Edited by Barry Rider
Chapter 14: Good corporate governance and corporate social responsibility in Indonesian banking institutions: a pathway to preventing financial crime
The significant growth of Indonesian financial institutions, both in banking and non-banking establishments, requires effective supervision and monitoring from the Indonesian government, as an external controlling body, in order to prevent financial crime. However, given the amount of corporate crime in Indonesia, it appears this body has shortfalls. Indonesia is one of the Asian Pacific’s most vibrant democracies, which has maintained political stability and emerged as a confident middle-income country. It had a population of 249.9 million people, GDP US$ 868.3 billion and GDP growth of 5.8 per cent in 2013. Based on the Indonesia Financial Services Authority report of May 2014, 120 commercial banks and 1,635 rural banks in Indonesia handled total assets of IDR 5,008,095 billion and IDR 79,159 billion respectively. With such a wealth of public funds involved, it is clear why supervision and monitoring plays an important part in creating good financial institutions. As a result of illegal activities and financial crimes within corporations, internal controls should be encouraged through Good Corporate Governance. Good Corporate Governance and Corporate Social Responsibility should be developed to build business ethics inside corporations. The Coordinating Minister for Economic Affairs of the Republic of Indonesia in 2006 stated that Good Corporate Governance is an important pillar of a market economy as it relates to the investors’ confidence both in the companies and in the overall business environment. Implementation of Good Corporate Governance encourages fair competition and a good business climate, leading to sustainable economic growth and stability.
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