gcg overview

Corporate Governance

Good Corporate Governance (GCG) is a company management system that reflects the synergistic relationship between management and shareholders, creditors, governments, suppliers and other stakeholders. The implementation of GCG in a Company is significant to ensure the Company’s sustainability and support the development of a healthy business environment and adding value to all stakeholders. By applying GCG principles, a Company can survive and remains tough in overcoming intense business competition. GCG is expected to be a better means to achieve Vision, Mission and Corporate Objectives.

GCG Principles, which consist of Transparency, Accountability, Responsibility, Independence and Justice must be implemented thoroughly and consistently and become the soul and spirit of every Insan Pupuk Kaltim. As a result, GCG will provide protection for stakeholders and ultimately GCG will help create a conducive environment for sustainable business growth.

Implementation of Good Corporate Governance

The implementation of Good Corporate Governance (GCG) is a form of Pupuk Kaltim’s compliance to the circular letter of PT Pupuk Indonesia (Persero) as a shareholder of Pupuk Kaltim based on SE-08/XI/2012 on November 27, 2012, regarding the Implementation of Good Corporate Governance for the subsidiaries of PT Pupuk Indonesia (Persero).

The implementation of Good Corporate Governance in Pupuk Kaltim aims to:

1. Optimize the corporate values, in order to make the Company be highly competitive, both nationally and internationally, so as to maintain the Company’s existence and its sustainability to achieve its aims and objectives.
2. Encourage the management of the Company in a professional, efficient, and effective manner and empower the functions and increase the independence of the Company’s Organ.
3. Encourage the Company’s organ to be able to make decisions and execute actions based on high moral values and compliance with laws and regulations, and aware of the social responsibility of the Company toward the Stakeholders and the sustainability of the surrounding environment.
4. Increase Company's contribution in the national economy.
5. Improve conducive environment for the development of national investment.

Good Corporate Governance Commitment

Pupuk Kaltim is committed to implement GCG by issuing Directors' Decree No. 13/DIR/III.2012 regarding  the improvement of Pupuk Kaltim’s structure of organization by forming Compliance and Risk Management Department as the work unit to manage GCG, with regard to the Compliance and Risk Management.

Based on the direction of the Shareholders according to letter No. U-1283/A00000.UM/2014 dated September 5, 2014 on the Standardization Policy of Corporate Governance and Risk Management Work Unit, on December 8, 2014 stipulated Decree No. BOD. 50/DIR/X.2014 valid from October 1, 2014 on the Improvement of Directors' Decision Letter concerning the Organizational Structure of PT Pupuk Kalimantan Timur, the Compliance and Risk Management Department changed its name into Department of Corporate Governance and Risk Management.

In the implementation of GCG, Pupuk Kaltim issued Board of Director’s Decree (SKD) No. 40/DIR/VII.2013 dated July 8, 2013 regarding the implementation of GCG in Pupuk Kaltim, which is an improvement of the SKD No. 4/DIR/II. 2010 regarding the Improvement of Code of Conduct of PT Pupuk Kalimantan Timur, which include:

• Establish and enforce "Code of Good Corporate Governance of PT Pupuk Kalimantan Timur", as set out in Attachment I to this Board of Directors Decree, as the main reference for the implementation of Good Corporate Governance at PT Pupuk Kalimantan Timur. This Decree is further called "GCG PKT Guidelines",
• Establish and enforce "Manual of Board of Commissioners and Board of Directors (Board Manual) of PT Pupuk Kalimantan Timur", as stated in Attachment II, as the main reference and govern the relationship between the Board of Commissioners and the Board of Directors in PT Pupuk Kalimantan Timur.

The implemented GCG practices are:

• All important transactions that require Shareholders approval are executed in compliance to the regulation. Shareholders have directed the Board of Directors to make various breakthroughs in responding to market conditions.
• The Board of Commissioners has a Board Manual that regulates functions, tasks and responsibilities
• The Board of Directors has made changes to the organizational structure, anticipating business and strategy development, implementing risk management, conducting risk self-assessment and improving the quality management capability
• The Corporate Secretary delivers the information to stakeholders periodically, clearly and accurately, through print and electronic media.
• The Company has established a GCG Self-Assessment Team and conducts assessments based on parameters drawn up by BPKP.

Code of conduct

The company’s Code of Conduct delineates the principles that will serve as guidance for PT Pupuk Kalimantan Timur (Pupuk Kaltim) as a company and the entire member of the Board of Commissioners, the Board of Directors and all employees or Insan Pupuk Kaltim to perform its duties, responsibilities and their respective authorities.

The implementation of Company Code of Ethics in Pupuk Kaltim is stated in the Decree of the Board of Directors of PT Pupuk Kaltim Number: 79 / DIR / XII.2016 dated December 30, 2016.

Determination and enforcement of documents as contained in the Attachment to this Decree of the Board of Directors, hereinafter referred as PT Pupuk Kalimantan Timur Code of Conduct, or Corporate Code of Conduct in short, is the main reference for the application of Code of Conduct in PT Pupuk Kalimantan Timur.

The objectives for the development of Corporate Code of Conduct are:

1. To develop good behavior in accordance with high ethical standards for the corporation, commissioners, directors and employees; and
2. To develop good relationships with external parties based on the principles of good corporate governance and the spirit of the company’s Code of Conduct

Furthermore, by applying the Corporate Code of Conduct Pupuk Kaltim is assured to obtain the long term benefits, such as:

1. Employees enjoy an honest, ethical and open working environment thereby enhancing the productivity and overall wellbeing of employees.
2. The company will own a good reputation, protection of lawsuits, if any, being prosper, gain success and have a sustainable business.
3. The public will generally enjoy a good relationship with the Company and is expected to improve the social and economic welfare of the community.

Pupuk Kaltim is committed to continually uphold the values stated in the Company Code of Conduct and Integrity Pact. In its implementation, the company also invites the participation of all communities and businesses to monitor the implementation of Company Code of Conduct and Integrity Pact.

Company Code of Conduct as a Corporate Guideline

Kode Etik Perusahaan Sebagai Pedoman Individu

Gratification

Gratification is the activity and or acceptance of Gifts/Souvenirs and Entertainment, whether received domestically or abroad, executed through electronic means or without electronic means, and conducted by Insan Pupuk Kaltim related to his/her position in Pupuk Kaltim, thus may cause a conflict of interest that affects the independence, objectivity, and professionalism of Insan Pupuk Kaltim.

To actualize a trustful, transparent and accountable business management in Pupuk Kaltim, Pupuk Kaltim implements a firm attitude towards gratification control involving Insan Pupuk Kaltim, although throughout its business activities, gratification is something that may be difficult to avoid by Insan Pupuk Kaltim. This attitude is imperative to be cultivated in Pupuk Kaltim environment to allow Insan Pupuk Kaltim to consistently maintain their dignity during business relationship with Stakeholders.

A Gratification Control Guideline was developed in line with Pupuk Kaltim Management Manual, the Code of Conduct and values applicable to Pupuk Kaltim. The guidelines are structured as a gratification control between Insan Pupuk Kaltim with third parties during their business activities. The monitored activities include acceptance, gratification giving and request as well as management unit and reporting mechanism. Gratification control is very important for the company because it can cause a conflict of interest that may affect the independence, objectivity and professionalism of Insan Pupuk Kaltim, which may lead to criminal bribery and prompt legal consequences that potentially harm the company image.

Guidelines for Gratification Control of PT Pupuk Kaltim is stated in Directors Decree Number: 55/ DIR/X.2015. Guidelines for Gratification Control of PT Pupuk Kaltim is the main reference for the implementation of Gratification Control in PT Pupuk Kaltim. The Decree list the followings:

1. Guidelines for Gratification Control of PT Pupuk Kaltim
2. Structure and Authorized Duties of Gratification Control Unit (UPG) of PT Pupuk Kaltim
3. Gratification Control Report Form of PT Pupuk Kaltim.

This Gratification Control Guidelines apply to Insan Pupuk Kaltim, which include Board of Commissioners, Board of Directors, and Employees of PT Pupuk Kaltim. The aims and objectives of the Company's Gratification Control Guidelines include:

1. Improve the understanding and compliance of all Insan Pupuk Kaltim to the provisions of gratification
2. Establish a conscious and understandable Company environment in handling/controlling all forms of gratification
3. As a Guideline for Insan Pupuk Kaltim to understand, prevent and overcome Gratification in the Company
4. As a Guideline for Insan Pupuk Kaltim in taking a firm stance on Gratification in the Company to realize a good company management
5. To actualize a Company management that is free of all forms of Corruption, Collusion and Nepotism (KKN)
6. To create a transparent and accountable environment which support the GCG within the Company.

Basic Principle of Gratification Control in Pupuk Kaltim

1. Giving Away Gift/Souvenir and Entertainment
   Insan Pupuk Kaltim is PROHIBITED either directly or indirectly to give Gifts/Souvenirs and or Entertainment to any party who has business relationship with or competitors of Pupuk Kaltim in the aim of obtaining information, or something that is not justified by applicable legislation, or to influence the targeted party to do and/or not to do anything relating to his/her position.
2. Accepting Gift/Souvenir and Entertainment
   Insan Pupuk Kaltim who due to his position and/or family members (nuclear family), is PROHIBITED to accept or request either directly or indirectly Gift/Souvenir and or Entertainment from any party who has business relationship with or competitor of Pupuk Kaltim in the aim of obtaining information, or something that is not justified by the applicable legislation, or to influence the party concerned to do and/or not to do anything relating to his/her position.

If Insan Pupuk Kaltim was offered/awarded a Gift/Souvenir and or Entertainment which is not in complieance to the provisions set out in this Manual, he/she is obliged to DO REJECTIFICIAL DIFFERENCE to the offer/gift, by explaining these policies and rules to the Third Party.

Protection of Reporting Entity

1. The complainant of Gratification shall be entitled to obtain safeguards from the Company in the form of:
   
   • Protection from non-objective and detrimental or offensive personnel actions toward the Reporting Entity such as (but not limited to) downgrading of the rank of position, decrease of appraisal, proposals for assignment/mutation or other career barriers;
   • Mutation/ transfer to the Reporting Entity in the event of intimidation or physical threat to the complainant;
   • Legal assistance in accordance with applicable provisions in the Company.
2. The safeguard measures referred to the number 1 (one) above are applied in the case of:
   
   • Intimidation, threats, discredit or other unusual treatment from both internal and external parties;
   • The Reporting Entity submits a written application to the Board of Directors through UPG.

Sanctions for Violations

Violation of the provisions written in the Gratification Control Guidelines will be subject to applicable criminal sanctions in the company and applicable legislation.

INTEGRITy pact

Pupuk Kaltim also thrives to create a national business world that is clean, transparent and professional.

Currently, the Board of Commissioners, Board of Directors and employees of Pupuk Kaltim have signed the Integrity Pact Charter upon the Code of Conduct.

Integrity Pact Charter of Board of Commissioners, Board of Directors and Employees contains of these statements:

1. Use all the potential that I have to help accelerate the realization of a clean, transparent and professional corporate governance in order to participate in improving the future of the nation.
2. Earnestly implement the Integrity Pact of PT Pupuk Kalimantan Timur that includes Good Corporate Governance (GCG), Code of Conduct/Code of Ethics and the principles of healthy business practice and the implementation of proportional reward and punishment system.
3. Uphold the Basic Principles of Corporate Integrity that are honest, trustworthy, avoid conflicts of interest, and do not tolerate bribery.
4. Invites all officials and employees of PT Pupuk Kalimantan Timur to sign the Integrity Pact charter and implement them consistently and responsibly.
5. Have fully understood the company’s Code of Conduct and is willing to apply whole-heartedly.
6. As a commitment to uphold the integrity and PT Pupuk Kalimantan Timur’s Code of Conduct, I am willing to accept sanctions and be processed according to the applicable law if I am proven guilty of doing dishonest acts, conflict of interest, act of stealing, corruption and accepting bribes.
7. Inviting business actors related either directly or indirectly with PT Pupuk Kalimantan Timur to sign the Integrity Pact in order to build the islands of Integrity in the business world.

Violation upon the Integrity Pact has consequences in accordance with applicable regulations.

risk manaGement

The company continually strives to provide the greatest benefit shareholders and stakeholders. However, in its business practice, the uncertainty that comes from internal and external factors may affect the achievement of company’s goal. The uncertainty factors are greater due to faster and more complex business climate. The uncertainty factors are unavoidable business risk, yet should be managed through a mechanism namely “risk management’.

A company that can manage its risk well is considered to have sensitive ability to detect risk, has the flexibility to respond risk and ensure its resource capacity to perform action in minimizing risks, whereas those that are unable to well-manage their risks will waste their resources and time, thus lead to unattainable company’s goal.

As one of the pillars of GCG implementation, risk management plays an important role in providing reasonable and useful confidence for the continuity and improvement of the Company's business amid the uncertainty of the business environment.

Implementation of risk management in all business activities undertaken by the Company is always based on the risk that is controlled optimally, so it is expected not to cause impairment to the company. In some cases, efforts are made to exploit risks into opportunities that can increase corporate profits. Pupuk Kaltim has a risk management guideline which serves as a guidance for Pupuk Kaltim to implement risk management and is expected to provide an understanding for all employees regarding the substance of the Risk Management Policy set by the Board of Directors as a reference for the implementation of risk management for all work units. In implementing risk management, one must pay attention to risk characteristics and the way to manage them.

Pupuk Kaltim Risk Management System


 
Basic Implementation of Risk Management in Pupuk Kaltim:

1. Decision of the General Meeting of Shareholders (hereinafter referred to RUPS) of Pupuk Kaltim dated June 5, 2012, to apply Good Corporate Governance Practices referring to the Decree of the Minister of State-Owned Enterprises Number PER-01/MBU/2011 on the Implementation of Good Corporate Governance Practices on SOEs and to apply Risk Management using ISO 31000: 2011 SNI Framework (hereinafter referred to as ISO 31000).
2. Regulation of the Minister of State-Owned Enterprises Number: PER-01/MBU/2011 on Practice of Good Corporate Governance Implementation on State-Owned Enterprises in Article 25:
   
   • in every decision/action making, the Board of Directors must consider business risk;
   • the Board of Directors must build and execute integrated corporation management risk program, which is a part of the Good Corporate Governance program implementation;
   • the implementation of risk management program is conducted by:
     
     1. Establishing a separate working unit under the Board of Directors
     2. Assigning an existing and relevant work unit to carry out the risk management function
     3. The Board of Directors shall submit a risk management profile report and handling it in the same time with the company's periodical report.
3. Decree of the President Director of PT Pupuk Kalimantan Timur No. 40/DIR/VII/2013 dated July 08, 2013 on the Implementation Policy of Good Corporate Governance throughout the company.
4. Circular Letter Number SE-03/II/2013 dated February 4, 2013 on Risk Management Policy and Guidelines of PT Pupuk Indonesia (Persero) and Subsidiaries.

Risk Management Work Unit

The Risk Management Working Unit experienced a fairly dynamic organizational change. Since its establishment, Pupuk Kaltim Risk Management was managed by the Department of Risk Management and Compliance led by the Head of Department under the Director of Finance. On July 7, 2011 there was a change of organizational structure in PT Pupuk Kaltim according to Board of Director’s Decree (SKD) No. 44/DIR/VI.2011, the Risk Management and Compliance Department was changed to the Risk Management Department and led by Manager under GM Financial Administration.

The need for risk management in Indonesia is increasing that the Government issued a Regulation of State Minister of State-Owned Enterprises No. 01/MBU/2011 to regulate the integration between Good Corporate Governance, Risk Management and Internal Control. In order to comply with the regulation, the infrastructure of Risk Management unit was improved.. On March 28, 2012 in accordance with SKD No.13/DIR/III.2012 the Risk Management Department was changed into the Compliance and Risk Management Department headed by a Manager in the Main Directorate under the Corporate Secretary.

Based on the direction of the Shareholders as stated in the letter No. U-1283/A00000.UM/2014 dated September 5, 2014 on the Working Standardization Policy of Corporate Governance and Risk Management, on December 8, 2014 a Board of Directors Decree is stipulated. SKD No. 50/DIR/X.2014 that was valid from October 1, 2014 regulates about the improvement of Directors' Decision Letter concerning with the Organizational Structure of PT Pupuk Kalimantan Timur, the Compliance and Risk Management Department was changed into the Department of Corporate Governance and Risk Management to date.

whistleblowing system

Whistleblowing System is an application provided by Pupuk Kaltim for those who have information and want to report an act of indication of violation that occurred in Pupuk Kaltim.

Why should there be a Whistleblowing System?

PT Pupuk Kalimantan Timur continuously strives to maximize the value of the company by applying the principles of Good Corporate Governance (GCG) namely transparency, accountability, accountability, independence and fairness. Utilizing this method, the company is expected to have a strong competitiveness, both nationally and internationally.

The Circular Letter of PT Pupuk Indonesia (Persero) as the Shareholder of PT Pupuk Kalimantan Timur has ratified the Regulation of the Minister of State-Owned Enterprises No. PER-01/MBU/2011 on the implementation of Good Corporate Governance to further strengthen the function of handling this violation as mechanisms required to respond to and manage the Company's risks.

In GCG implementation, whistleblowing is one of the internal control elements at the entity level that should be designed and implemented by the Company's established unit to:

1. Identify, detect and resolve the possibility of corruption (fraud) and violation of applicable regulations that may harm the Company;
2. Provide formal channels especially for employees of PT Pupuk Kaltim and third parties i.e. communities, vendors, customers and other stakeholders within the PT Pupuk Kalimantan Timur to address the problem/complaint.

Through the policy of handling and reporting violations is expected PT Pupuk Kalimantan Timur can grow the following important things:

1. Directors are getting better at performing their duties, functions and responsibilities in their respective fields;
2. Directors may undertake various concrete actions in order to follow up the supervision of the employees and stakeholders in a comprehensive, coordinated, integrated and synergic manner and respect each other's rights, authority and authority under applicable laws and regulations

LHKPN

Background of LHKPN Implementation in PT Pupuk Kaltim

In supporting the Company's programs and policies to create a clean country of Corruption, Collusion and Nepotism and improve compliance reporting of wealth and gratuities, the BUMN Board of Directors is instructed to establish the structural and functional officers under it that are required to complete the State Licensing Report (LHKPN). In accordance with Circular Letter of PT Pupuk Indonesia (Persero) Number: SE-08/X/2015 dated October 7, 2015 regarding Obligation of Submission of State Administration's Liabilities Report (LHKPN) for all Subsidiaries of PT Pupuk Indonesia (Persero) submit State Asset Management Wealth Report LHKPN) for Officials at PT Pupuk Indonesia (Persero) and Subsidiaries. Based on the above matter, the Board of Directors of PT Pupuk Kalimantan Timur stipulates Decree of the Board of Directors Number 32/DIR/VII.2014 concerning the Submission of State Administration Official Report (LHKPN) for Officials in PT Pupuk Kalimantan Timur and Subsidiaries.

Officials at PT Pupuk Kalimantan Timur who are obliged to report LHKPN

1. Board of Commissioner of PT Pupuk Kalimantan Timur
2. Board of Directors - PT Pupuk Kalimantan Timur
3. Board of Commissioners of Subsidiaries
4. Board of Directors of Subsidiaries
5. Official Grade I / GM / Structural / Functional / equivalent PT Pupuk Kalimantan Timur
6. Grade I / GM Official / Subsidiary equivalent
7. Grade II Official / Manager / Subsidiary equivalent
8. Grade II Official / Structure / Functional Manager / equivalent PT Pupuk Kalimantan Timur

Obligations of State Organizer Related to LHKPN

Based on the above provisions, the State Organizer is obliged to:

1. Creating and/or updating the State Asset Management Report and Delivering directly to the Corruption Eradication Commission (KPK) shall be coordinated by the LHKPN manager appointed by the Company no later than 2 (two) months after:
   
   • Occupy the position for the first time;
   • Experiencing a promotion or mutation
   • Has occupied a position of 2 (two) years.
2. For officers entering the retirement age shall be required to submit LHKPN no later than 2 (two) months prior to the duty-free period
3. Announce LHKPN which has been validated by KPK in media/means of announcement in each Company for at least 1 (one) month

Negligence in Fulfilling LHKPN Liability

For the Reporting Author as meant in the second Dictum who neglected in presenting the LHKPN report, the company shall give the following sanctions:

1. The first step, oral reprimand
2. Second step, Written Reprimand;
3. Third step:
   
   • Pending the bonus payments or the like for active officials;
   • Deferred payment of Old Age Benefit (SHT) or equivalent for a retired official;
   • The delay of definitive appointment for officers receiving promotions;

The pending rights will be granted if the obligation to submit LHKPN has been implemented in accordance with the provisions of this Decree.

conflict of interest

Conflict of Interest is a situation or condition faced by Company’s employee due to his/her position that comes with authority which potentially can be misused, intentionally or unintentionally, for other purposes, thus may affect the quality of his/her decision and violate the Company’s trust.

Conflict of Interest Situations

1. Situation that causes the use of Company assets, titles or names for personal or group interests;
2. Situation that allows Insan Pupuk Kaltim or certain parties to have special access not to follow the procedures and regulations that should be applied;
3. Situation that causes the supervisory process to not comply with the procedure due to the influence and expectation of the supervised party;
4. Situation that causes confidential information within the office or Company utilized for personal or group interests;
5. Situation in which Insan Pupuk Kaltim has concurrent position in some companies and/or organizations that have direct relation or utilization of a position for personal interest or other related class of positions;
6. Situations which cause Insan Pupuk Kaltim to receive gratification aimed at influencing policies, decisions, or treatment of the authorities, thus influence the process of receiving, promoting, or mutating officials/employees; obtain information, or something that is not justified by the applicable legislation, or to influence the party concerned to do and/or not to do anything relating to his/her position.
7. Situation in which Insan Pupuk Kaltim has affiliation/familial relationship with other party having interest on decision of Insan Pupuk Kaltim and/or action related to his position in the Company;
8. Situation in which Insan Pupuk Kaltim having blood relation or marital relationship with members of the Board of Directors and/or Board of Commissioners of the Company;
9. Situation in which Insan Pupuk Kaltim owns shares, either directly or indirectly along with his family, either jointly or individually, in another company which transact with the Company;
10. Situations which allow Insan Pupuk Kaltim to provide more information than the Company has specified, thus give privileges or opportunities for prospective providers of Goods/Services to win in the Procurement of Goods/Services in the Company;
11. Situation in which Insan Pupuk Kaltim has other occupation aside his/her main job, unless they are in compliance with prevailing rules and regulations in the Company;
12. Situation in which a person can determine his/her own salary/remuneration;
13. Situation which allows a person to use his/her influence during post-employment;
14. Situation which allows a person to have direct or indirect involvement in the management of competitor companies and/or partner companies or other potential partners.

The Causes of Conflict of Interest

1. Misuse of authority, i.e. by making decisions or actions that are not in accordance with the objectives or exceeding the limits of authorization granted by the Company's provisions and the laws and regulations;
2. Concurrent of position, in which Insan Pupuk Kaltim holds other position that creates a Conflict of Interest with his/her main duties and responsibilities to the Company, and   distract him/her from performing his/her duties in a professional, independent and accountable manner;
3. Gratification, which means giving/receiving in a broad sense, which includes giving/receiving money, goods, discounts, commissions, interest-free loans, travel tickets, lodging facilities, travel, free treatment, and other facilities. The gratifications include those that are received either domestically or abroad and carried out using electronic means or without electronic means, that were performed by Insan Pupuk Kaltim in relation to the authority/position in the Company, which may create Conflict of Interest affecting the independence, objectivity or professionalism of Insan Pupuk Kaltim;
4. Affiliate relationship is the type of relationship that Insan Pupuk Kaltim has with other parties related to the Company's business activities, whether due to blood relations, marital relationships or friendship relationships that may affect his/her decision;
5. Vested interest is the desires/needs of Insan Pupuk Kaltim concerning with personal matters.