Implementing Good Corporate Governance Principles by Village Owned Enterprises: A Case Study From North Sumatera
Detania Sukarja, Mahmul Siregar, Tri Murti Lubis
Universitas Sumatera Utara
Abstract
All business entities receiving capital from the public budget must apply Good Corporate Governance ("GCG") principles which include transparency, accountability, responsibility, independency and fairness. However, unlike the regulations relating to State-Owned Enterprises (“BUMN”) and Regionally-Owned Enterprises (“BUMD”) which explicitly regulate the obligation of the companies to implement GCG principles, the regulation on Village-Owned Enterprises (“BUM Desa”) does not specify and regulate this explicitly. BUM Desa and similar business entities need to be managed in accordance with these principles in order to reach their maximum potential and be publicly accountable. Sound and professional management of BUM Desa is particularly important because it relates to the Indonesian Government-s Village Fund program. The program aims to improve the welfare of villages, overcome development gaps between villages and strengthen rural communities as the subject of development. This paper aims to showcase the result of a research conducted covering 10 BUM Desas spread across 6 regencies in North Sumatera. The research seeks to assess the comprehension of BUM Desa managers relating the concept of GCG and document to what extent they apply the principles in the management of their business entities in conjunction with the regulations. The results showed that managers understood the urgency of managing business entities correctly in accordance with statutory regulations, but almost all of them did not understand GCG as a concept. On this basis the research emphasizes the importance of strengthening the regulatory frameworks for BUM Desa to explicitly reference application of GCG principles.
Keywords: BUM Desa; Village-Owned Enterprises; Good Corporate Governance
Topic: Trade and Business