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What is Good Corporate Governance, Benefits and Principles

Mengenal apa itu good corporate governance (GCG)

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In a company, there is a concept that is held to maximize performance and also increase the value and quality of the company. The principle applied by the company is called Good Corporate Governance or abbreviated as GCG.

This concept becomes a code of ethics and principles that must be emphasized in a company. Good Corporate Governance is a principle in a company that is applied to maximize the performance and value of a company.

It can also be interpreted as a company's efforts to create a good relationship pattern between (stakeholders) within the company. This is because, every company has members stakeholder-each of them.

In this article, we will explain further regarding the meaning, examples of implementation, and also the indicators needed for Good Corporate Governance.

Definition of Good Corporate Governance

Good Corporate Governance is a framework principle that regulates the relationship between various interested parties in a company. Shareholders or stakeholder, board of directors, management, employees, creditors and the community are part of these parties.

Good Corporate Governance A good one places transparency, accountability and responsibility of each member of the company in managing the company. Building stakeholder trust helps increase company value in the long term.

Benefit of Good Corporate Governance

Implementation of Good Corporate Governance menjadi semakin penting dalam era globalisasi dan semakin banyak perusahaan yang menerapkan prinsip ini sebagai bagian dari strategi bisnis mereka.

Good Corporate Governance will provide many benefits for a company, as well as for stakeholders in that company. The following are the benefits a company gets from implementing it GCG.

1. Improve Company Performance 

GCG helps companies make better decisions, improve efficiency and effectiveness, and increase profitability. So that policy makers and company directors will be more responsive in deciding on company policies and be more targeted.

2. Increase Access to Capital 

GCG making companies more attractive to investors and increasing access to capital. Stakeholders will generally look for companies that have financial recording good and stable capital. Companies with stable capital have better resilience and the ability to determine their future direction over a longer period of time.

This is what makes companies obliged to implement the principles GCG into managing the company's capital and budget so that investors are increasingly interested in investing in the company.

3. Improve Company Reputation

GCG build a positive company image and improve the company's reputation. A company with an implementation concept Good Corporate Governance well will have brand awareness which is better than companies that have not implemented the principles GCG well.

This will improve the company's reputation for both investors and clients or consumers. This reputation increase can potentially be an opportunity for companies to expand their business.

4. Improving Company Sustainability 

GCG helps companies manage risks and improve long-term corporate sustainability. Managers will generally make decisions related to risk management based on principle of Good Corporate Governance.

This is done so that the company does not take the wrong steps either in making decisions to anticipate risks, or in taking risks that must be faced.

Therefore, a company must understand the principles of Good Corporate Governance which must be mastered. 

Principle of Good Corporate Governance

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Get to know the various principles of good corporate governance. (© Pexels)

Good Corporate Governance (GCG) or Good Corporate Governance is based on five main principles consisting of:

1. Transparansi (Transparency)

Openness in conveying material information is very important for a company to stakeholders. This is related to information delivered accurately by the company, on time, and easily understood by clients and other interested parties.

This transparency will later become a provision and indicator for companies to improve their reputation based on the trust of clients and stakeholders.

Examples include the publication of financial reports and internal audit, disclosure of information related to changes in ownership and company structure, and announcements of important decisions such as employee holidays and so on.

2. Akuntabilitas (Accountability)

Accountability for all actions and decisions taken by the company must be carried out carefully through an efficient process. The board of directors and management are responsible to shareholders or stakeholders for all decisions taken.

Companies that adopt careful and appropriate policies will attract more investors.

Examples like performance evaluation board of directors and management, internal audit, and reporting systems whistleblowing.

3. Tanggung Jawab (Responsibility)

Awareness and compliance with applicable laws and regulations. Companies are responsible for their social and environmental impacts. A company that complies with legal regulations, social norms and upholds the rights of local residents will have stronger resilience than other companies.

Examples include implementing a code of ethics, compliance with labor standards, and good environmental management such as creating a work atmosphere that meets standards and is humane, or implementing rational and accountable working hours and overtime.

4. Kemandirian (Independency)

It is the company's freedom from influence or pressure from any party in making a decision. The decisions taken are the responsibility of the board of commissioners and the teams under their auspices.

The board of commissioners and its committees must be independent from management and not take sides with any stakeholders or personal interests. Companies trying to make it happen Good Corporate Governance will filter any important information before submitting it to the board of commissioners.

Companies with good independence will gain a high reputation among investors and clients.

Examples can be found in the formation of independent committees such as the audit committee, nomination and remuneration committees as well as several committees which are generally used as investigators and focus on safeguarding company assets and materials.

This means that these committees move freely without restraint or pressure from any party in a company.

5. Kewajaran (Fairness)

Fair and equal treatment to all stakeholders, employees and clients. The aim is that no party is disadvantaged in making company decisions and actions and everyone can accept and implement these decisions well.

This principle is the most important principle in the company because this principle will shape the company's work environment which reflects the "face of the company". A good company work environment will make the company get a healthy company label.

Implementation of GCG Good ones build stakeholders' trust in the company, thereby increasing the company's value in the long term. The five principles GCG These are interrelated and must be implemented together to achieve good corporate governance.

So it will benefit both the company itself and all stakeholders in the company.

Principle of Good Corporate Governance bukan hanya untuk perusahaan besar, tetapi juga penting untuk  perusahaan kecil dan menengah seperti UMKM. Salah satu implementasi Good Corporate Governance is a system auditing well.

Audithink's Comprehensive Features offers applications to assist the audit process for your company's internal team. Which is useful for realizing implementation Good Corporate Governance in your company. Contact us for services related to your company's internal audit.

If you're interested in our offerings, start by getting in touch contact for further discussion with the relevant technical team.