Astra in 1992 and when the economic crises hit Indonesia during 1997-1998 the Indonesia Bank Restructuring Agency took over the shares of PT Astra. In fact after 1992 there is no majority shareholder of PT Astra concentrated in one family's hand. As of 30 April 2000 Cycle & Carriage (Mauritius) Ltd. (CCL) became the controlling majority shareholder of PT Astra (24.14 % shares) by taking over the controlling shares of the IBRA.

The control of PT Astra management, either Board of Commissioners (Komisaris) or Board of Directors (Direksi), before and after 1992 basically was dominated by independent professional people. It is still ongoing when CCL became the majority shareholder. From 11 members of the Komisaris, 5 commissioners represent the majority shareholder while the 6 others are independent commissioners (more than 50 % of members of the Komisaris are independent commissioners). 8 members of the Direksi, only 1 person represents the majority shareholder and the 7 others are independent directors (more than 80 % of members of the Direksi are independent directors). It is in line with the recommendation in the Code of Corporate Governance that recommends that at least 20 % of members of both the Komisaris and the Direksi are independent ones.

Contrary to PT Timah which has been audited on its corporate governance, PT Astra has never done on the same thing. However, PT Astra's commitment to applying the corporate governance by complying to all legal provisions is implemented. For example, the total borrowing of PT Astra and its subsidiaries from Bank Universal (subsidiary bank of PT Astra's group) is amounting to 7.29 % of total credit given by Bank Universal to its debtor. It is in line with the provision concerning the legal lending limit which allows bank to lend a maximum of 20 % of the bank's capital to its group member companies.

Realizing the important of good corporate governance implementation, the Komisaris and the Direksi are responsible to implement the good corporate governance in which assisted by all divisions of PT Astra. For example the Corporate Secretary organizes the Legal Division, the Investor Relations, and the Corporate Communications to run its missions and objectives properly which are consecutively reviewed once in a week at department level, twice in a month at division level, and twice in a year at the Direksi level. These are necessary to evaluate on how the mission and the objectives are implementing in order to achieve a good corporate governance in its fields. Besides, there are Independent Commissioners and Audit Committee as the supporting institutions to make sure the implementation of good corporate governance in PT Astra.

At the moment when corporate governance becomes an important issue, PT Astra has complied with establishing an Audit Committee as recommended by BAPEPAM (Indonesia Capital Market Supervisory Agency) in May 2000. BAPEPAM itself regulated provisions concerning Audit Committee in June 2000 and gave companies a period of one year to prepare themselves.

Because of the political and economic crisis PT Astra Total Net Consolidated Revenue was down 28 % in 1998 compared to 1997. But for 1999 PT Astra reported a growth of its net revenue for by 34 % to Rp 15 trillion, from Rp 11 trillion in 1998. In 1999 Asiamoney magazine awarded PT Astra for its good corporate governance implementation in Best Managed Companies. One of those criteria was the transparency. Now, PT Astra employs 94,402 people in Indonesia.