FCGI - Forum for Corporate Governance in Indonesia

Definition of Good Corporate Governance
FCGI Publication 2006

Companies increasingly depend on external capital (equity, loans) for the financing of their activities, investment and growth. It is therefore increasingly in their interest to assure external financiers of the proper and most efficient use of funds, and of the fact that the management acts in the best interest of the company. Such assurance is given by a system of corporate governance.

A sound corporate governance system should provide effective protection for shareholders and creditors, so that they can assure themselves of getting a proper return on investment. It should therefore also help to create an environment conducive to the efficient and sustainable growth of the corporate sector.

Corporate governance can therefore be defined as: a set of rules that define the relationship between shareholders, managers, creditors, the government, employees and other internal and external stakeholders in respect to their rights and responsibilities, or the system by which companies are directed and controlled . (taken from Cadbury Committee of United Kingdom) The objective of corporate governance is to create added value to the stakeholders .

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Definition of Corporate Responsibility

“Corporate (Social) Responsibility (CR) is a mechanism for organizations to voluntarily integrate social and environmental concerns into their operations and their interaction with their stakeholders, which are over and above the organization’s legal responsibilities.” (UK BSI)

…and without easily measurable benefits for the company (EB)

CR assumes that we will continue to do the things previously done, but with less impact.