Knowledge

In an increasingly complex business world, corporate governance is a key factor in organizational sustainability. An empirical study by Gompers, Ishii, dan Metrick (2003) demonstrated that companies with strong corporate governance exhibit better financial performance and lower risk. Their findings indicate that companies with good corporate governance are more highly valued by investors, management is more accountable in business decision-making, and financial and operational risks can be effectively managed. 

ISO 37000, an international standard for governance of organizations, provides guidance for companies in implementing effective corporate governance. This standard is designed to assist organizations of various types, sizes, locations, and structures in achieving their objectives in a sustainable, ethical, and responsible manner. 

Structure of Corporate Governance Based on ISO 37000 

ISO 37000 establishes core purpose, core principles, and enabler principles that form the framework for governance of organizations to foster ethical behavior, commitment to managing duties and responsibilities, and effective performance, ultimately benefiting the company. 

Core Purpose (Objectives) 

Companies must possess a clear vision, mission, and objectives that align with stakeholder interests, focusing not only on profit but also on social and environmental impacts. Development in this context includes: 

• Formulating organizational vision, mission, and values in line with sustainability principles. 

• Identifying and managing risks and opportunities associated with achieving organizational objectives. 

• Aligning organizational strategy with stakeholder expectations. 

Core Principles 

As a solid foundation, these principles support the sustainable achievement of organizational objectives. 

1. Value Creation: Generating value for shareholders and other stakeholders through innovation, growth, and sustainability. 
2. Strategy: Company strategy must align with stakeholder interests and sustainability principles. 
3. Oversight: Robust oversight mechanisms to ensure the effectiveness of governance implementation. 
4. Accountability: Ensuring that decisions are made transparently and responsibly. 

Enabler Principles 

These principles support the implementation of effective corporate governance. 

1. Responsible Leadership: Top management must ensure transparency and accountability in company operations. 
2. Ethics and Integrity: Organizations must apply ethical values in every aspect of their operations to maintain reputation and public trust. 
3. Openness and Transparency: Providing relevant information to stakeholders for better decision-making. 
4. Risk Management and Compliance: Effectively managing risks and ensuring compliance with applicable regulations. 
5. Sustainability: Considering economic, social, and environmental impacts in decision-making. 

Outcomes of Corporate Governance 

The application of core principles and enabler principles in organizational governance ensures that every decision and action align with the values of sustainability, transparency, and accountability. With a strong foundation through Value Creation, Strategy, Oversight, and Accountability, supported by Responsible Leadership, Ethics and Integrity, Openness and Transparency, Risk Management and Compliance, and Sustainability, organizations can operate sustainably, responsibly, and with a clear direction in achieving long-term goals. This results in positive impacts, namely: 

• The organization has a clear direction in achieving long-term objectives. 

• The organization operates sustainably and responsibly. 

• Improved accountability in organizational management. 

• Commitment to fulfilling duties and responsibilities within the organization. 

• Ethical behavior in all operational aspects. 

• Higher accountability and data-driven decision-making. 

• An organization is better prepared to face business challenges and changes. 

• Operations that are responsible for the environment and society. 

Benefits of Corporate Governance 

1. Enhancing stakeholder trust, competitiveness, company reputation, company market value, operational efficiency, relationships with investors and business partners, efficiency in decision-making, customer & business partner trust, and positive company image. 
2. Ensuring business continuity, long-term growth, professional management of the company, compliance with applicable regulations, and long-term business sustainability. 
3. Reducing business & compliance risks and potential losses due to unmanaged risks. 
4. Avoiding scandals or ethical violations, legal sanctions & fines, and potential legal risks. 
5. Facilitating access to funding sources and investments. 
6. Attracting more sustainability-conscious investors. 

Conclusion 

ISO 37000 provides a comprehensive framework for effective organizational governance. By implementing the core purpose, core principles, and enabler principles, companies can achieve ethical behavior, commitment to duties and responsibilities, and effective performance. This will provide various benefits, including enhanced stakeholder trust, reduced business risks, improved operational efficiency, and ensured compliance and long-term sustainability. 

Written by Firmansyah Lubis – Consultant GRC Robere & Associate (Indonesia) 

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