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There are various factors to ensure the the Company's sustainability and one of them is corporate governance which is performed based on transparency, responsibility, accountability, equality, justice and compliance with the best standards. The good corporate governance is carried out with reference to the Company's Business Ethics and is designed in line with the Business and Work Ethics Guidelines applied to all companies within the Astra Agro Lestari Group.
GOVERNANCE As a company that operates in Indonesia, we abide by Law No 40 of 2007 on Limited Liability Company. According to the law, the company's organs consist of: [4.1]
1. General Meeting of Shareholders (AGM), the highest organ in the Company.
2. Board of Commissioners, a company organ that carries out oversight function.
3. Board of Directors, a company organ that carries out the Company's activities.
In the AGM, shareholders may provide recommendations or directions to the Board of Commissioners and Directors, related to efforts in improving the Company's performance. Other than through the AGM, shareholders can also convey various matters concerning the Company to the Board of Commissioners and/or Board of Directors, through Corporate Secretary. [4.4]
With the functions, duties and authorities of separate company organs, the Company ensures that there is no Commissioners serve concurrently as Directors. [4.2]
The Board of Commissioners consisted of seven members during the reporting period. Four Commissioners were nominated by the majority shareholder and were appointed in the AGM. However, based on the AGM decision, the Company also appointed three Independent Commissioners. The decision to appoint and the number of independent commissioners have met the terms of the Limited Liability Company Law. [4.3] [4.7]
In carrying out its functions, duties and authorities, the Board of Commissioners is assisted by the following Committees: [4.1]
- Nomination and Remuneration Committee Assigned to assist the board of Commissioners to ensure key positions within AAL Group are held by those who have the competencies in their respective fields. This committee also ensures the amount of remuneration and compensation commensurate with performance achievement based on a number of factors related to strategic goal and fundamental factors of Company performance. [4.5]
- Audit Committee Assigned to assist the board of Commissioners to ensure financial statements are presented fairly in accordance with generally accepted accounting principles in Indonesia; maintain the implementation of the company's internal control, internal and external auditing; oversee follow up of audit findings and risk management; evaluate the Company's social responsibility activities and ensure the Company comply with applicable laws and regulations. [4.10]
The Board of Directors consisted of six members until the end of reporting period. The Directors were appointed by the majority shareholder and determined in the AGM. The appointment was exercised with regard to the provisions of applicable laws and regulations, particularly Article 93 verse (1) of Limited Liability Company Law. [4.7]
In order to avoid conflict of interests, which may involve Board of Commissioners, Directors or other individuals within the management, aside from provisions in the Company Business Ethics, Internal Audit also conducts independent assessment on all activities with reference to the Internal Audit Charter. Results during the reporting period ensure there were no business activities or process that led to the conflict of interests or indication of corruption practices that could harm the Company.[4.6] [SO2] [SO4]
MANAGING RISK [4.9] [4.11] Several concerns in risk management have been concluded from discussions during the reporting period. The risk management is implemented through preparation of the Company's work plan and budget (RKAP) at the beginning of each year along with its implementation evaluation.
Commodity Price Risk Given the commodity prices tend to fluctuate in the global market, in its effort to manage risk, the Company has developed a high quality and low cost business model through intensification program and controlled expansion. It also conducts tight supervision on the flow of income and expenses according to CPO market development.
Financial Risk Most of the Company's business is subject to market condition of CPO commodity. To support financial stability for operations, the Company provides guidelines for cash transaction and financial planning policy to ensure diversification of financial risks. The Company also implements cost preservation program, investment analysis and project superintendent appointment, as well as manages funding facilities based on work plan priorities.
Operational Risk One of the factors that may hinder the Company's operations is the time gap between fertilizer price and CPO price volatility. There are times when the fertilizer price is high, the CPO is at an unfavorable price. The Company anticipates this risk by evaluating the method of fertilizer application to prevent it from being spilled or excessive, as well as procure the fertilizer through a centralized system to ensure reasonable price and quality, as well as secure supply.
Legal Risk Certainty of ownership and control of land may affect the operational performance of the Company. Therefore, the Company completes the licensing and land documents in accordance with the applicable laws. Partnership programs are also developed with the communities at the plantation sites, as an effort to prevent territorial conflicts and land disputes. If there is a court case, the Company will form an internal special team and use the services of legal professionals for dispute resolution.
Catastrophic Risk Catastrophic risks include natural disasters such as earthquakes, floods, tsunamis and fires. The Company has conducted analysis of risk and its impact as well as prepared mitigation in the form of business improvement, business continuity plan (BCP), risk sharing with insurance companies, as well as its own management of risk.
In an effort to achieve optimum and effective implementation of social responsibility in the economic, environmental and social areas, the Company has established the Environment & Social Responsibility Directorate. Along with other Directors, the Director reports on the implementation of social responsibility, one of which is the sustainability report that serves as an accountability to shareholders. [4.10]
EXTERNAL INITIATIVE The Company's commitment in implementing good corporate governance is also realized by adopting agreements, principles as well as an external initiatives applied nationally, the Indonesia Sustainable Palm Oil (ISPO). [4.12]
The Company is actively involved as a member of the Indonesian Palm Oil Producer Association (GAPKI). Through this organization, the Company actively develops good practices of oil palm cultivation and improved social responsibility implementation. Environment & Social Responsibility Director, Joko Supriyono, currently serves as a Secretary General of GAPKI. [4.13] [SO5]
As a professional entity, the Company has always been firmly independent in terms of political situation. We are not affiliated with any political power and do not give any form of political related assistance. The Company has never received any financial or other form of assistance from the Government. Instead, the Company always seeks to support the implementation of government programs, especially programs related to local communities' income improvement, known as the Income Generating Activities (IGA). [EC4] [SO6]
FAIR BUSINESS COMPETITION During the period of 2011, the Company and other CPO producers were investigated by the Business Competition Supervisory Commission (KPPU). The investigation was related to allegation of cartel practices among CPO producers and cooking oil manufacturers.
The charges were based on the KPPU analysis regarding high cooking oil prices during 2010 to 2011. The charges were not proven during court proceedings. The Company has never committed any cartel practice of CPO and cooking oil price fixing. The surge in cooking oil prices was solely due to high demand, while at the same time the production capacity could not meet market demand. [SO7]
STAKEHOLDERS He Company's sustainability cannot be separated from the efforts to build and foster relationships with all stakeholders. The Company has identified its stakeholders and approach methods to continue maintaining harmonious relationships with them. [4.15]
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