Summary of Corporate Governance – Week 3

Committees of The BoC

Arranged by:
Hayyin Nur Adisa 1606832851
Lulu Thasya Syahida 1606824124
Mentari Andini 1606877313
Yuniar Nawang W. 1606893216

Lecturer: Dr. Fitriany S.E., M.Ak.

UNIVERSITAS INDONESIA
DEPOK
2019
1. FRC (2016), Guidance on Audit Committee

Introduction

- This guidance is designed to assist company boards in making suitable arrangements for
their audit committees, and to assist directors serving on audit committees in carrying out
their role.
- Every board should consider in detail what audit committee arrangements are best suited
for its particular circumstances.
- While all directors have a duty to act in the interests of the company the audit committee
has a particular role, acting independently from the executive, to ensure that the interests
of shareholders are properly protected in relation to financial reporting and internal control.
However, the board has overall responsibility for an organisation’s approach to risk
management and internal control and nothing in the guidance should be interpreted as a
departure from the principle of the unitary board.
- The guidance contains recommendations about the conduct of the audit committee’s
relationship with the board, with the executive management and with internal and external
auditors.
- In particular, the management is under an obligation to ensure the audit committee is kept
properly informed, and should take the initiative in supplying information rather than
waiting to be asked. The board should make it clear to all directors and staff that they must
cooperate with the audit committee and provide it with any information it requires.
- Many of the core functions of audit committees set out in this guidance are expressed in
terms of ‘oversight’, ‘assessment’ and ‘review’ of a particular function.
- For groups, it will usually be necessary for the audit committee of the parent company to
review issues that relate to particular subsidiaries or activities carried on by the group.

Establishment and effectiveness of the audit committee

a. Establishment and terms of reference

- The board should establish an audit committee of at least three, or in the case of
smaller companies two, members, and should be independent non-executive
directors.
- The audit committee should be set out in written terms of reference tailored to the
particular circumstances of the company
- The audit committee and board should review annually the effectiveness of the audit
committee
b. Membership and appointment
 - Each audit committee will function differently depending on the composition of the
board and committee and the business in which the company is involved.
- Appointments to the audit committee should be made by the board on the
recommendation of the nomination committee, in consultation with the audit committee
chairman
c. Skills, experience and training
- The committee members should bring an independent mind-set to their role
- In considering the composition of the audit committee, the nominations committee and
board should have regard to ensuring a range of skills, experience, knowledge and
professional qualifications to meet the requirements of the Code.
- The company should provide an induction programme for new audit committee
members.
- Training should also be provided to members of the audit committee on an ongoing
and timely basis and should include an understanding of the principles of and
developments in corporate reporting and regulation.
d. Meetings of the audit committee
- It is for the audit committee chairman, there should be as many meetings as the audit
committee’s role and responsibilities require.
- A sufficient interval should be allowed between audit committee meetings and main
board meetings to allow any work arising from the audit committee meeting to be
carried out and reported to the board as appropriate.
- No one other than the audit committee’s chairman and members is entitled to be
present at a meeting of the audit committee. It is for the audit committee to decide if
nonmembers should attend for a particular meeting or a particular agenda item.
- The audit committee should, at least annually, meet the external and internal auditors,
without management.
- Formal meetings of the audit committee are the heart of its work. It is expected that
the audit committee chairman, and to a lesser extent the other members, will wish to
keep in touch on a continuing basis with the key people involved in the company’s
governance, including the board chairman, the chief executive, the finance director,
the external audit lead partner and the head of internal audit.
e. Resources
- The audit committee should be provided with sufficient resources to undertake its
duties
- The audit committee should have access to the services of the company secretariat
on all audit committee matters
 - The company secretary should ensure that the audit committee receives information
and papers in a timely manner to enable full and proper consideration to be given to
the issues.
- The board should make funds available to the audit committee to enable it to take
independent legal, accounting or other advice when the audit committee reasonably
believes it necessary to do so.
f. Remuneration
- Audit committees have wide-ranging, time-consuming and sometimes intensive work
to do.
- The level of remuneration paid to the members of the audit committee should take into
account the level of fees paid to other members of the board

Role and responsibilities

a. Relationship with the Board

- The audit committee should report to the board on how it has discharged its
responsibilities, including the significant issues that it considered in relation to the
financial statements and how these issues were addressed; its assessment of the
effectiveness of the external audit process and its recommendation on the appointment
or reappointment of the external auditor; and any other issues on which the board has
requested the committee’s opinion.
- Where there is disagreement between the audit committee and the board, adequate
time should be made available for discussion of the issue with a view to resolving the
disagreement.
- The audit committee should consider key matters of their own initiative rather than
relying solely on the work of the external auditor.
b. Annual reports and other periodic reports
- The audit committee should review, and report to the board on, significant financial
reporting issues and judgements made in connection with the preparation of the
company’s financial statements.
- It is the responsibility of management, not the audit committee, to prepare complete
and accurate financial statements and disclosures in accordance with accounting
standards and other regulations.
- Taking into account the external auditor’s view on the financial statements, the audit
committee should consider whether the company has adopted appropriate accounting
policies and, where necessary, made appropriate estimates and judgements.
 - When the audit committee is not satisfied with any aspect of the proposed financial
reporting by the company, it shall report its views to the board.
- The audit committee should review related information presented with the financial
statements, including the strategic report, and corporate governance statements
relating to the audit and to risk management.
- Where requested by the board, the audit committee should review the content of the
annual report and accounts and advise the board on whether, taken as a whole, it is
fair, balanced and understandable to inform the board’s statement on these matters
required under Section C.1.1 of the UK Corporate Governance Code.
- Where board approval is required for other statements containing financial information,
whenever practicable the audit committee should review such statements first.
c. Internal control and risk management systems
- The board has ultimate responsibility for an organisation’s risk management and
internal control systems, but the board may delegate to the audit committee some
functions to assist the board in meeting this responsibility.
- The audit committee should review the company’s internal financial controls.
- The company’s management has day-to-day responsibility for the risk management
and internal control systems, including the financial controls, and these should form an
integral part of the company’s day-to-day business processes.
- The audit committee should consider the level of assurance it is getting on the risk
management and internal control systems, including internal financial controls, and
whether this is enough to help the board in satisfying itself that they are operating
effectively
- If risk management and internal control responsibilities are delegated to different
committees the board should consider the impact of splitting those responsibilities.
- The audit committee should review and recommend to the board the disclosures
included in the annual report in relation to internal control, risk management and the
viability statement.
d. The internal audit process
- The need for an internal audit function will vary depending on company specific factors
including the scale, diversity and complexity of the company’s activities and the
number of employees, as well as cost-benefit considerations.
- The audit committee should regularly review the need for establishing an internal audit
function.
- In the absence of an internal audit function, other processes may need to be applied
to provide assurance to management, the audit committee and the board that the
system of internal control is functioning as intended
 - Where there is an internal audit function, the audit committee should review and
approve its role and mandate; approve the annual internal audit plan; and monitor and
review the effectiveness of its work.
- The audit committee should ensure that the internal audit plan is aligned to the key
risks of the business.
- The audit committee should ensure that there is open communication between the
different functions and that the internal audit function evaluates the effectiveness of
the risk, compliance and finance functions as part of its internal audit plan.
- The audit committee should ensure that the function has unrestricted scope, the
necessary resources and access to information to enable it to fulfil its mandate, and is
equipped to perform in accordance with appropriate professional standards for internal
auditors.
- The audit committee should approve the appointment or termination of appointment of
the head of internal audit.
- In undertaking a review of effectiveness of the internal audit function the audit
committee should confirm that it is satisfied that the quality, experience and expertise
of the function is appropriate for the business.
- In its annual assessment of the effectiveness of the internal audit function the audit
committee should meet with the head of internal audit without the presence of
management to discuss the effectiveness of the function, review and assess the
annual internal audit work plan, receive a report on the results of the internal auditors’
work, and monitor and assess the role and effectiveness of the internal audit function
in the overall context of the company’s risk management system.
- The audit committee may also wish to consider whether an independent, third party
review of internal audit effectiveness and processes is appropriate.
- If the external auditor is being considered to undertake aspects of the internal audit
function, the audit committee should consider the effect this may have on the
effectiveness of the company’s overall arrangements for internal control, the effect on
the objectivity and independence of the external auditor and the internal audit function
and investor perceptions in this regard.
e. The external audit process
- The audit committee is the body responsible for overseeing the company’s relations
with the external auditor.
1) Appoinment and tendering
- The audit committee should have primary responsibility for the appointment of
the auditor.
 - The audit committee should be responsible for the selection procedure for the
appointment of audit firms.
- The audit committee should annually assess, and report to the board on, the
qualification, expertise and resources, and independence of the external
auditors and the effectiveness of the audit process, with a recommendation on
whether to propose to the shareholders that the external auditor be
reappointed.
- If the external auditor resigns, the audit committee should investigate the issues
giving rise to such resignation and consider whether any action is required.
- The audit committee should evaluate the risks to the quality and effectiveness
of the financial reporting process, especially in light of the auditor’s
communications with the audit committee.
2) Terms and Remuneration
- The audit committee should approve the terms of engagement and the
remuneration to be paid to the external auditor in respect of audit services
provided
- The audit committee should review and agree the engagement letter issued by
the external auditor at the start of each audit, ensuring that it has been updated
to reflect changes in circumstances arising since the previous year.
- The audit committee should satisfy itself that the level of fee payable in respect
of the audit services provided is appropriate and that an effective, high quality,
audit can be conducted for such a fee.
3) Independence, including the provision of non-audit services
- The audit committee should assess the independence and objectivity of the
external auditor annually, taking into consideration relevant UK law, regulation,
the Ethical Standard and other professional requirements.
- The audit committee should monitor the external audit firm’s compliance with
the Ethical Standard, the level of fees that the company pays in proportion to
the overall fee income of the firm, or relevant part of it, and other related
regulatory requirements.
- The audit committee should seek annually from the audit firm information about
policies and processes for maintaining independence and monitoring
compliance with relevant requirements.
- The audit committee should agree with the board the company’s policy for the
employment of former employees of the external auditor, taking into account
the Ethical Standard and legal requirements and paying particular attention to
 the policy regarding former employees of the audit firm who were part of the
audit team and moved directly to the company.
- The normal rotation period for the audit engagement partner and key audit
partners is five years, but a degree of flexibility over the timing of rotation is
possible for instance: where the audit committee decides that it is necessary to
safeguard the quality of the audit without compromising the independence and
objectivity of the external auditor.
- The audit committee should develop and recommend to the board the
company’s policy in relation to the provision of non-audit services by the
auditor, taking into account the Ethical Standard and legal requirements, and
keep the policy under review.
- The audit committee is responsible for approving non-audit services. The
committee’s objective should be to ensure that the provision of such services
does not impair the external auditor’s independence or objectivity.
- The audit committee should set and apply a formal policy specifying the types
of non audit service for which use of the external auditor is pre-approved.
- The audit committee needs to set a policy for how it will assess whether non-
audit services have a direct or material effect on the audited financial
statements, how it will assess and explain the estimation of the effect on the
financial statements and how it will consider the external auditors’
independence.
4) Annual audit cycle
- The audit committee should ensure that appropriate plans are in place for the
audit.
- The audit committee may also wish to hold an initial discussion without the
auditor to consider factors that could affect audit quality and discuss these with
the auditor.
- The audit committee should review and monitor management’s
responsiveness to the external auditor’s findings and recommendations.
- The audit committee should assess the effectiveness of the audit process.
- In the course of its assessment of effectiveness, the audit committee should:
ask the auditor to explain the risks to audit quality that they identified and how
these have been addressed; discuss with the auditor the key audit firm and
network level controls the auditor relied on to address the identified risks to
audit quality and enquire about the findings from internal and external
inspections of their audit and their audit firm; review whether the auditor has
met the agreed audit plan and understand the reasons for any changes, obtain
 feedback about the conduct of the audit from key people involved, review and
monitor the content of the external auditor’s management letter, and other
communications with the audit committee.

Communication with shareholders

- The audit committee has a role in ensuring that shareholder interests are properly
protected in relation to financial reporting and internal control.
- The audit committee section should include the following matters: how the audit committee
composition requirements have been addressed, and the names and qualifications of all
members of the audit committee during the period, if not provided elsewhere, the number
of audit committee meetings, how the audit committee’s performance evaluation has been
conducted, an explanation of how the committee has assessed the effectiveness of the
external audit process and of the approach taken to the appointment or reappointment of
the external auditor; the length of tenure of the current audit firm; the current audit partner
name, and for how long the partner has held the role; when a tender was last conducted;
and advance notice of any retendering plans, if the external auditor provides non-audit
services, the committee’s policy for approval of non-audit services; an explanation of how
the committee has assessed the effectiveness of internal audit and satisfied itself that the
quality, experience and expertise of the function is appropriate for the business; and the
significant issues that the committee considered.
- The committee needs to exercise judgement in deciding which of the issues it considered
in relation to the financial statements were significant.
- When reporting on the significant issues, the audit committee would not be expected to
disclose information which, in its opinion, would be prejudicial to the interests of the
company.
- The section need not repeat information disclosed elsewhere in the annual report and
accounts, but could provide signposts to that information.
- The chairman of the audit committee should be present at the AGM to answer questions
on the separate section of the annual report describing the audit committee’s activities and
matters within the scope of the audit committee’s responsibilities.
2. Mallin: Chapter 8

THE BOARD OF DIRECTORS

The board of directors leads and controls a company and hence an effective board is
fundamental to the success of the company. The board is the link between managers and
investors, and is essential to good corporate governance and investor relations.

ROLE OF THE BOARD

The board is responsible for: determining the company’s aims and the strategies, plans, and
policies to achieve those aims; monitoring progress in the achievement of those aims (both
from an overview company aspect and also in terms of analysis and evaluation of its own
performance as a board and as individual directors); and appointing a CEO with appropriate
leadership qualities. Sir Adrian Cadbury (2002) gives an excellent exposition of corporate
governance and chairmanship, and the role and effectiveness of the board in corporate
governance.
Taylor et al. (2001) identified three major challenges facing company boards over the
forthcoming five-year period to build more diverse boards of directors, to pay more attention
to making their boards more effective, and to be able to react appropriately to any changes in
the corporate governance culture. The board will focus on the value drivers of the business to
give the firm competitive advantage. Clearly, the composition of the board will play a key role
in whether a company can successfully meet these challenges. The presence of the most
suitable non-executive directors will help the board in this task. The role and appointment of
non-executive directors is discussed in more detail later.

ROLE, DUTIES AND RESPONSIBILITIES

The Code (2010) states that, ‘the board’s role is to provide entrepreneurial leadership of the
company within a framework of prudent and effective controls which enables risk to be
assessed and managed’ (para A.1).
The board should have regular meetings, with an agenda, and there should be a formal
schedule of matters over which the board has the right to make decisions. There should be
appropriate reporting procedures defined for the board and its subcommittees. The board
should have a balance between executive and non-executive directors. All directors should
have access to the company secretary and also be able to take independent professional
advice. The Code (2010) recommends that directors should receive appropriate training when
they are first appointed to the board of a listed company.
CEO
The CEO has the executive responsibility for the running of the company’s business, whereas
the chairman has responsibility for the running of the board. The two roles should not therefore
be combined and carried out by one person, as this would give an individual too much power.
Hermes, in The Hermes Corporate Governance Principles, states that it is generally opposed
to a CEO becoming chairman of the board at the same company.

CHAIRMAN
The chairman is responsible for the running of the board and for ensuring that the board meets
frequently, that directors have access to all the information they need to make an informed
contribution at board meetings, and that all directors are given the opportunity to speak at
board meetings.
The difference between the authority of chairmen and that of chief executives is that
chairmen carry the authority of the board, while chief executives carry the authority delegated
to them by the board. Chairmen exercise their authority on behalf of the board; chief executives
have personal authority in line with the terms of their appointment.
The chairman should hold meetings with the non-executive directors without the
executives present. Full-time executive chairs exert their greatest influence in strategy and
resource dependence tasks whereas part-time, non-executive chairs seem to exert more
influence over monitoring and control tasks’.

SENIOR INDEPENDENT DIRECTOR

The Code (2010) provides for the appointment of a senior independent director (SID) who
should be one of the independent non-executive directors.
‘the senior independent director should be available to shareholders if they have
concerns which contact through the normal channels of chairman, chief executive or
finance director has failed to resolve or for which such contact is inappropriate’
The Hermes Corporate Governance Principles also see the SID as providing an additional
communication channel to shareholders and states: ‘if the chairman of the board is not
independent, then the board should appoint a senior independent director whose role would
include reviewing the performance of the chairman’ (para. 3.4).

COMPANY SECRETARY
The company secretary has a range of responsibilities, including facilitating the work of the
board by ensuring that the directors have all the information they need for the main board and
also for the board subcommittees (commonly audit, remuneration, and nomination), and that
such information flows well between the various constituents. The company secretary advises
the board, via the chairman, on all governance matters and will assist with the professional
development needs of directors and induction requirements for new directors and also must
act in good faith and avoid conflicts of interest.

BOARD SUBCOMMITTEES
The board may appoint various subcommittees, which should report regularly to the board,
and although the board may delegate various activities to these subcommittees, it is the board
as a whole that remains responsible for the areas covered by the subcommittees.
Used for various purposes, the main one being to assist the dispatch of business by
considering it in more detail than would be convenient for the whole board, the second purpose
is to increase objectivity either because of inherent conflicts of interest such as executive
remuneration, or else to discipline personal preferences as in the exercise of patronage.

AUDIT COMMITTEE
Important role of the audit committee: ‘while all directors have a duty to act in the interests of
the company, the audit committee has a particular role, acting independently from the
executive, to ensure that the interests of shareholders are properly protected in relation to
financial reporting and internal control’
Role of the audit committee to review the scope and outcome of the audit, and to try
to ensure that the objectivity of the auditors is maintained. The audit committee provides a
useful ‘bridge’ between both internal and external auditors and the board, helping to ensure
that the board is fully aware of all relevant issues related to the audit. The audit committee’s
role may also involve reviewing arrangements for whistle-blowers (staff who wish confidentially
to raise concerns about possible improper practices in the company).
Effective audit committees undertake more monitoring which results in wider audit
scope and higher audit fees. Contrary to our expectations, we find the association between
audit committee effectiveness and non-audit service fees to be positive and significant,
especially for larger clients. This suggests that larger clients are more likely to purchase non-
audit services even in the presence of effective audit committees probably due to the
complexity of their activities. Overall, our findings support regulatory initiatives aimed at
improving corporate governance quality

REMUNERATION COMMITTEE
The remuneration committee should make recommendations to the board, within agreed
terms of reference, on the company’s framework of executive remuneration and its cost; it
should determine on their behalf specific remuneration packages for each of the executive
directors, including pension rights and any compensation payments.
 The establishment of a remuneration committee (in the form recommended by the
Code) prevents executive directors from setting their own remuneration levels. The
remuneration committee mechanism should also provide a formal, transparent procedure for
the setting of executive remuneration levels, including the determination of appropriate targets
for any performance-related pay schemes. The members of the remuneration committee
should be identified in the annual report. The remuneration of non-executive directors is
decided by the chairman and the executive members of the board. The company chairman
may serve on—but should not chair—the remuneration committee where he/she is considered
independent on appointment as the chairman.

NOMINATION COMPANIES
The board would also not have a balance in as much as there would be a lack of independent
non-executive directors. Nomination committee which should lead the process for board
appointments and make recommendations to the board. A majority of members of the
nomination committee should be independent non-executive directors. The chairman should
not chair the nomination committee when it is dealing with the appointment of a successor to
the chairmanship.
The nomination committee should evaluate the existing balance of skills, knowledge,
and experience on the board, and utilize this when preparing a candidate profile for new
appointments. The nomination committee should throw its net as wide as possible in the
search for suitable candidates to ensure that it identifies the best candidates. The nomination
committee should also be involved with succession planning in the company, noting
challenges that may arise and identifying possible gaps in skills and knowledge that would
need to be filled with new appointments.
Our finding that nominating committee independence significantly affects the quality of
board monitoring has important policy implications given the intense debate on the costs and
benefits of mandatory board regulations since the passage of SOX.

RISK COMMITTEE
The company’s system of internal controls and have mechanisms in place to ensure that the
internal controls of the company and risk management systems are operating efficiently. A
risk committee should therefore comprehend the risks involved by, inter alia, using derivatives,
and this would necessitate quite a high level of financial expertise and the ability to seek
external professional advice where necessary
ETHICS COMMITTEE
Companies may try to ensure that there is a strong organizational ethic by cascading an ethics
code throughout the company, from director level to the worker on the shop floor. This lack of
an explicit mention is perhaps rather surprising given the frequent ‘breaches’ of perceived
good corporate governance: infringement of shareholder rights, fraud, and excessive
executive remuneration.
The extent to which ethics codes are actually used by executives when making
strategic choices as opposed to being merely symbolic is unknown. Financial executives are
more likely to integrate their company’s ethics code into their strategic decision processes if
(a) they perceive pressure from market stakeholders to do so (suppliers, customers,
shareholders, etc.); (b) they believe the use of ethics codes creates an internal ethical culture
and promotes a positive external image for their firms; and (c) the code is integrated into daily
activities through ethics code training programs. The effect of market stakeholder pressure is
further enhanced when executives also believe that the code will promote a positive external
image. Of particular note, we do not find that pressure from non-market stakeholders (e.g.,
regulatory agencies, government bodies, court systems) has a unique impact on ethics code
use.

NON-EXECUTIVE DIRECTORS
The non-executive director’s role essentially has two dimensions. One dimension—which has
been given much emphasis in the last decade—is as a control or counterweight to executive
directors, so that the presence of non-executive directors helps to ensure that an individual
person or group cannot unduly influence the board’s decisions.
Given the importance of their distinctive contribution, non-executive directors should
be selected with the same impartiality and care as senior executives. The importance of non-
executive directors was echoed in the Organisation for Economic Co-operation and
Development (OECD) Principles: ‘Boards should consider assigning a sufficient number of
non-executive board members capable of exercising independent judgement to tasks where
there is a potential for conflict of interest. Examples of such key responsibilities are financial
reporting, nomination and executive and board remuneration.
Non-executive directors should constructively challenge and help develop proposals
on strategy. They should scrutinise the performance of management in meeting agreed goals
and objectives and monitor the reporting of performance. They should satisfy themselves on
the integrity of financial information and that financial controls and systems of risk
management are robust and defensible. They are responsible for determining appropriate
levels of remuneration of executive directors and have a prime role in appointing, and where
necessary removing, executive directors, and in succession planning.
INDEPENDENCE OF NON-EXECUTIVE DIRECTORS
To try to ensure objectivity in board decisions, it is important that there is a balance of
independent non-executive directors.Board independence usually requires that a sufficient
number of board members not be employed by the company and not be closely related to the
company or its management through significant economic, family or other ties. This does not
prevent shareholders from being board members.
The independence of non-executive directors is an area of corporate governance that
institutional investors and their representative groups monitor very carefully and disclosure of
biographical information about directors and increasing use of databases of director
information should help to identify potential problems.
Non-executive directors should undertake that they will have sufficient time to meet
what is expected of them’ and ‘their other significant commitments should be disclosed to the
board before appointment, with a broad indication of the time involved and the board should
be informed of subsequent changes. The independence-performance relationships are more
significant in financial institutions with excessive risk-taking behaviors.
3. OJK Rules on Audit Committee, Nomination & Remuneration Committee

POJK No. 55/POJK.04/2015 - Audit Committee

Definisi
Komite Audit adalah komite yang dibentuk oleh dan bertanggung jawab kepada Dewan
Komisaris dalam membantu melaksanakan tugas dan fungsi Dewan Komisaris.
Tugas, Tanggung Jawab, dan Wewenang
● Komite Audit bertindak secara independen dalam melaksanakan tugas dan tanggung
jawabnya.
● Dalam menjalankan fungsinya, Komite Audit memiliki tugas dan tanggung jawab paling
sedikit meliputi:
a. melakukan penelaahan atas informasi keuangan yang akan dikeluarkan Emiten atau
Perusahaan Publik kepada publik dan/atau pihak otoritas antara lain laporan
keuangan, proyeksi, dan laporan lainnya terkait dengan informasi keuangan Emiten
atau Perusahaan Publik;
b. melakukan penelaahan atas ketaatan terhadap peraturan perundang-undangan yang
berhubungan dengan kegiatan Emiten atau Perusahaan Publik;
c. memberikan pendapat independen dalam hal terjadi perbedaan pendapat antara
manajemen dan Akuntan atas jasa yang diberikannya;
d. memberikan rekomendasi kepada Dewan Komisaris mengenai penunjukan Akuntan
yang didasarkan pada independensi, ruang lingkup penugasan, dan imbalan jasa;
e. melakukan penelaahan atas pelaksanaan pemeriksaan oleh auditor internal dan
mengawasi pelaksanaan tindak lanjut oleh Direksi atas temuan auditor internal;
f. melakukan penelaahan terhadap aktivitas pelaksanaan manajemen risiko yang
dilakukan oleh Direksi, jika Emiten atau Perusahaan Publik tidak memiliki fungsi
pemantau risiko di bawah Dewan Komisaris;
g. menelaah pengaduan yang berkaitan dengan proses akuntansi dan pelaporan
keuangan Emiten atau Perusahaan Publik;
h. menelaah dan memberikan saran kepada Dewan Komisaris terkait dengan adanya
potensi benturan kepentingan Emiten atau Perusahaan Publik; dan
i. menjaga kerahasiaan dokumen, data dan informasi Emiten atau Perusahaan Publik.
● Dalam melaksanakan tugasnya, Komite Audit mempunyai wewenang sebagai berikut:
a. mengakses dokumen, data, dan informasi Emiten atau Perusahaan Publik tentang
karyawan, dana, aset, dan sumber daya perusahaan yang diperlukan;
 b. berkomunikasi langsung dengan karyawan, termasuk Direksi dan pihak yang
menjalankan fungsi audit internal, manajemen risiko, dan Akuntan terkait tugas dan
tanggung jawab Komite Audit;
c. melibatkan pihak independen di luar anggota Komite Audit yang diperlukan untuk
membantu pelaksanaan tugasnya (jika diperlukan); dan
d. melakukan kewenangan lain yang diberikan oleh Dewan Komisaris.
● Komite Audit mengadakan rapat secara berkala paling sedikit 1 (satu) kali dalam 3 (tiga)
bulan.
● Komite Audit wajib membuat laporan kepada Dewan Komisaris atas setiap penugasan
yang diberikan.
● Komite Audit wajib membuat laporan tahunan pelaksanaan kegiatan Komite Audit yang
diungkapkan dalam Laporan Tahunan Emiten atau Perusahaan Publik.

POJK No. 34/POJK.04/2014 - Nomination and Remuneration Committee

Definisi
Komite Nominasi dan Remunerasi adalah komite yang dibentuk oleh dan bertanggung jawab
kepada Dewan Komisaris dalam membantu melaksanakan fungsi dan tugas Dewan
Komisaris terkait Nominasi dan Remunerasi terhadap anggota Direksi dan anggota Dewan
Komisaris.
Tugas dan Tanggung Jawab
● Komite Nominasi dan Remunerasi wajib bertindak independen dalam melaksanakan
tugasnya.
● Dalam melaksanakan tugasnya, Komite Nominasi dan Remunerasi bertanggung jawab
kepada Dewan Komisaris.
● Komite Nominasi dan Remunerasi mempunyai tugas dan tanggung jawab paling kurang:
a. terkait dengan fungsi nominasi:
1. memberikan rekomendasi kepada Dewan Komisaris mengenai:
(a) komposisi jabatan anggota Direksi dan/atau anggota Dewan Komisaris;
(b) kebijakan dan kriteria yang dibutuhkan dalam proses Nominasi; dan
(c) kebijakan evaluasi kinerja bagi anggota Direksi dan/atau anggota Dewan
Komisaris;
2. membantu Dewan Komisaris melakukan penilaian kinerja anggota Direksi
dan/atau anggota Dewan Komisaris berdasarkan tolok ukur yang telah disusun
sebagai bahan evaluasi;
3. memberikan rekomendasi kepada Dewan Komisaris mengenai program
pengembangan kemampuan anggota Direksi dan/atau anggota Dewan Komisaris;
dan
 4. memberikan usulan calon yang memenuhi syarat sebagai anggota Direksi
dan/atau anggota Dewan Komisaris kepada Dewan Komisaris untuk disampaikan
kepada RUPS.
b. terkait dengan fungsi remunerasi:
1. memberikan rekomendasi kepada Dewan Komisaris mengenai:
(a) struktur Remunerasi;
(b) kebijakan atas Remunerasi; dan
(c) besaran atas Remunerasi;
2. membantu Dewan Komisaris melakukan penilaian kinerja dengan kesesuaian
Remunerasi yang diterima masing-masing anggota Direksi dan/atau anggota
Dewan Komisaris.
● Dalam melaksanakan fungsi Nominasi, Komite Nominasi dan Remunerasi wajib
melakukan prosedur sebagai berikut:
a. menyusun komposisi dan proses Nominasi anggota Direksi dan/atau anggota Dewan
Komisaris;
b. menyusun kebijakan dan kriteria yang dibutuhkan dalam proses Nominasi calon
anggota Direksi dan/atau anggota Dewan Komisaris;
c. membantu pelaksanaan evaluasi atas kinerja anggota Direksi dan/atau anggota
Dewan Komisaris;
d. menyusun program pengembangan kemampuan anggota Direksi dan/atau anggota
Dewan Komisaris; dan
e. menelaah dan mengusulkan calon yang memenuhi syarat sebagai anggota Direksi
dan/atau anggota Dewan Komisaris kepada Dewan Komisaris untuk disampaikan
kepada RUPS.
● Dalam melaksanakan fungsi Remunerasi, Komite Nominasi dan Remunerasi wajib
melakukan prosedur sebagai berikut:
a. menyusun struktur Remunerasi bagi anggota Direksi dan/atau anggota Dewan
Komisaris;
b. menyusun kebijakan atas Remunerasi bagi anggota Direksi dan/atau anggota Dewan
Komisaris; dan
c. menyusun besaran atas Remunerasi bagi anggota Direksi dan/atau anggota Dewan
Komisaris.
● Komite Nominasi dan Remunerasi wajib menyusun pedoman yang bersifat mengikat bagi
setiap anggota Komite Nominasi dan Remunerasi.
● Komite Nominasi dan Remunerasi harus melaporkan pelaksanaan tugas, tanggung jawab,
dan prosedur Nominasi dan Remunerasi yang dijalankan kepada Dewan Komisaris.
● Setiap anggota Komite Nominasi dan Remunerasi dilarang mengambil keuntungan pribadi
baik secara langsung maupun tidak langsung dari kegiatan Emiten atau Perusahaan
Publik selain penghasilan yang sah.
4. OECD (2015), Ch. 6

THE RESPONSIBILITIES OF THE BOARD

The board is chiefly responsible for monitoring managerial performance and achieving an
adequate return for shareholders, while preventing conflicts of interest and balancing
competing demands on the corporation. In order for boards to effectively fulfil their
responsibilities they must be able to exercise objective and independent judgement. Another
important board responsibility is to oversee the risk management system and systems
designed to ensure that the corporation obeys applicable laws, including tax, competition,
labour, environmental, equal opportunity, health and safety laws.
The Principles recommend that institutional investors disclose their policies with
respect to corporate governance. Voting at shareholder meetings is, however, only one
channel for shareholder engagement. Direct contact and dialogue with the board and
management, represent other forms of shareholder engagement that are frequently used. In
recent years, some countries have begun to consider adoption of codes on shareholder
engagement (“stewardship codes”) that institutional investors are invited to sign up to on a
voluntary basis.
• Board members should act on a fully informed basis, in good faith, with due diligence and
care, and in the best interest of the company and the shareholders.
• Where board decisions may affect different shareholder groups differently, the board
should treat all shareholders fairly.
• The board should apply high ethical standards. It should take into account the interests of
stakeholders.
• The board should fulfil certain key functions, including:
a. Reviewing and guiding corporate strategy, major plans of action, risk management
policies and procedures, annual budgets and business plans; setting performance
objectives; monitoring implementation and corporate performance; and overseeing
major capital expenditures, acquisitions and divestitures.
b. Monitoring the effectiveness of the company’s governance practices and making
changes as needed. Includes continuous review of the internal structure of the
company to ensure that there are clear lines of accountability for management
throughout the organisation.
c. Selecting, compensating, monitoring and, when necessary, replacing key executives
and overseeing succession planning. In most two tier board systems the supervisory
board is also responsible for appointing the management board which will normally
comprise most of the key executives.
 d. Aligning key executive and board remuneration with the longer term interests of the
company and its shareholders. To develop and disclose a remuneration policy
statement covering board members and key executives. Such policy statements
specify the relationship between remuneration and performance, and include
measurable standards that emphasise the longer run interests of the company over
short term considerations. Good practice that remuneration policy and contracts for
board members and key executives be handled by a special committee of the board
comprising either wholly or a majority of independent directors and excluding
executives that serve on each other’s remuneration committees, which could lead to
conflicts of interest.
e. Ensuring a formal and transparent board nomination and election process. While
actual procedures for nomination may differ among countries, the board or a
nomination committee has a special responsibility to make sure that established
procedures are transparent and respected.
The board has a key role in defining the general or individual profile of board
members that the company may need at any given time, considering the appropriate
knowledge, competencies and expertise to complement the existing skills of the
board. Has the responsibility to identify potential candidates to meet desired profiles
and propose them to shareholders, and/or consider those candidates advanced by
shareholders with the right to make nominations. There are increasing calls for open
search processes extending to a broad range of people.
f. Monitoring and managing potential conflicts of interest of management, board
members and shareholders, including misuse of corporate assets and abuse in related
party transactions.
g. Ensuring the integrity of the corporation’s accounting and financial reporting systems,
including the independent audit, and that appropriate systems of control are in place,
in particular, systems for risk management, financial and operational control, and
compliance with the law and relevant standards.
h. Overseeing the process of disclosure and communications
• The board should be able to exercise objective independent judgement on corporate
affairs.
a. Boards should consider assigning a sufficient number of non-executive board
members capable of exercising independent judgement to tasks where there is a
potential for conflict of interest. Examples of such key responsibilities are ensuring the
integrity of financial and non-financial reporting, the review of related party
transactions, nomination of board members and key executives, and board
remuneration.
 b. Boards should consider setting up specialised committees to support the full board in
performing its functions, particularly in respect to audit, and, depending upon the
company’s size and risk profile, also in respect to risk management and remuneration.
When committees of the board are established, their mandate, composition and
working procedures should be well defined and disclosed by the board.
c. Board members should be able to commit themselves effectively to their
responsibilities.
d. Boards should regularly carry out evaluations to appraise their performance and
assess whether they possess the right mix of background and competences.
• In order to fulfil their responsibilities, board members should have access to accurate,
relevant and timely information.
• When employee representation on the board is mandated, mechanisms should be
developed to facilitate access to information and training for employee representatives, so
that this representation is exercised effectively and best contributes to the enhancement
of board skills, information and independence.
5. PwC (2011), Audit Committee Effectiveness: What Works Best, 4th, Executive
Summary, Chapters 7, 8, and 9

SELECTING COMMITTEE MEMBERS

Commite Composition
The first thing to consider in selecting members who have long been approved for the
company. The CEO has limited rights in choosing committee members. But determining the
former CEO or CFO on the committee is a good decision because they have pragmatic
considerations. Including members with a non-financial background is also important because
it will support the effectiveness of the point of view. The most important thing is to have
committed members.
The committee chair
New committee members must take the time to study the company in more detail and
understand the areas most at risk in reporting. Committee members must understand each
other's strengths and weaknesses.
Member's attribute
Independence and ability in the field of finance are needed by member committee, but the
following are also important: integrity, skepticism, independent judgment, courage to
challenge answers that don't appear right, knowledge about company risk and control, ability
to express perspective and suggestion .
Committee size
At least 3 members but can be more than that. The more members there are, the more
expectations and point of view there will be in facing problems.

MEETING
Member committee conducts meetings and discussions with management. Because there are
many complex responsibilities for the committee, meetings should be held within a certain time
frame.
Schedule, Frequency and Duration
Usually in the range in 1 or 2 years, the committee will determine the schedule of meetings,
either meet in person or by telephone and other communication media. Usually 3-5 in-person
meetings and 5-8 in-phone meetings are shorter in duration
Agenda & Briefing materials
There must be a written agenda that specifies what must be discussed. The goal is for the
committee to focus on what needs to be achieved. There must be briefing materials that are
made and completed and then sent before the meeting starts. The contents can be in the form
of trend analysis or graphics that more effectively explain the current situation.
Participant
Many parties can be present such as Internal / External auditor, CFO, Controller, corporate
secretary. But there will be sessions where meetings are only held by the committee, internal
audit directors, and external audits, to discuss issues that are more focused. The committee
here has an important role to ensure the meeting is carried out well even before the meeting
is held.
Dynamic & Reporting Meeting
It is important to pay attention to how the meeting is going. The meeting should not be too
script-oriented or overly-formal, ask questions and challenges, and dare to speak up. After the
meeting, the committee is responsible for providing reports to the board so that they also know
the problems, developments, and changes that occur.

SUPPORTING COMMITTEE EFFECTIVENESS

Charter
Charter assists with agenda meetings and provide checkpoints for committees, allowing them
to keep on track on activities. Its a good idea to review the charters periodically to ensure it
continues to be appropriate in changing rules.
Evaluations
Committee evaluations can be done by comparing their activities with charters, comparing
activities against leading practices, discussing performance among committee members,
individual member assessments are also needed
Resource
In carrying out its activities, the committee needs help from other resources to do
administrative or guide matters in shaping the agenda. For example, from corporate secretary
or finance division. Not infrequently the committee requires additional resources depending
on the situation, for example resources in the legal field to deal with changes in rules related
to the business environment.
Training & educations
Orientation for member committees, especially new members is something that can be done
so that new members know the risks, and know how the governance works. Ongoing
development is also important for pre-existing members to keep adjusting to changes.