Understanding the Definition, Types, and Duties of the Board of Directors

Duties of the Board of Directors – A growing company cannot be separated from the role of great people in it. Apart from the owner of the company, the board of directors plays an important role in building the company. However, to make or appoint this board of directors cannot be arbitrary as long as you appoint people. If it is done haphazardly, the company may not run as expected or it may even end in bankruptcy.

Therefore, as a company owner, you need to make various considerations in preparing the right board of directors so that the company can develop later. So that you can choose the right person to serve as a board of directors, you should first understand the duties of the board of directors, their types, members and salaries which have been summarized from various sources. Check out the more detailed explanation below:

Definition of the Board of Directors

In rule 33/POJK.04/2014, corporate companies and public companies are required to have a board of directors. If based on Article 1 number (5) of Law Number 40 of 2007 concerning Limited Liability Companies (“UUPT”), the board of directors is an organ of the Company that has the authority and is fully responsible for managing the Company and is also in the interests of the Company, in accordance with the aims and objectives of representing the Company, either inside or outside the court in accordance with the articles of association.

In addition, the board of directors is also the people who are elected to represent the shareholders as well as the governing bodies. The board of directors is also determined on the basis of the size of the company’s bylaws, starting from the number of members, structure, and powers.

Type of Board of Directors

The Board of Directors itself is divided into two types, namely the Internal Board of Directors and the External Board of Directors, with a more detailed understanding as follows:

1. Internal Board of Directors

The internal board of directors are members of the board of directors who are major shareholders, employees and officials, and members of the Board of Directors who then have experience in advancing a company. The company director cannot be on the board of directors because the position can be said to be a company executive.

2. External Board of Directors

External board of directors are members of the board of directors who are also someone who comes from outside the company or is independent. In the external board of directors can occupy a chair on the board, but are not involved in the day-to-day operational work of the company.

Usually, external directors provide opinions that are more objective and more independent in providing and resolving company problems with the aim of not benefiting several parties.

Duties of the Board of Directors

The board of directors has the main role as someone who represents the shareholders, which means the main role of the board of directors is to act on the interests of the company which will then generate profits for the company.

It’s safe to say that the board of directors has a role as the last line of defence. This is because the board of directors will make decisions regarding the direction of the company to play a role in maintaining Human Resources (HR).

Another role of the board of directors is in determining compensation for executives, establishing company policies or regulations, and representing each network to then support executives and the board of directors team. In addition, the board of directors must also be able to provide power to the management of a rising company and to ensure maximum profits for the company.

The duties of the board of directors that have been stated in Article 97 UUPT and are proactive, include:

  1. The Board of Directors is responsible for all management of the company for the benefit of the company which is in accordance with the aims and objectives of the company, and must also comply with policies that are deemed appropriate within the limits specified in the Law or in the Articles of Association.
  2. Directors are also required to act in good faith and be responsible for managing a company.
  3. Directors are also required to represent the company both outside and in court.
  4. The Board of Directors is also required to prepare and maintain a register of shareholders, minutes of the GMS, and minutes of meetings of the directors, maintain the company’s books of accounts, and report their share ownership.
  5. If you then experience negligence or loss, each member of the board of directors is then personally responsible for all losses to the Company if the person concerned is then negligent in carrying out his duties. If the board of directors consists of 2 or more members of the board of directors, then this responsibility will then apply jointly and severally to each member of the board of directors.
  6. Then, he also has to lead and manage the company by determining policies according to interests and goals. He maintains and manages the company’s assets, organizes, supports and controls the pattern of division of tasks for each of his employees.
  7. He also appoints and fires employees and approves the company’s annual budget
  8. He determines salaries, compensation and employee benefits, he also submits financial reports, management and company performance to shareholders on a regular basis.
  9. Seeking and guaranteeing the implementation of the business as well as the company’s activities in accordance with the aims and objectives.
  10. He also prepares the RJPP and RKAP which are strategic plans that contain the company’s goals and objectives to be achieved and seek approval from the board of commissioners.
  11. He also makes an annual report in accordance with the applicable laws and regulations.
  12. The board of directors will provide accountability for all information regarding the condition and running of the company to the GMS in the form of an annual report.
  13. Providing periodic reports according to the method and time in accordance with applicable regulations and other reports whenever requested by the shareholders.
  14. Make a complete company organizational structure with detailed tasks, responsibilities and authorities of management at every level.
  15. Establish clear and balanced measures of success or performance indicators, both from financial and non-financial aspects, to then observe the achievement of the vision, mission and goals of a company.
  16. Monitor and evaluate the implementation of the RJPP and RKAP, including achieving financial and non-financial targets and following up on various deviations from targets.
  17. Develop and implement a company risk management system and build company information technology.
  18. The Board of Directors also follows up on audit findings from the Internal Oversight Unit, the Audit Committee and the External Auditor, who then report them to the Board of Commissioners.
  19. The Board of Directors also reports relevant information to the Board of Commissioners, for example plans, HR development programs, and accountability for risk management, assessment of company soundness, as well as information technology performance reports.
  20. Together with the Board of Commissioners, they are responsible for preparing and holding the GMS.
  21. The Board of Directors also ensures that the company carries out various social responsibilities and pays attention to the interests of stakeholders in accordance with applicable rules and regulations.
  22. The Board of Directors also reports to the company regarding his and his family’s shareholding in other companies.
  23. He then also carries out other obligations in accordance with the provisions stipulated in the articles of association and those determined by the GMS.
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Members of the Board of Directors in a Company

The members of the board of directors who are generally found in a company include:

1. HR Planning & Policy Department

Responsible for helping managers to coordinate tasks and evaluate the performance of their subordinates, he also creates work programs, such as in the form of training for development for employees.

2. Internal Audits

Internal audit is a systematic and objective assessment which is then carried out by internal auditors to be able to examine and evaluate organizational activities. With this internal audit, the company’s finances can be maintained properly, so that the company’s finances do not go bankrupt.

3. Corporate Secretary

The corporate secretary is a part that supports the board of directors and plays an important role in ensuring the implementation of various aspects of transparency in a company. The corporate secretary then also functions to establish internal and external communications, investor relations and company leaders.

4. Risk Management Department

This part of the risk management department has responsibility for determining financial, safety and security risks in a company. That way, the production of a company can still run well and smoothly.

5. SHE Management Department

Management of SHE ( Safety and Healthy Environment ) is a series of processes and procedures to then identify potential hazards in the company’s work environment.

6. Department of Corporate Social Responsibility (CSR)

Judging from the law, CSR is then responsible to all stakeholders, starting from employees, shareholders, as well as consumers, the community and the surrounding environment in all economic, social and environmental aspects of the company.

Board of Directors salary

With so many and not easy tasks and responsibilities, the salary you get as a board of directors is not small. The income from the board of directors is not only from the base salary, but also the board of directors also gets allowances, bonuses and so on. The following is a description or example of the salary of the board of directors of some of the largest companies in Indonesia:

  • Bank BCA board of directors salary: the average is IDR 2.16 billion per month
  • Bank BNI board of directors salary: the average is IDR 1.03 billion per month
  • Pertamina’s board of directors salary: average is IDR 5.61 billion per month
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The Board of Directors then has a Big Share in the Company The board of directors in the company has a very big influence, especially on the success of the company. The board of directors who carry out all their duties and responsibilities properly and correctly and in accordance with various applicable regulations, the company will then run as it should.

If the company grows well thanks to the strategy and proper management of the board of directors, then the company’s stock will rise, and vice versa. Vice versa, if the board of directors cannot carry out their duties properly, the company can experience losses or even go bankrupt.

Thus the discussion about the meaning, salary, and duties of the board of directors. As previously explained, the board of directors cannot be done haphazardly. So, company owners must choose carefully and thoroughly if they want to find a board of directors.

Likewise those of you who want to become a board of directors, you must have the ability to manage the company. Then, are you interested in becoming a board of directors?

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