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Agency problems that arise among executives tend to maximize utility self- interest in the creating or composing the local budget,
because they have the advantage of information information asymmetry. As a result, executives tend to do budgetary slack. This happens due to
the executive try to secure its position in the government in the point of view of legislative and the public people, even for the sake of the next
election, but budgetary slack of APBD is more for personal interest among executives self-interest rather than for the benefit of society.
Latifah, 2010.
2. Good Corporate Governance
a. Concept of Good Corporate Governance Good Corporate Governance indefinitely as a system which has
authority and as a control to add value for all of stakeholders. As principal of corporate governance have interest for all shareholders
and stakeholders in corporate governance. Understand of corporate governance according to the Turnbull Report in the UK April 1999
Corporate Governance is a company ’s system of internal control,
which has principal to the management ’s risk which are significant to
fulfill of its business objectives to safeguard the company ’s asset and
enhancing over time the value of the sharehold ers’ investment. The
Implementation involved development of GCG, have two related aspects, namely: hardware and software. The hardware includes the
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establishment of technical or structural change and organizational systems. The software includes more psychosocial change of
paradigm, vision. In real-world business practices, most companies more emphasize hardware aspects, such as the preparation of systems
and procedures and the establishment of organizational structures. Gede Raka, as panelist from Indonesian Institute for Corporate
Governance IICG, stated of Good Corporate Governance have implied the company and not make a profit for owners, but create
value for all concerned parties. Good Corporate Governance concept reflects to share, care, and preserve. Good Corporate
Governance should changes of system and structure and dimension paradigm, vision, mission of organization. Changes in technical
aspects of structure and systems are required as management ’s
capabilities. In this case, focuses in concern are regularity and smoothness on the process in organization as well as members of the
companys adherence to the policy to implement the Principles Good Corporate Governance.
The definition according to Cadbury, said that Good Corporate Governance is direct and control the company, in order to reach
balance between power of strength and authority of company. World Bank defines Good Corporate Governance is a collection of laws,
regulations, and rules which have to fulfill and can push the
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performance of corporate resources as function efficiently, in order to generate economic value of sustainable long term for
shareholders and society as a whole. According to decree of Minister of state-owned enterprise
No: PER-01MBU2011 regarding on the implementation of Good Corporate Governance practices in state-owned enterprise is
principles underlying the process and mechanism of corporate governance based enterprise management regulations and business
ethics. b. Good Corporate Governance
’s Legal Basis in Indonesia
In Indonesia, the implementation of good corporate governance guidelines have been made by Komite Nasional Kebijakan
Governance KNKG through his new book released in 2006 entitled “Pedoman Umum Good Corporate Governance Indonesia. Devices
Regulations and Legislation Circular of Minister of State for Investment and Development of State-Owned Enterprises 106 of 2000
and Decree of Minister of State Enterprises no. 23 2000 that regulate and formulate the development of good practice the companys
corporate governance in the company, and then refined with KEP- 117M-MBU2002 which is renewed by the Regulation of Minister of
State-Owned Enterprises PER-1MBU2011 of Implementation Practices of Good Corporate Governance GCG on SOEs. There
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has also been issued Decree of Minister of State Enterprises no.103 Year 2002 on Establishment of Audit Committee. Capital
Market Supervisory Board No. through a circular.. SE- 03PM2000 has recommended that public companies to maintain audit
committees.
c. Basic Principles of Good Corporate Governance
