|Good Corporate Governance|
The Company is committed to implement Good Corporate Governance (GCG) in accordance with the provisions of prevailing laws and regulations in the Republic of Indonesia. Implementation of GCG will ensure transparency, accountability, business ethics and commitment to protect all stakeholders. GCG is not merely implemented as a mandatory legal obligation, more than that, it has become a corporate culture in line with the Company’s vision and mission.
GCG will also ensure that all corporate business activities will benefit not only the shareholders, but also other stakeholders including the communities living in the area surrounding the oil palm plantations. Implementation of GCG will also guarantee the Company’s compliance in conducting good and sustainable management of the environment.
Implementation of GCG according to principles that are in line with the Company’s vision and mission has become a joint responsibility of all the Company departments and the entire workforce of the Company. Hence, practicing GCG will guarantee the continuity of the Company’s business.
General Meeting of Shareholders (Annual General Meeting - AGM)
According to Law No. 40 of 2004 on Limited Liability Companies (Perseroan Terbatas/UU PT), the General Meeting of Shareholders or commonly referred to as Annual General Meeting (AGM) is an organ of the Company vested with authority not given to the Board of Directors or the Board of Commissioners within the limits as stipulated in the UU PPT and the Company’s Articles of Association. AGM plays an important role in a company. Through the AGM, shareholders make important decisions related to the Company, among others evaluating the performances of the Board of Commissioners and the Board of Directors, approve the Annual Report and approve strategic decisions related to corporate actions proposed by the Board of Directors/Shareholders neither intervene in the tasks, functions and authorities of the Board of Commissioners nor those of the Board of Directors.
On April 14, 2015, the Company held an AGM which adopted the following resolutions:
Board of Commissioners
Board of Directors
Board of Commissioners
The Board of Commissioners is one of the organs within the Company tasked with and responsible for performing supervision, both generally and specifically in accordance with the provisions of the Articles of Association and to provide advice to the Board of Directors.
In 2015, the Board of Commissioners issued a Board of Commissioners Charter which sets out the legal foundation and implementation of the Board of Commissioners’ task including its values, a description of its tasks, responsibilities and authority, procedures for meetings and decision-making and reporting.
Below are the duties and responsibilities of the Board of Commissioners:
In line with the provisions of the Company’s Articles of Association, for certain actions, the Board of Directors requires the approval from the Board of Commissioners.
As resolved during the Shareholders AGM in April 14, 2015, the Board of Commissioners shall be comprised of five persons, two of which are Independent Commissioners. Appointment and termination of the members’ term of office shall be resolved during the Shareholders AGM.
The Board of Commissioners presented an accountability report of the supervision on the Company’s management during the AGM on April 14, 2015. Until the end of its term of office, the Board of Commissioners has held 4 (four) Board of Commissioners meetings to discuss the Company’s performance in line with the strategic plan and working plans established by the Company’s Board of Directors for the relevant financial year. During each of these meetings, the Board of Commissioners also invited the Board of Directors and Audit Committee.
The Board of Commissioners held regular meetings to discuss the Company’s performance. In line with the Articles of Association, a Board of Commissioners’ Meeting is deemed valid and authorized to make binding decisions if half of the members of the Board of Commissioners are present or represented during the meeting. The Board of Commissioners and its members have full access to all information related to the Company.
Board of Directors
The Board of Directors is the executive organ that carries the duties and full responsibility to conduct business operations in the interest of the Company according to the Company’s vision, mission and strategy in line with Articles of Association. Members of the Board of Directors are appointed and terminated from office by the AGM.
In 2015, the Board of Director issued a Board of Director Charter which sets out the legal foundation and implementation of the Board of Director’ task including its values, a description of its tasks, responsibilities and authority, procedures for meetings and decision-making and reporting accountability reporting.
Below are the duties and responsibilities of the Board of Directors:
Board of Directors meeting is held regularly. The policy is in compliance with provisions of the Company Articles of Association and UU PT and finds its implementation in weekly Board of Directors meetings which took place 38 times during 2015.
In order to comply with the Indonesia Stock Exchange regulation No. I-A on Listing of Shares (Stock) and Equity-Type Securities Other Than Stock Issued by the Listed Company (Pencatatan Saham dan Efek Bersifat Ekuitas Selain Saham Yang diterbitkan Oleh Perusahaan Tercatat) (BEI Rule No. I-A), the AGM has appointed Rudy as an Independent Director.
The Audit Committee is established by and answers to the Board of Commissioners. In the performance of its duties and responsibilities, the Audit Committee shall refer to the Audit Committee Charter established by the Board of Commissioners. Membership of the Audit Committee shall comprise three persons, one of whom shall be one of the Independent Commissioner who shall also concurrently the Chairman of the Audit Committee. The office term of the Audit Committee shall be 2 years.
The main function of the Audit Committee is to assist the Board of Commissioners in carrying out their supervisory function over the Company. The Audit Committee shall regularly meet with the Board of Directors and its ranks to evaluate the Company Performance and submit a report of its evaluation during each of the regular meetings with the Board of Commissioners. Reports on the accountability of the Audit Committee will be further elaborate in the Audit Committee Report.
In 2015, the Board of Commissioners has established the following composition of the Audit Committee:
Nomination and Remuneration Committee
The Nomination and Remuneration Committee is established by and responsible to the Board of Commissioners. In the performance of its duties and responsibilities, the Nomination and Remuneration Committee shall refer to the Nomination and Remuneration Committee Charter established by the Board of Commissioners.
Membership of the Nomination and Remuneration Committee shall comprise three persons, one of whom shall be one of the Independent Commissioner who shall also concurrently the Chairman of the Nomination and Remuneration Committee. The office term of the Nomination and Remuneration Committee shall be 2 years.
The Nomination and Remuneration Committee assists the Board of Commissioners in performing its function of nominating and remunerating members of the Board of Directors and the Board of Commissioners. Reports on the accountability of the Nomination and Remuneration Committee will be further elaborate in the Nomination and Remuneration Committee Report.
In 2015, the Board of Commissioners has established the following composition of the Nomination and Remuneration Committee:
The Corporate Secretary is one of the functions within the Company given the task and responsibility to communicate with external parties such as the capital market authorities, the stock exchange authorities, investors and the public. The Corporate Secretary answers to the Board of Directors.
The function of Corporate Secretary shall include Company duties, relationship with investors and the public:
The position of Corporate Secretary is held by Rudy who is also a duly appointed member of the Board of Directors.
The Internal Audit is responsible for assisting the Board of Directors in evaluating of all of the Company’s business activities. The Internal Auditors also assist the Board of Directors in ensuring that Good Corporate Governance is implemented in every aspect of the Company’s organization. The Internal Auditors assist the Board of Directors in conducting the Company’s business efficiently and effectively in order to improve on the existing performance.
By virtue of the decree of the Chairman of Bapepam-LK No. KEP/496/BL/2008, the Internal Auditors must perform their duties according to the Internal Audit Charter which regulates the Internal Audit working system. In performing its tasks the Internal Auditors must be guided by the Risk Based Audit Method. This auditing method demands an internal control system test, efficiency and effectiveness of the Company’s business operations and compliance with prevailing laws and regulations.
Internal Auditors are partners of the Board of Commissioners, the Board of Directors and other stakeholders in order to achieve the Company’s objectives Periodically, the Internal Audit convenes routine meetings with the Audit Committee and holds discussions with all relevant divisions. The objective is to review and disseminate information of the Internal Audit team’s findings and recommend corrective measures to support the Company’s performance improvement.
The Company, whose main line of business is in oil palm plantations, will always face many business risks, the majority of which are among others external risks beyond the Company’s control. The business risks faced by the Company corresponds with the characteristic risks in the commodity sector, one of which is price fluctuations.
Below are several risks which have the potential of affecting the Company’s business operations:
1. Commodity Price Risks
The palm oil business is always influenced by price fluctuations as a result of fluctuating supply and demand on the international market. The higher the price, the higher the Company’s profits will be. On the other hand, the lower the price, the lower the profits with a potential of causing greater losses.
To anticipate this risk, the Company must ensure that the Crude Palm Oil (CPO) produced is of higher quality with a low production cost so as to maintain competitiveness in the market throughout the year.
2. Financial Risks
Financial risks may be caused by fluctuations on the international market and fluctuations in the currency exchange. But the Company and its subsidiaries enjoy an excellent liquidity which support the Company’s action plan and sustain the Company against possible fluctuations in the market. In addition, the banking industry is ready to extend funding facilities to the Company.
3. Operational Risks
Operational risks related to the labor management and fertilizing costs. As commonly known, labor and fertilizing costs are the two largest components in the Company’s business operations. Operational risks are anticipated by implementing a more efficient process of crop husbandry and improving the productivity of human resources by applying mechanization and automation.
4. Legal and Policy Risks
As a Company active in the palm oil industry, the Company is also facing legal and policy risks. Legal risks are risks arising in relation with fulfilling the legality aspects of the plantations managed by the Company. Whereas, policy risks are related to changes in policies in the palm oil industry, both policies of the national Government and the regional Government.
Legal risks related to the relationship between the Company and the community in the surroundings of the Company’s plantations. In maintaining a harmonious relationship between the Company and the community, the Company always ensures that the presence of its plantations must at all times provide a positive mutual benefit to the community. This scheme is brought through Corporate Social Responsibility programs.
5. Catastrophic Risks
Catastrophic risks are risks faced by the Company resulting from natural disasters such as flooding, land slides and earth quakes. Natural disasters can pose a business risk to the Company. Therefore, the management of the Company has designed measures to mitigate the risks of natural disasters, as well as anticipative efforts in the event such natural disasters occur.
Business ethics is a system of values explicated from the corporate culture and adhered to by all components within the Company, from the Board of Directors, the management, to all employees. These Business ethics will become a reference for all components within the Company in their conduct with the environment, both internal and external. Including the conduct with stakeholders.
The Company always confirms its commitment to uphold business ethics at all times by complying with all prevailing laws and regulations prevailing in Indonesia. In its implementation, the Board of Directors together with the management and all employees always ensure that every aspect of the Company’s business shall adhere to the principles of Good Corporate Governance which cover such aspects as transparency, accountability, reasonability and full responsibility. Consistent implementation of business ethics will increase the Company’s value in the eyes of shareholders and other stakeholders.
In implementing business ethics, the Company will also avoid conflicts of interest within the Company, starting from the Board of Directors, the management and all of the employees. The Board of Directors, the entire management and all employees are prohibited from accepting remuneration in any form, from others who have either direct or indirect interests.
The Company also consistently and continuously communicates the Business Ethics Standards as well as Company values to all employees and all stakeholders. As such, Business Ethics Standards may become the reference in attitude and conduct of all components within the Company.
Corporate Supporting Professional Institutions
The Company and its subsidiaries assigned Corporate Supporting Professional Institutions to support its business activities, which include independent accountant, actuary, and rating agencies with total payments of approximately Rp 11.3 billion in 2015.
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