International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online) 10.30845/ijhss

Corporate Governance for Employees’ Welfare
Martono Anggusti, Bismar Nasution, Benny Tabalujan, Mahmul Siregar, Hikmahanto Juwana, Suhaidi, Tan Kamello

The debate about Corporate Social Responsibility (CSR) to stakeholders is a fairly lengthy debate in the repertoire of the development of Company Law.At least there are two fundamentally different views to interpret the CSR. The views, firstly, cling to the belief that the concept of corporate social responsibility is counterproductive in the business world. According to Milton Friedman, a corporation are naturally only have a goal to generate economic objectives for shareholders. A prominent liberal economics is very pessimistic and tend to oppose any attempt to make the company as a social purpose.Furthermore, in Capitalism and Freedom (1962), Milton Friedman clearly states that in a free society there is one and only one social responsibility of business that utilizes the company's resources and engages in activities that aim to maximize profits. If this goal is achieved by the company, it actually functions, and corporate social goals have been achieved, namely to improve the welfare of society.The doctrine of the social responsibility in business, damagesthe freemarket economic system.Acknowledging social responsibility that will lead to an economic system leads to the direction of the economic plans of the Communist Countries. In the writings, published in the New York Times Magazine on September 13th, 1970, with the title: "The Social Responsibility of Business is to Increase Its Profits". This reasoning is supported by Joel Bakan,which teaches that if the company gives some of its profits to the community, the company has violated its nature.However, business sustainability can take place in the long term if the company is able to provide an answer to the needs of stakeholders and give them what they need. This is in lieu with the second view, that there is an increasing importance of the role and position of all stakeholders in the Good Governance Management of a Company. Surely,the second thought, extremely gives rise to the contradiction on the first view.The second view expressly acknowledges the existence of CSR towards stakeholders. R. Edward Freeman in, "A Stakeholder Theory of the Modern Corporation," offers an alternative to the theory of Friedman. On the view of Freeman, Friedman wrong to assume that the main task is the company's executive moral fiduciary issue to their shareholders and that in fulfilling this obligation they act socially responsible.
Freeman takes issue with dissention and his opinions are:
1. "That the company's managers have a duty to all groups and individuals who own shares (a stake) in or claim on the company (Freeman refer to groups and individuals as 'stakeholders');
2. That there was no stakeholder groups should be given primacy over the other when the company mediate the competition claims of stakeholders; and
3. That company law should be changed to require executives to manage their enterprise in accordance with the principles of the theory of stakeholders, namely, Freeman stated that the executive should be notified (legal / official) to manage their company in the interests of their stakeholders ".
Regardless of whether the stakeholder management leads to improved financial performance, managers must manage the business for the benefit of all of stakeholders. It should not look at a company as a mechanism to improve the financial returns of stockholders,but as a vehicle for coordinating stakeholders interests and view management as having a fiduciary relationship not only to shareholders, but to all of stakeholders. According to the normative of stakeholders theory, management must give equal consideration to the interests of all stakeholders, while a conflict of interest, to manage the business so as to achieve the optimum balance between them. This, of course, implies that there will be a time while management is obliged to at least partially sacrificing the interests of the stockholders to those of other stakeholders.In line with this thinking, John Hasnas,stated that "management's fundamental obligation is not to maximize the firm's financial success, but to Ensure its survival by balancing the conflicting claims of multiple stakeholders."John Elkington in Cannibal with Forks: The Triple Bottom Line Twentieth Century Business (1997) says that if a company wants to remain sustained, then he needs to consider not only the interests of the shareholders (profit), but also must pay attention to the welfare of the people which were in it and around (peoples) and environmental sustainability (planet).Stakeholder theory states that the basic duty of management is not to maximize the financial success of the company, but to ensure its survival by balancing the conflicting demands of various stakeholders. The Company shall be managed for the benefit of stakeholders, customers, suppliers, owners, employees, and local communities. The rights of these groups must be ensured and, further, the group must participate, in some sense, in decisions that substantially affect their welfare.Apart from the conceptual debate about the Corporate Social Responsibility (CSR). CSR in Indonesia has been acknowledged. Article 88, Law No. 19 of 2003 on State-Owned Enterprises (SOE Act), firmly establish the SOEs can set aside part of its profits for the purposes of development small businesses, cooperatives and community development around the SOE. Then, Act No. 40 Year 2007 on Limited Liability Companies, Article 74, confirms the existence of Corporate Social Responsibility in Limited Liability company in Indonesia.In fact, Article 74 is more advanced conceptually by putting social and environmental liability in limited liability company as a social mandatory, not just a moral and ethical responsibility. Article 74 has a power that can be enforced against a limited liability company to implement social and environmental liability.Shifting the paradigm of the management company which is intended only to the interests of shareholders (profit) in the direction of the management of the company, to consider the interests of all stakeholders, and environmental interests, assessed constitutional by the Constitutional Court on legal considerations in the Constitutional Court Decision 53 / PUU-VI / 2008, is explained, that the Indonesian economy system as set forth in Article 33 of the 1945 Constitution:
1. The economy shall be organized as a common endeavour based upon the principles of the family system.
2. Sectors of production which are important for the country and affect the life of the people shall be controlled by the state.
3. The land, the water, and the natural riches contained therein shall be controlled by the State and exploited to the greatest benefit of the people.
That understanding individualistic and liberalism in the economy was not fit, even in contrary to the economic democracy embraced by the nation of Indonesia. Earth, water and natural resources contained in it not only for the prosperity of the few entrepreneurs who have capital, but rather for the prosperity of the people. The economy as a joint venture, not only between employers and the state, but also collaboration between employers and the community, especially the surrounding community. Genuine concern of employers on their social environment will provide a secure business environment for the surrounding community feel cared by the employer, so it will strengthen the fabric of the relationship between employers and society.Based on the Decision of the Constitutional Court concluded that the Good Governance management company solely devoted to the interests of shareholders, are not in accordance with democratic principles adopted by the State Indonesian economy. Good Governance Management companies must instead be directed to the welfare of the people of Indonesia. Therefore, companies must be managed with due regard to the interests of all stakeholders, no exception labor / employees of the company. Thus, the management of the company needs to consider the interests of all stakeholders not only as a moral responsibility of the company, but as a mandate of a company law. Company should orient its company management efforts to improve the welfare ofstakeholders; including workers / employees of the company is the embodiment of company's contribution to the mutual obligations between the government and the business community to improve the welfare of the community.Implementation of the Good Governance management company, for the benefit of stakeholders, did not specifically aimed at corporate responsibility efforts to improve the welfare of employees. Article 74 of the Limited Liability Company Law does not specifically direct the implementation of corporate social responsibility to the interests of employees. However, it does not mean that the discussion of social regulation of corporate governance efforts is directed at improving the welfare of the employees concerned becomes unimportant. The ambiguity of Article 74 of the Limited Liability Company Law actually cause the position of employees as part of an internal stakeholders or primary stakeholders of the limited liability company grow weary and still received less attention. On 4th April 2012, the Government enacted Government Regulation No. 47 of 2012 on Social and Environmental Responsibility Company Limited. As the implementation of Article 74 of the Limited Liability Company Law, Government Regulation 47 of 2012 is focused on regulating the use of a limited liability company expense budget has been earmarked as the cost of social and environmental responsibility. However, this rule did not clearly set out the allocation of the budget, the amount of the budget, and the subject use of the budget. Thus, it would be difficult to expect the implementation of this government regulation to improve the lives and welfare of labor as the company's internal stakeholders. Therefore, regulation of corporate governance is to realize the efforts to improve the standard of living and welfare of labor is still very necessary. The discussionabout the need forlegislationthatdirects thecorporate governance management toimprove the livesandwelfare oflaboris stillrelevantandveryimportantthing to do. At least there aresomevery basic reasons onthe importance on discussing the need forlegislationthatdirects thecorporate governance managementtoimprove thewelfare oflaborinIndonesia, namely:First, Corporate Governance (CG) management that gives attention to efforts to improve the lives and welfare of employees / workers / labors is not a concern in the legislation governing the company in Indonesia. Legislation currently regulating corporate governance is still dominated by the interests of employers in optimizing capital or in developing other businesses in order to generate profits and shareholder value.Although social and environmental responsibility has been mandatory under Article 74 of the Limited Liability Company Law, but its application in the narrow scope led to the implementation of social and environmental responsibility under Article 74 of the Limited Liability Company Law is not very significant in efforts to improve the lives and well-being of the company workforce. Law governing companies, such as Act No. 40 of 2007 on Limited Liability Companies Act No. 19 of 2003 on State Owned Enterprises, Act No. 25 Year 2007 on Investment and Act No. 8 of 1995 on the Capital Market is more focused on efforts to the creation of a conducive business climate as a requirement that the business community in Indonesia can compete to face an increasingly competitive global competition. In other words, the main interest underlying the legislation was the interest of shareholders. Public welfare, including welfare of the workers, do not become a major priority of the legislation. Where noted, Article 43 paragraph (3) Limited Liability Company Law paves the way for efforts to improve the status and welfare of employees through the issuance of new shares that are specifically intended for employees. Through Article 43 paragraph (3) that, it is possible to elevate the position of the employees become shareholders through the Employee Stock Ownership Plan (ESOP).However, the implementation of Article 43 paragraph (3) is highly dependent on the generosity of its shareholders through the Annual General Meeting (AGM), because after all if General Meeting of Shareholders does not decide that the issuance of new shares is specifically intended for the benefit of employees, the new shares shall first be offered to existing shareholders, or better known as the pre-emptive right.Basically some aspects of corporate governance related to efforts to improve the welfare of the employees as one of the stakeholders can be the rationale, for example: Protection of interests of employees,in various corporate action such as a merger, consolidation, acquisition, and spin-off companies, bankruptcy, and liquidation of the company; efforts to increase the value and dignity of employees through improving the status of workers / employees become owners / shareholders as ESOP (Employee Stock Ownership Plan, Profit Sharing etc), is an effort to increase bipartite collaboration that are mutually beneficial.Secondly, the setting ofCSR as stipulated in Article 74 of the Limited Liability Company Law, did not provide a strong emphasis on the use and size of the CSR fundfor efforts to improve the lives and welfare of employees as internal stakeholders. Article 74 of the Limited Liability Company Law and its implementing regulations as stipulated in Government Regulation No. 47 of 2012 on Social and Environmental Responsibility Company Limited is only intended to regulate the use of budget CSR General Meeting of Shareholders approved the Work Plan and Budget (CBP).Article 74 and its implementing regulations have not sufficiently regulated the practices of companies devoted to the interests of stakeholders, including workers / employees that are outside the company's CSR program budgeted. Article 74 and its implementing regulations are focused on the use of budget CSR for the benefit of local communities and the environment. The fate of the workers / employees still beyond the reach of Article 74 of the Limited Liability Company Law Jo. Government Regulation no. 47 in 2012. Thirdly, the accommodation is not enough on Principles of ISO 26000 as the standardization of CSR in theLimited Liability Company Law. For example, about 7 Principles of ISO 26000: ISO 26000 principles namely:
1. Community development;
2. Consumers;
3. Practice Institution healthy activities;
4. Environment;
5. Employment;
6. The Human Rights;
7.Organization Governance (Government Organization).
Fourth, the welfare conditions of laborers / workers / employees which still a concern in Indonesia. Labor / Workers / Employees, or more popular as workers have extremely significant contribution in supporting the Indonesian economy. Beside as a driver of economic state, workers also became one of the major strengths in building civilization. Labours or workers who drive the economic sectors under which incidentally has a tremendous contribution to the State's economy and to balance the savior even balance the State's economic growth. Ironically, a very major role and importance is not getting an adequate appreciation of the government and the business world. Wages received by workers / employees are not comparable / insufficient to meet real needs. When compared with the speed of the increase in the cost of "running" while wages "going nowhere" no increase or even just suffered a setback. From the Central Bureau of Statistics as an overview in 2006 for simple decent life in Jakarta, someone has to spend between Rp 1.5 million to Rp 2 million per month for the purposes of daily life. Compared then to the local minimum wage in Jakarta which only Rp 950.000, - It is clear that it is impossible worker / laborer to live decently.Other data illustrates the inequities of life of workers / laborers presented in the research of AKATIGA. Government efforts to create a conducive investment climate and invite as many foreign and domestic investors to encourage government in implementing two basic strategies namely run low wage policy and apply the principles of liberalization, flexible and decentralized in matters of employment.The low wages of workers / laborare used as an attraction to invite investors.Investment Coordinating Board (BKPM) includes wage / cheap labor in Indonesia, the minimum limit of the highest labor costs in Java (Rp. 1.3344 million, - per month - USD 147 per month) is still lower than the wages of workers in Thailand (USD 240 per month), even if the wages in Java are raised 50%. Labor wages is used as a negotiating tool in the management of the automotive component industry in Indonesia with Trade Unions is the main attraction of Indonesia to invite investors. Cheap labor has proven to create difficult lives on labors because the averageminimum wage in Indonesia Rp 892.160, - can only afford about 62.4% of real expenditures of workers / laborers.Fifth, handed efforts to improve the welfare of employees through legislation in the field of employment was inadequate. During this time, the problem is always delivered on labor welfare legislation in the field of employment. As described above,cheap labor leads to the welfare of workers / laborers which is not feasible. It is proven that the issue of lifting the standard of living and welfare of the workers / laborers can not be left solely to the legislation in the field of employment. Efforts to improve the standard of living and welfare of the workers / laborers need to be supported by the corporate governance management system which can support the improvement of the standard of living and welfare of workers / employees, either in the form of optimal utilization of corporate social responsibility and stewardship corporate governance rules, which can support the improvement of the standard life and welfare of the workers / employees. Sixth, the limited liability company law can be used as an instrument to improve the welfare of employees through corporate governance management arrangements to improve the lives and well-being of employees. Thus, despite the existence of legislation in the field of employment, legislation governing its managed stylist, for example the Limited Liability Company Law, the Law on Enterprises, Investment Law, Capital Market Law and its implementing regulations can be used as an instrument to direct more attention to the behavior of the company interests of stakeholders, including workers / employees. In such a context, the role of the State through the Government as law makers is necessary, so that the problems of workers welfare / employees are not solely left to the market mechanism with the argument of economic liberalization and globalization. In addition to the government party, the Company is a good alternative receptacle to resolve the problem, because the company provides a receptacle mutual benefit to work, learn, gain experience fitting, in differentemployment level: Employee, Self-employed, Employer, and Investor (ESEI). Under conditions of the wise, the state described as a referee in a football game. He has no right to strike or hold the ball. That needs to be done for the football game is running smoothly and there is no cheating. Has this value been realized? What is the role of the entrepreneur as the manager of the largest natural resource? The reality is that entrepreneurs can not immediately meet the standards of stakeholders, so that what is referred to as welfare is commensurate discourse. From the first, issues workers / employees being widely reported, but from the beginning these issues are not resolved, resulting in gaps. To note in common, is that one of the drivers in the business in the last decade of this century in addition to the profitability of an investment in the form of people.

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