Tony Silitonga
Indonesian Institute for Corporate Directorship (IICD)
Ten Boardroom Challenges
1. Board Mandate
2. Management Oversight – Selecting, Supervising, Evaluating,
Compensating, and Replacing Management
3. Corporate Strategy & Risk – Challenging management assumptions
about opportunities & Risks; consensus about strategic direction;
monitoring achievement or strategic goals
4. Disclosure – Overseeing audit processes, accounting policies and
disclosure requirements
5. Corporate Values – Establishing an appropriate “tone at the top”.
6. An Effective Governance System – Developing and implementing a
governance system that makes efficient and effective use of limited
resources.
7. Independent-Minded Board – Ensuring board objectivity.
8. Fiduciary Governance – Understanding and meeting the expectations of
shareholders and regulators.
9. Informing the Board – Identifying the board’s information needs and
ensuring the board has access to that information.
10. Responding to Crises – Responding quickly and responsibly to
corporate problems.
Tony Silitonga - 2006
Half of the Fortune 500 companies in 1987 are not Fortune
500 companies today. Many of these companies have
FAILED AND CLOSED THEIR DOORS FOREVER. Reasons
cited are numerous (“Failures of Vision”, “Identity Crisis”,
“Anybody Out There”, “The Glue Sticks, and Sticks”,
“Enemies Within”).
Escalating challenge of CEO survival (Within 2 years, 57%
of the largest 367 companies in USA REMOVED their CEOs )
There are CHANGES in nature of the business,
investment, and investors (3 most obvious ones:
Constituent Demands are Greater, Expectations are Higher,
Competition is Tougher)
To influence the Boardroom guidelines and
Best Practices that build on OECD Principles
Tony Silitonga - 2006
Operational
Excellence
NOT AVAILABLE / NOT CLEAR
Tony Silitonga - 2006
NEW ENTRANTS
SUPPLIER
RIVALRY
BUYER
SUBSTITUTE
SOCIAL
Tony Silitonga - 2006
Tony Silitonga - 2006
McKINSEY’S INTERNATIONAL INSTITUTIONAL INVESTORS’ SURVEY CONFIRMS
IMPORTANCE OF GOOD CORPORATE GOVERNANCE IN INDONESIA
•
“In evaluating Asian companies for potential investment,
how important is the quality of board practices relative to
financial issues?”
Source: McKinsey survey of 250 institutional investors with aggregate assets
under management of USD3.2 trillion
Tony Silitonga - 2006
High
Tobin’s Q
Low
Commitment/
1.00
Over
Performers
High
Commitment
36.07%
49.18%
Low
Commitment
High
Commitment/
13.11%
Under
Performers
Low
1.64%
Low
67.37
Corporate Governance Scorecard
High
Tobin’s Q: Lowest = 0.73; Highest = 7.25 CG Score: Lowest = 52.04; Highest = 82.83
Tony Silitonga - 2006
Tobin’s Q
High
1.00
Low
Low
67.37
High
Tony Silitonga - 2006
Tony Silitonga - 2006
TRUTHS about FRAUD
• Fraud is recognised as a significant threat facing
businesses, big or small, all over the world.
• Some frauds arise because of too much trust being placed
on one individual with no effective segregation of duties.
• Employees can commit fraud at any time and for
whatever reason.
ACRONYM FOR FRAUD :
F ALSE
R EALITIES
A PPEARING
U NDER
D ECEPTION
Tan Chen Leong CFE
IICD-Marcus Evans Forum for Directors
16-17 Jan. 2006 – Mulia Hotel, Jakarta
Tony Silitonga - 2006
FRAUD RISK ???
•
•
•
Losses from fraud are likely to be grossly
misleading because only a fraction of fraud is
reported. Statistically:
One out of every four persons will steal
whenever they can.
Two out of four persons will steal when they
think they can get away with it.
In total, 75% of all persons are potential
fraud perpetrators.
Tan Chen Leong CFE
IICD-Marcus Evans Forum for Directors
16-17 Jan. 2006 – Mulia Hotel, Jakarta
Tony Silitonga - 2006
To face the challenges ?
Board needs
the right people,
the right culture,
the right issues,
the right information,
the right process and
the right follow-through
Tony Silitonga - 2006
For
The Board to Consider !!!
Tony Silitonga - 2006
Ten Boardroom Challenges
1. An Effective Governance System – Developing and implementing a
2.
3.
4.
5.
governance system that makes efficient and effective use of limited
resources.
Board Mandate
Corporate Values – Establishing an appropriate “tone at the top”.
Corporate Strategy & Risk – Challenging management assumptions
about opportunities & Risks; consensus about strategic direction;
monitoring achievement or strategic goals
Disclosure – Overseeing audit processes, accounting policies and
disclosure requirements
6. Fiduciary Governance – Understanding and meeting the expectations of
shareholders and regulators.
7. mAnagement Oversight – Selecting, Supervising, Evaluating,
Compensating, and Replacing Management
8. Independent-Minded Board – Ensuring board objectivity.
9. Informing the Board – Identifying the board’s information needs and
ensuring the board has access to that information.
10. Responding to Crises – Responding quickly and responsibly to
corporate problems.
Tony Silitonga - 2006
Ten Boardroom Challenges
1. Implementation
2. Time Concern (2 X)?
3. Interdependent but Accountable
4. Advanced Training
5. Maximum Board Seat
6. Insurance
Tony Silitonga - 2006