- 80 -
Priyantono Rudito has served as our Director of Human Capital Management “HCM” since May 11, 2012. Concurrently, he also serves as Commissioner of Telkomsel, our subsidiary. Since he joined Telkom in 1991, he has served in a number of positions,
including as VP for Corporate Strategic Planning 2011-2012 and VP for Marketing Consumer Care 2007-2011. He holds a Bachelor’s degree in Industrial Engineering from Institut Teknologi Bandung 1991 and a Master’s degree in Business Marketing
1997 and a Doctoral degree in Management 2011 from the Royal Melbourne Institute of Technology, Australia.
Ririek Adriansyah Ririek Adriansyah has served as our Director of Wholesale International Service “WINS” since May 11, 2012. Concurrently, he
also serves as President Commissioner of TII, our subsidiary. He joined Telkom in 1990 and, prior to his appointment as Director of WINS, served as, among other positions, President Director of TII, our subsidiary 2011-2012, Director of Marketing Sales, TII
2010-2011, Director of International Carrier Service, TII 2008-2010 and Deputy EGM of Infratel Division, Telkom 2004-2008. He holds a Bachelor’s degree in Electrical Engineering from Institut Teknologi Bandung 1989.
B. COMPENSATION Compensation of Commissioners and Directors
Each Commissioner is entitled to monthly remuneration and benefits. They are also entitled to bonuses based on our business performance and achievements, which amount is determined by shareholders at the GMS. Commissioners are also entitled to a lump
sum allowance upon resignation.
Each Director is entitled to a remuneration consisting of a monthly salary and other allowances including retirement benefit. Directors also receive an annual bonus based on our business performance and achievements, which amount is determined by
shareholders at the GMS. The bonus and incentive are budgeted every year based on recommendations of the Directors and confirmation from Board of Commissioners before being considered by shareholders at the GMS.
The Nomination and Remuneration Committee is responsible for formulating the Commissioners’ and Directors’ salaries, which is further discussed in a joint meeting of our Board of Directors and Board of Commissioners for approval. The agreed formula is then
submitted to the shareholders at the AGMS for consideration and approval.
The procedure for determining remuneration of our Board of Commissioners is as follows:
The Board of Commissioners requests the Nomination and Remuneration Committee to formulate a proposal for the remuneration of the Board of Commissioners;
The Nomination and Remuneration Committee requests an independent party to formulate the framework for the remuneration of
the Board of Commissioners;
The Nomination and Remuneration Committee proposes the remuneration framework to the Board of Commissioners;
The Board of Commissioners proposes the remuneration for the members of the Board of Commissioners to the GMS; and
The GMS determines the remuneration for the members of the Board of Commissioners. Bonus and incentives are budgeted every year based on recommendations of the Board of Directors and confirmation from the Board
of Commissioners before being considered by the shareholders at the AGMS. The Nomination and Remuneration Committee is responsible for formulating proposed formulae for the salaries of the Board of Directors’ which are further discussed during a joint
meeting Board of Directors and Board of Commissioners for approval. The approved formula is then proposed in GMS for final approval. The performance of the Board of Directors and other management is measured through effective performance evaluations,
which are conducted comprehensively, systematically and periodically in accordance with a decree of the Board of Commissioners. The criteria used in the assessment on the performance of Board of Directors is based on the balanced scorecard method measuring
four main aspects, namely Financial, Customer, Internal Business Process, and Learning and Growth, each comprising three key performance indicators “KPI”: Shared KPI, Common KPI and Specific KPI. Shared KPIs are the same in name, target, realization
and achievement for all the Board of Directors. Common KPIs have the same name and target, but specify different realization and achievement for each of the Directors. Specific KPIs are different for each of the Directors and represent specific programs as the
primary duty and priority for each of the Directors and its Directorate.
The net amount of remuneration paid to our Commissioners and Directors for the year ended December 31, 2013, including basic compensation honorarium, bonus and other incentives, was Rp164 billion US20 million. There is no management pension plans
or contingent compensation in place.
- 81 - C. BOARD PRACTICES
Our Board of Commissioners acts as our overall supervisory and monitoring body with principal functions including planning and development, operations and budgeting in compliance with our Articles of Association, and to carry out the mandate and resolutions
of the AGMS and EGMS. The Board of Commissioners does not have the authority to run or manage our Company, except in the exceptional situation of all members of the Board of Directors having been suspended for any reason. The Board of Commissioners
provides advice and opinions to the AGMS with respect to financial reporting, business development, appointment of auditors, and other important and strategic matters related to corporate actions. The Board of Commissioners also reviews our work plan and
budget, keeps abreast of our progress, and in case our Company gives an indication of slowing-down, immediately requests the Board of Directors to notify the shareholders and provides recommendations on measures for mitigation. Finally, the Board of
Commissioners ensures that our corporate governance program is properly applied and maintained according to the applicable regulations.
The Board of Commissioners is obliged to carry out its duties and responsibilities according to our Articles of Association, decisions from the AGMS and EGMS and applicable laws and regulations.
The Board of Commissioners is assisted by a Board of Commissioners Secretary as well as the Audit Committee, the Nomination and Remuneration Committee and the Planning and Risk Evaluation and Monitoring Committee. As necessary, the Board of
Commissioners seeks assistance from professional advisors.
Meetings of the Board of Commissioners are held at least once a month at any time deemed necessary by one or more members of the Board of Commissioners, or at the written request of one or more shareholders holding at least one-tenth of our outstanding shares of
common stock. Decisions at Board of Commissioners meetings are taken through a process of deliberation and consensus. If a consensus cannot be reached, decisions are based on a majority vote of the Commissioners in attendance or who are represented at the
meeting. In the event of a tie, the proposal in question must be rejected. The quorum for all Board of Commissioners meetings is more than one-half of the total number of Commissioners then represented in person or by proxy granted to another Commissioner at such
meeting.
Our Board of Directors is generally responsible for managing our business in accordance with applicable laws, our Articles of Association and the policies and directives issued by the GMS and the Board of Commissioners. The Board of Directors also has the
right to act for and on our behalf, inside or outside a court of law, on any matter and for any event, with another party.
Meetings of the Board of Directors may be convened at any time deemed necessary at the request of one or more members of the Board of Directors, at the request of the Board of Directors or upon a written request from one or more shareholders representing one-
tenth or more of the total number of outstanding shares of common stock.
Meetings of the Board of Directors are chaired by the President Director. In the event that the President Director is unavailable or absent for any reason, the meeting will be chaired by a member of the Board of Directors appointed in the meeting.
The decisions of the Board of Directors meetings shall be reached by consensus through deliberation. If this method fails, the decision shall be passed by voting based on the majority votes by Board of Director members cast in the meeting. A quorum is reached at a
meeting where more than half of the members of the Board of Directors are present or represented legally by proxy in the meeting. Each member of the Board of Directors who is present at the meeting shall be entitled to cast one vote and one vote for each other
member of the Board of Directors whom he represents.
Individual Directors are charged with specific responsibilities.
Audit Committee
The Audit Committee operates under the authority of the Audit Committee Charter, which was promulgated by a Decree of the Board of Commissioners. The Audit Committee Charter is regularly evaluated and, if necessary, amended to ensure compliance with OJK
and SEC requirements and other relevant regulations. The Audit Committee charter was stipulated by the Board of Commissioners’ Decree No.11KEPDK2011 dated November 30, 2011 regarding the Charter of the Telkom Group Audit Committee. In 2013, no
changes were made to regulations related to our Audit Committee that would require us to amend our Audit Committee Charter.
The Audit Committee Charter outlines the Audit Committee’s purpose, function and responsibilities. It provides that the Audit Committee is responsible for:
Overseeing our financial reporting process on behalf of the Board of Commissioners;
Providing recommendations to the Board of Commissioners regarding the selection of our external auditor, subject to
shareholder approval;
Discussing with our internal and external auditors on the overall scope and plans of their respective audits;
- 82 -
“ICOFR”;
Convening regular meetings with internal and external auditors, without the presence of management, to discuss the results of their evaluation and audit of our internal controls as well as the overall quality of our financial reporting; and
Carrying out additional tasks that are assigned by the Board of Commissioners, especially on financial and accounting related
matters as well as other obligations required by the Sarbanes Oxley Act of 2002. The Audit Committee may engage an independent consultant or other professional advisers to assist in carrying out its functions. In
addition, the Audit Committee receives and handles complaints.
Audit Committee Independence
Bapepam-LK Audit Committee Rules require that the Audit Committee consist of at least three members, one of whom must be an Independent Commissioner who serves as chairman, while the other two members must be independent. At least one of these two
members must have expert knowledge in the context of Item 16A of Form 20-F in the field of accountancy or finance. In order to be considered independent under the prevailing Indonesian rules, the external members of the Audit Committee:
May not be an executive officer of a public accountant firm that has provided audit or non-audit services to us within the six
months prior to his or her appointment as an Audit Committee member;
May not have been our executive officer within the six months prior to his or her appointment as an Audit Committee member;
May not be affiliated with our majority shareholder;
May not have a family relationship with any member of the Board of Commissioners or Board of Directors;
May not own, directly or indirectly, any of our shares; and
May not have any business relationship that relates to our businesses. Currently, the Audit Committee consists of five members: i Johnny Swandi Sjam Independent Commissioner and Chairman; ii
Agus Yulianto Secretary; iii Virano Gazi Nasution Independent Commissioner; iv Parikesit Suprapto Commissioner; v Sahat Pardede.
Audit Committee Financial Expert
See Item 16A “Audit Committee Financial Expert”.
Exemption from US Listing Standards for Audit Committees
See Item 16D “Exemptions from the Listing Standards for Audit Committees”.
Nomination and Remuneration Committee
Our Nomination and Remuneration Committee was formed pursuant to Board of Commissioner’s decree No.003KEPDK2005 dated April 21, 2005 regarding the Establishment of the Nomination and Remuneration Committee.
The objective of the Nomination and Remuneration Committee is to establish, administer and enforce corporate governance principles in the process of nomination for strategic management positions and the determination of the Board of Directors’ remuneration. The
duties of the Nomination and Remuneration Committee are to:
Devise a nomination and selection system for strategic positions within Telkom, referring to corporate governance principles, such as transparency, accountability, responsibility, fairness and independence;
Assist the Board of Commissioners who engaged with the Directors in selecting candidates for strategic positions in Telkom i.e.
one level under the Directors and similarly for Directors and Commissioners of a consolidated subsidiary that contributes 30 or more of our consolidated revenue, such as Telkomsel. Exclusively for Telkomsel, the Committee’s recommendation would be
passed on to the holder of the Series A Dwiwarna share; and
Formulate a remuneration system for Directors based on fairness and performance. As of December 31, 2013, the members of our Nomination and Remuneration Committee were Jusman Syafii Djamal President
Commissioner, Hadiyanto, Parikesit Suprapto, Johnny Swandi Sjam, Virano Gazi Nasution and Yuki Indrayadi. To maintain independence in the execution of their tasks, members of the Nomination and Remuneration Committee have no relationship, either
directly or indirectly, with us. There are no service contracts or benefits to be provided for Board of Directors of our Company or subsidiaries upon their termination as Board of Directors.
- 83 - D. EMPLOYEES
We had a total of 25,011 employees as of December 31, 2013, consisting of 17,881 Telkom employees and 7,130 employees of our subsidiaries. This figure represents a decrease 2.6 compared to the position as of December 31, 2012, reflecting the continued
implementation of our multi exit program initiated in 2002 which aims to improve efficiency.
The following is our employee profile by position, educational background and age group.
Position 2013
Telkom Subsidiaries
Telkom Group Percentage
Senior Management 135
306 441
1.8 Middle Management
2,711 1,276
3,987 15.9
Supervisors 9,936
2,095 12,031
48.1 Others
5,099 3,453
8,552 34.2
Total 17,881
7,130 25,011
100
As of December 31, 2013, 25.2 of our employees did not have a tertiary education pre university, compared to 45.0 who had graduated university. This reflects our focus to recruit highly educated candidates with the right qualifications to support our growth.
Level of Education 2013
Telkom Subsidiaries
Telkom Group Percentage
Pre University 5,632
665 6,297
25.2 Diploma Graduates
4,260 974
5,234 20.9
University Graduates 6,262
5,002 11,264
45.0 Post Graduates
1,727 489
2,216 8.9
Total 17,881
7,130 25,011
100
As of December 31, 2013, employees over the age of 45 continued to dominate our workforce, comprising 65.7 of our total employees, followed by employees in the 31 to 45 age group which comprised 24.7 and those under 30 age group which comprised
9.6.
Age Group 2013
Telkom Subsidiaries
Telkom Group Percentage
30 756
1,644 2,400
9.6 31 - 45
4,170 2,001
6,171 24.7
45 12,955
3,485 16,440
65.7
Total 17,881
7,130 25,011
100
Approximately 78.3 of our employees were located in western Indonesia and approximately 21.7 of our employees were located in eastern Indonesia.
Retirement Program
The retirement age for all our employees is 56. We have two pension schemes, which are a Defined Benefit Pension Plan “DBPP” tailored for permanent employees who were hired prior to July 1, 2002, and b Defined Contribution Pension Plan “DCPP” that
applies to other permanent employees.
a.
Defined Benefit Pension Plan “DBPP” DBPP is calculated for participants based on years of service, salary level at retirement and is transferable to dependent families if
the respective employee passes away. Telkom Pension Fund Division administers the program while the main source of pension fund comes from us and employee contributions. Employees participate in the program with 18 of their basic salary before
March 2003, employee contribution rate was 8.4 while we contribute the remaining balance. The minimum monthly pension benefit for retired employees is approximately Rp425,000 per month. Our contribution to the pension fund reached Rp187 billion,
Rp186 billion and Rp182 billion, respectively, for the years ended December 31, 2011, 2012 and 2013.
- 84 - Telkomsel operates its own DBPP for its employees. With this program, employees are entitled to retirement benefits calculated
Infomedia also has its own DBPP for its employees.
b.
Defined Contribution Pension Plan “DCPP” We operate a Defined Contribution Pension Plan for permanent employees who were recruited on or after July 1, 2002. DCPP is
managed by several appointed financial institutions pension fund from which employees can choose. Our contribution to the financial institutions pension fund is determined by the portion taken from participating employee’s basic salary, which totalled
Rp5 billion, Rp5 billion and Rp6 billion, respectively, for the years ended December 31, 2011, 2012 and 2013.
To create a more effective and competitive business environment, we also have an Early Retirement Program “ERP”. The program is run in line with the execution of the 2013-2017 Human Capital Master Plan which is expected to release 1,548
employees. This program is offered to employees who are deemed to have met certain requirements in terms of education, age, position and performance. From 2002 through December 31, 2013, we spent Rp7.3 trillion as compensation for 14,195
employees who participated in the program. In 2013, we did not execute an early retirement program.
Management of Employee Relations with Management
Pursuant to the Presidential Decree No.831998 regarding Ratification of ILO Convention No.871948 regarding Freedom of Association and Protection of the Right Organize, our employees established the Telkom Employees Union “SEKAR”. As of
December 31, 2013, SEKAR represented a total of 16,283 employees or 91.1 of our total workforce. Pursuant to Law No.132003 regarding Manpower and Regulation of the Minister of Manpower and Transmigration No.PER.162011
concerning Procedures Preparation and Ratification of Company Regulations and Preparation and Registration Collective Work Agreement “CWA”, SEKAR is entitled to represent employees in the negotiation of the CWA with management. To renew the
expired CWA IV, negotiations for the CWA V were conducted during 2013. These negotiations have resulted in an agreement that was signed by both parties on August 23, 2013, and has been ratified by the Directorate General of Work Requirement, Welfare and
Discrimination Analysis of the Ministry of Manpower and Transmigration. CWA V is in effect until August 23, 2015.
Telkomsel and Infomedia also have employees’ unions. Telkomsel’s employees’ union, “SEPAKAT”, has 3,972 members or representing 93.1 of Telkomsel’s total employees. Neither we nor our subsidiaries with employees union have experienced material
labor action.
E. SHARE OWNERSHIP
