Analysis of Indonesian Court Decisions on Director’s Duty in State-Owned Enterprises: An Agency Problem Perspective

Abstract

This paper discusses the Indonesian court decisions on four cases that involve state-owned enterprises and its subsidiary’s director: PT Merpati Nusantara Indonesia, PT Pertamina (Persero), PT Pelabuhan Indonesia II (Persero) and PT ASDP Indonesia Ferry (Persero). The director in these companies was charged with corruption following business decision that they made. This paper proposes to re-analyze these cases from agency problem perspective which suggests that in an entity where ownership and management are separated, conflict of interest is common and that owner shall spend some costs to align his and his manager’s interest. Using juridical normative method, this paper discusses the similarities and inconsistencies of these cases and finally analyze them from agency problem perspective. From the perspective of agency problem, there were different interests shown by the government as shareholder and the director – the government focused on avoiding state loss while the director pursued the company’s best interest at the time. Despite already prescribing incentives and monitoring mechanisms under the law, policy-maker and law enforcement shall acknowledge these conflict of interests as input to better the corporate governance procedure and enforcement of director’s duty.