KNKG Expect PUGBMKI Can Encourage Family Business Sustainability

Rupiah illustration (Photo: dock. Antara)

JAKARTA - The National Governance Policy Committee (KNKG) in mid-2022 has issued a General Guideline for Government of Indonesian Family-Owned Business (PUG-BMKI).

Meanwhile, PUG-BMKI is expected to be a guide for the family of business owners in ensuring business sustainability through good governance practices.

On the other hand, the 2023 Price Waterhouse Coopers (PWC) survey on family business shows that 74 percent of family business leaders understand the need for mutual trust among family members.

However, the survey also explained that conflicts in the family also hamper efforts to build wider trust in business lines.

In the 2021 edition of the PWC Family Business Survey, 15 percent said they had a conflict resolution mechanism to deal with family disputes. Meanwhile, in this year's survey, it rose to 19 percent.

In addition, only 65 percent of family business leaders say they have formally a governance system containing including shareholder agreements, constitution and family protocols, and even getting to the existence of a will.

The results of the survey show that family business governance is very important to maintain business continuity, one of which can manage and resolve conflicts between families.

For this reason, the family as shareholders in a business entity or corporation needs to be equipped with the best knowledge of governance practices that can be adjusted to the needs, business environment, size and complexity of business activities, as well as risks and challenges faced.

Meanwhile, several family-owned companies managed to take the floor on the stock exchange and managed to improve the performance of the IPO results. However, there are also the opposite so as to harm stakeholders, especially shareholders from the community.

Based on these needs above, PUG-BMKI contains principles that are followed by recommendations and guidelines for its implementation. As well as content by the four pillars of governance, namely ethical behavior, accountability, transparency, and sustainability.

Meanwhile, with such a governance structure, it is hoped that family-owned businesses will be encouraged to create an increase in value for long-term and sustainable stakeholders.

Chairman of the Association of Indonesian Issuers (AEI) Armand Wahyudi Hartono in his speech said, This is what is needed to do right so that there are standards, even though there are standards but not necessarily true.

"But those who have determined do have certain standards that are more sustainable and the goal of this is not only to follow the checklist but to become more good communication for more ISO and SNI," he explained Thursday, November 2.

Armand said that in terms of business or founders, they definitely need governance in line with succession and follow according to the development of time in business adjustments.

Finally, Armand said the business he runs must have a good, reasonable and profitability basis.

KNKG Expert Council Natalia Subagjo said that based on a study by family companies in Indonesia, 40 percent of market capitalization in Indonesia, 70 percent of family companies in Indonesia cannot survive until the 2nd and third generations. So there needs to be governance policy guidelines so that it can be sustainable as a business.

KNKG member and IICD Trustee Andi Ilham Said conveyed the governance policy compiled by the KNKG as GPS to determine the long-term policy direction for the purpose and strategy of a company's business policy.

Hidayaturrahman, a representative from the Jatinom Indah group, said that this guide is very important for the business continuity of family companies, but signs are needed so that they do not fall into and can adapt to the increasingly comprehensive development of the era.

"My father had said he wanted to close this family business with great consideration and continued to try to improve the company's performance by upgrading skills to face challenges that alternately need high standards to continue business to the next generation," he said.

Shanti Lasminingsih Poesposoetjipto, President Commissioner of Samudera Indonesia (SMDR) also said that continuing the family business does have its own challenges where we have the first generation background and cannot be under that condition.

In line with other resource persons, Shanti also said that the importance of governance guidance for all business lines so that family business sustainability can be maintained amid ecosystem changes and various sentiments that can sometimes occur so quickly.

"If policy makers in the company cannot mitigate every matter related to their business quickly, they can be diluted," he said.

This talk show was held as a series of the preparation and socialization of the 2022 Indonesian Family-Owned Business Governance General Guidelines (PUG-BMKI).

After participating in this talk show, participants are expected to understand the best principles and practices of family companies in maintaining business sustainability.