Gender participation and influence in corporate governance networks in Indonesia
Corporate governance involves efforts to ensure that corporate objectives are met, and that the interests of shareholders and other corporate stakeholders are upheld. Given the significant accountability of corporate boards for the management and control of capital, studies have explored the implications of board composition and diversity on outcomes such as risk, decision-making, corporate social responsibility practices, and firm performance, among others.
Strong boards are also seen to exert significant influence on corporate culture and organisational management practices. In light of the size and scope of some of the largest corporations in the world, the influence of corporate boards on the domestic and interconnected global economy cannot be underestimated.
Reflecting its Dutch influences, Indonesian corporate governance structures are characterised by a dual board, composed of a board of commissioners tasked with the control function, and a board of directors tasked with the management function. The report finds that a total of 512 commissioners serve on the supervisory boards of the major corporations in the country. A company typically appoints six commissioners to its board, with the smallest board composed of two commissioners and the largest composed of 22 commissioners.
Of all the commissioners that serve on the top 100 corporations, only 52 (or around 10%) are women. Women tend to comprise around 10% of the board of commissioners of individual companies. Notably, however, more than half of the companies (a total of 57) have boards that are composed only of men. There remains significant opportunity for companies to increase gender participation and reap the benefits of greater gender balance in supervisory boards in the country.
In Indonesia, the corporate governance network of the top 100 corporations is relatively fragmented. A commissioner typically sits on only one board; therefore, the majority of commissioners tend to have low levels of network connectedness. However, a total of 51 of the 512 commissioners (or around 10%) are members of between two and four corporate boards. Among these most connected (and hence most important) commissioners, only three are women.
The report points to significant opportunities to increase the participation of women in supervisory board membership in Indonesia. Previous studies elsewhere have found higher levels of gender diversity at the board level to have positive effects on stock value and profitability, among others. This may be attributed to improvements in decision-making processes as a result of the board having a more diverse set of skills, experiences and perspectives to draw upon.
- Principles of corporate governance
- The case of Indonesia
- Indonesia’s top 100 corporate boards
- Gender participation in supervisory boards
- Industry differences
- Corporate governance networks
- Connectedness and ‘betweenness’