Corporate Governance Framework

Our commitment to applying GCG is articulated in an operational framework in accordance with our GCG policy as set forth in BoD Decree No.29 year 2007. This framework integrates certain management systems that are prerequisites for GCG application in the company to provide assurance that GCG is being implemented effectively at the operational level, ensuring that every transaction, whether internal or external, is conducted in an ethical manner and in accordance with best corporate governance practices.
Recognizing that our success rests on the establishment of a set of core values and a corporate culture as well as our capacity to implement GCG, we have formulated a framework and a roadmap for GCG to ensure that our GCG implementation is based on a shared understanding between management and all other elements of the Company, which is internalized in the running of the Company. The four main pillars that form the foundation for the consolidation of our GCG implementation are:

  • The application of business ethics that incorporate our corporate values. These are communicated every year to all of employees and their understanding of them is regularly surveyed;
  • The management of effective operational policies and procedures that match the demands of the business, as a reference for the management of the Company and as guidelines for employees;
  • The integrated application of risk management based on COSO Enterprise Risk Management; and
  • Internal supervision and the application of internal controls based on COSO Internal Control, primarily
    for internal control over financial reporting.

 

To achieve these aims, we have established a GCG system, as follows:


PREMC :Planning and Risk Evaluation and Monitoring Committee
ERM :Enterprise Risk Management
PMS :Performance Management System
CSA :Control Self-Assessment
SOD :Segregation Of Duties
CSR :Corporate Social Responsibility


1995
Telkom became a public company, with its shares listed and traded on the Jakarta Stock Exchange (“JSX”), Surabaya Stock Exchange (“SSX”), the New York Stock Exchange (“NYSE”) and the London Stock Exchange (“LSE”). Telkom’s stock was offered without listing on the Tokyo Stock Exchange. During this period, the pressure to implement GCG increased because as a public company, Telkom was forced to be better and more professional in carrying out the mandate of its owners/investors, and had to comply with the provisions in force, particularly on information disclosure and transparency.

1997/1998 - 2002
D uring this era, the Company along with the rest of the industry, experienced the pressure of an economic crisis. Nevertheless, we emerged from this period having learned many valuable lessons on the implementation of GCG. The demands of applying professional business practices and prudential principles while pursuing sustainable growth were a valuable experience for our entire workforce. Pursuant to the provisions, Telkom was seen as a model for the implementation of GCG practices in SOEs that was already fulfilling the provisions of Minister of SOEs Regulation No. 117 year 2002, which
was later amended by Minister of SOEs Regulation No. 1 year 2011 regarding the Application of Good
Corporate Governance in SOEs. In line with the SEC provisions on the implementation of sections 404, 302 and 906 of the Sarbanes Oxley Act, Telkom, whose shares are traded on the NYSE, was required to improve the accountability of GCG in the Company through the application of internal controls.

2006 to the present
Our implementation of GCG following the enforcement of the provisions of the Sarbanes Oxley Act has been a valuable learning experience. GCG is an integral part of our implementation of internal controls, risk management and compliance and required the implementation of IT-based governance in the Company. This was a valuable period for Telkom as we went from applying GCG at a normative level to embedding it at the implementation level. Corporate governance was finally fully understood at all levels and systems, the objectives and levels of implementation were integrated starting from the entity level right down to the operational transaction level.

The Telkom Group is committed to implementing GCG consistently to ensure that we can always offer the best service to our customers and respond to the interests of our other stakeholders. In 2011, we continued to improve the quality of our GCG implementation, while fostering an ethical climate in which we could build a business that is prestigious both internally and externally, through the tenacity of our BoC, BoD and the entire group. We actively pursued the implementation of GCG and business ethics in 2011 through the following activities:

  1. Telkom Group Commitment to Peak Management The entire BoC and BoD of the Telkom Group strengthened their commitment to GCG at the Telkom Leadership Meeting II 2011 on July, 26 2011 by making a statement and signing a declaration of their commitment to strengthen the implementation of GCG in the Telkom Group and disseminating the Telkom Group GCG Guidelines. This demonstrated the seriousness with which the Telkom Group’s Commissioners’ and Directors’ view GCG as a corporate necessity.
  2. Seminar on ”Business Ethics and Good Corporate Governance in SOEs”.
    This seminar was held on March 30, 2011 at Sultan Hotel Jakarta, organized by the SOE Executive Club. Among the speakers were the Minister of SOEs, This was a valuable period for Telkom as we went from applying GCG at a normative level to embedding it at the implementation level. Corporate governance was finally fully understood at all levels and systems, the objectives and levels of implementation were integrated starting from the entity level right down to the operational transaction level.

The Telkom Group is committed to implementing GCG consistently to ensure that we can always offer the best service to our customers and respond to the interests of our other stakeholders. In 2011, we continued to improve the quality of our GCG implementation, while fostering an ethical climate in which we could build a business that is prestigious both internally and externally, through the tenacity of our BoC, BoD and the entire group. We actively pursued the implementation of GCG and business ethics in 2011 through the following activities:

  1. Telkom Group Commitment to Peak Management The entire BoC and BoD of the Telkom Group strengthened their commitment to GCG at the Telkom Leadership Meeting II 2011 on July, 26 2011 by making a statement and signing a declaration of their commitment to strengthen the implementation of GCG in the Telkom Group and disseminating the Telkom Group GCG Guidelines. This demonstrated the seriousness with which the Telkom Group’s Commissioners’ and Directors’ view GCG as a corporate necessity.
  2. Seminar on ”Business Ethics and Good Corporate Governance in SOEs”. This seminar was held on March 30, 2011 at Sultan Hotel Jakarta, organized by the SOE Executive Club. Among the speakers were the Minister of SOEs, the Law Mafia Task Force, the Anti-Corruption Commission (“KPK”), and prosecutors. We saw this seminar as an important step in the process of continuous improvement on GCG and ethics.
  3. Knowledge Sharing on Gratuities We organized this opportunity to support the government/KPK campaign on gratuities control, in collaboration with the KPK’s Gratuities Directorate, and it was attended by all our subsidiaries. It was followed up with a joint workshop on March 24-25, 2011 as part of the initiative to improve policy on gratuities through the Gratuities Control Program in line with existing provisions and current dynamics.
  4. Telkom Group GCG Forum Various forums were held on synergy in the management of GCG in the Telkom Group, reinforcing the BoC and BoD commitment to and directions on the proper implementation of GCG and ethics, including the Telkom Group GCG Workshop in Bogor on June 15, 2011.
  5. Entrepreneurs Against Bribery Community (“KUPAS ”) Forum At a discussion panel on ”Building an Anti-Bribery Culture in SOEs” organized by the KUPAS at the KPK, Telkom was an organizer and initiator of the Strategic-Manufacturing Industry SOEs. Our President Director was a speaker at this forum, along with the Minister of SOEs and the Vice Chair of the KPK.
  6. Telkom as a GCG Resource for the Anti Corruption Initiative Study Telkom was asked for its input on the formulation of indicators and weightings covering: commitment to the integrity of top management, guidelines on ethics and behavior, handling of conflicts of interest, management of whistleblowing systems, management of reporting the receipt of gifts and the prohibition on giving bribes, rule enforcement, and other initiatives such as innovation. This reflects the high esteem placed by the Ministry of SOEs on our implementation of GCG and the systems and processes we have put in place and implemented in line with our ethics and compliance.
  7. Telkom as a Counterpart in the Formulation of Assessment Criteria for GCG in SOEs According to a letter of the Minister of SOEs’ Expert Staff on Corporate Governance, Telkom is perceived to have undergone a lengthy process of putting in place a comprehensive and optimal corporate governance structure and processes, making it an ideal contributor to the development of best GCG practices. For this reason Telkom was asked for its input on the draft criteria for the Ministry of SOEs’ GCG Assessments. Telkom’s contribution was requested on updating the assessment criteria to accommodate recent developments in GCG practice and capital market regulations, and in considering  strategic targets for the application of GCG best practices in SOEs.
  8. Telkom as a Counterpart in the Formulation of GCG Regulations for SOEs Telkom was also asked to contribute its input on the draft Minister of SOEs BUMN Regulation regarding the Application of GCG in SOEs, which resulted in Minister of SOEs Regulation no.1/2011 dated August 1, 2011, which updated the Minister of SOEs Decree no.117/2002 dated July 31, 2002. Telkom was also involved in routine information sharing and discussions held by the National Committee on Governance Policy.
  9. Gratuities Control Program and Training of Trainers by KPK. The KPK Training of Trainers (“ToT”) for Telkom took place in two batches in June and July 2011 in order to prepare agents of change for staggered and mass dissemination of the implementation of the Gratuities Control Program for all stakeholders. The participants were drawn from employees in Senior Leader Bands 1 and 2 who were judged to have high integrity and strong ethics who were selected through a rigorous assessment process assessment both online and offline. KPK materials on gratuities, ethics, integrity, managing gifts, the KPK’s JAMU (Clear, Secure, Easy and Beneficial) learning concept and teaching methodologies were disseminated through this ToT.
  10. Facilitator in Reporting Assets by the KPK and Ministry of SOEs. Telkom lent its support to the KPK and the State Minister for SOEs by completing the Report on the Assets of State Officials (“LHKPN”), in accordance with Article 20 of Law No.28 year 1999 regarding State Officials who are Clean and Free from Corruption, Collusion and Nepotism. All state officials must be prepared to report their assets and undergo an inspection of the same (prior to, during and after completing their term of office).
  11. Benchmark Company Telkom’s perceived competence and experience have made it the object of a number of benchmarking visits from both domestic and international companies and institutions. The many companies that visited Telkom in 2011 included Telekom Malaysia, Bank of Indonesia, Ministry of Industry, Ministry of Finance, MoCI, PT PLN, PT Timah, KAI, KPK, PT PGN, PT Pupuk Kujang, and Telecom Egypt. Through benchmarking media, we can exchange information on numerous topics including GCG, internal control, risk management, service, SAP, IT, human resources, e-learning/learning centers, wholesale management, etc.