1. IICD

2.  This study is aimed to provide evidence on corporate governance practices of all listed firms in the Jakarta Stock Exchange.  Using a unique method of research on the basis of publicly available information, such as company’s annual report, financial report, notice to call AGM, reports on results of AGM, corporate laws, regulations, etc.

3.  The instrument of the assessment was developed based on international standard practices promulgated by the Organization for Economic Development and Cooperation (OECD), consisting of five (5) principles:  Rights of shareholders  Equitable treatment of shareholders  Role of stakeholders  Disclosure and transparency  Responsibilities of the board

4.  The empirical results show that overall the level of disclosure on corporate governance practices among publicly-listed companies was relatively low, as reflected by the overall mean score of 61.26%

5. PrinciplesScore Rights of shareholders51,23 Equitable treatment of shareholders83,02 Role of stakeholders58,76 Disclosure and transparency66,64 Responsibilities of the board52,36 Overall61,26

6.  Corporate governance performance gap between top quartile and bottom quartile firms is quite high.  In terms of overall mean score, top quartile performance was 71.52 percent, while bottom quartile was only 52.71 percent.  The most challenging tasks facing companies, regulatory bodies, and other governance- related institutions are how to enhance the commitment of these bottom quartile companies as well as other companies to practice good corporate governance.

7.  The study further found that companies tend to comply to mandatory laws and regulations while they tend to not practicing voluntary good governance practices  Companies in sectors which are highly regulated, such as banks, have higher score than those in unregulated sectors  In addition, State Owned Enterprises tend to have higher scores than other firms

8. CategoryScore SOEs74,63 Banking70,70 Overall61,26

9.  When comparing corporate governance score between the two consecutive studies (2005 and 2004), the mean score slightly decreased in all categories of firms.  Two major factors contribute to the decrease, which are:  The second study involved all listed companies while the first study only involved firms that are/have been included in the LQ-45 Index. Firms in the LQ-45 Index have higher score than other companies.  The second study employed more stringent instrument than the first study.

10. CategoryScore (2005) Score (2004) SOEs74,6376,38 Banking70,7074,91 Overall61,2667,29

11.  When comparing the two studies by the same subject companies (60 companies for overall, 12 companies for SOEs, and 9 companies for banks) the improvement of performance did exist

12. YearOverallBanksSOEs 200569,5078,0076,51 200467,2974,9176,38

13.  Finally, empirical evidence shows that corporate governance practice is significantly and positively correlated to company’s economic performance, although the correlation is relatively weak.