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The implementation of corporate governance guidelines is meant to have a purpose and benefits as follows Forum Corporate Governance Indonesia FCGI,
2001: 1 Achieving a sustainable growth of the company through a management system
based on the principles of transparency, accountability, responsibility, independence, and fairness.
2 Encouraging the empowerment and independence of the functions of each organ of the company, e.g., the board of commissioners, the board of
directors, and the general meeting of shareholders GMS. 3 Encouraging shareholders, the board of commissioners, and the board of
directors to take decisions and actions based on the value of high moral and compliance with laws and regulations.
4 Encouraging the emergence of awareness and corporate social responsibility towards society and the environment.
5 Optimizing shareholder value while considering other stakeholders, and 6 Improving the competitiveness of enterprises, both nationally and
internationally, thereby increasing confidence in the market which can encourage the flow of investment and sustainable economic growth.
a. Board of Commissioner Size BOC
Indonesia adopted two-tier board system. Companies incorporated under the Indonesia Company Law 2007 must have two boards, supervisory board
that performs the monitoring role and management board that perform the executive role. The supervisory board is clearly separated from and
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independent of the executive or management board, consistent with the characteristic of the continental European governance model. The two-tier
board makes a clear separation between the Board of Directors and Board of Commissioners. Board of Commissioners has very important roles in the
company, especially in the implementation of good corporate governance. The Board of Commissioners lies at the core of corporate governance-charged with
ensuring strategic guidance mechanism. Since management is responsible for the firm‘s efficiency and competitiveness and Board of Commissioners is the
proper focal point of the c orporation‘s perpetuation and success
Anitawati, 2011.
Board of Commissioners has responsibility to supervise the quality of information in the financial statement. This is important to consider
management need on doing earning management, which could affect the decreasing of investor belief. In order to overcome this problem, Board of
Commissioners has permitted to have an access on company information. Board of Commissioners does not have authority in the company, so Board of
Director responsible to deliver the information that related to the company. Additionally, the function of Board of Commissioners is to make sure a
company has done social responsibility and consider the stakeholder need as good as monitoring the effectively of corporate governance practice National
Code for Good Corporate Governance, 2001 cited in Febriyanto, 2013.
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b. The Board of Director Size BOD
The board of directors is a party to a corporate entity tasked with carrying out the operation and management of the company. According to the limited
liability company act, which can be appointed as a board member is an individual who is able to carry out legal action and not been declared bankrupt
or become a member of the directors or commissioners who were found guilty of causing the company to go bankrupt, or a person who never convicted of
committing adverse financial criminal state within five years prior to appointment. Paul, 2000.
The boards of directors are fully responsible for all operations and management of the company in order to carry out the interests in achieving
company goals. The board of directors is responsible for the affairs of the company with external parties such as suppliers, customers, regulators and
legal parties. With such a large role in the management of the company, directors basically have a significant controlling interest in resource
management companies and funds from investors. Functions, powers, and responsibilities of directors is expressly stipulated in Law no. 40 of 2007 on
Limited Liability Company. In this law, the board has the task, among others: 1. A leading publishing company with corporate policies.
2. Choose, assign, and supervise duties of the employee and the manager. 3. Approve the annual budget of the company.
4. Delivering a report to shareholders for the company performance.
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Board size is the number of the board of director in the company which is generally composed of inside and outside members and responsible to run the
company‘s business. Most of the researchers found that, the larger board size negatively impacts the value of the firm. Literatures on board size and firm
value are firstly emerged in the early 1990s with the article of Lipton Lorsch 2009. The advocated small board since they believed that the board
would become ineffective when a group grows too large, thereby building on the organizational behavior theory, Yusuf, 2013.
The Malaysian Code of Corporate Governance FCGM, 2012 outlines the principal responsibilities of the board of directors in public listed companies,
which are: 1 To review and adopt a strategic plan for the company
2 To oversee the conduct of the company‘s business to evaluate whether the
business is being managed properly 3 To identify principal risks and ensure the implementation of appropriate
systems to manage these risks 4 To undertake succession planning, including appointing, training, fixing
compensation, and replacing senior management where applicable 5 To develop and implement an investor relations program or shareholder
communication policy for the company; and 6
To review the adequacy and the integrity of the company‘s internal control systems and management information systems, including systems for
compliance with applicable laws, regulations, rules, directives and guidelines.
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The Board of Directors is also as the Corporate Governance guarantor. Shareholders elect the Board of Directors to oversee management and to
assure that stakeholders‘ long-term interests are served. Through oversight, review, and counsel, the Board of Directors establishes and promotes business
and organizational objectives. The Board oversees the company‘s business affairs and integrity, works with management to determine the company‘s
mission and long-term strategy, performs the annual Chief Executive Officer CEO evaluation, oversees CEO succession planning, establishes internal
controls over financial reporting, and assesses company risks and strategies for risk mitigation. Naciri, 2008 pg. 24
c. The board of Independent Size BOI
