GOOD CORPORATE GOVERNANCE

Good Corporate Governance Background
The demands of business dynamics and the increase of competitive business climate require every company to improve its performance continually. On the other hand, the demands of shareholders, investors, communities and other stakeholders on good corporate management becomes a prerequisite that can not be avoided by the Directors in managing the Company. Therefore, the Company management based on the principles of good corporate governance has become an imperative for business performer to maintain its existence.

Good Corporate Governance
The process and structure used by the Company organs to realize the value of shareholders in long term by keep paying attention to the interests of Stakeholders, is referring to the legislation and ethical values.

1) Good Corporate Governance Principle
Good Corporate Governance has been the commitment of PT Krakatau Steel (Persero) Tbk, as a basis for corporate growth in long term. This commitment begins with GCG audit by Price Waterhouse Cooper in 2000, followed by the GCG committee formation in charge of preparing code of conduct known as "Corporate Ethics" in 2001.

2) Business Ethics and Code of Conduct.
Every year the company preparing and determining the Company Work Plan and Budget refers to the Company Long Term Plan which already predetermined before. Program, targets and objectives which specified in the Company Work Plan and Budget has been explained in phases to each work unit up to the line manager level. Along with the determine of Objectives and Annual Work Plan, each work unit leader sign the Integrity Pact as a form of commitment to the implementation of Good Corporate Governance Principles consistently. The value of corporate culture (Competence, Integrity, Reliable, Innovative) is expected to be the basic values that animate the execution of programs implementation and objectives which have been set and coordinate all the components of the company.

Board of Commissioners and Directors
Board of Commissioners consists of 4 (four) commissioners, 2 (two) of them are Independent Commissioner. Implementation job of Supervisory Board of Commissioners refer to the Law No. 40 Year 2007 regarding Limited Liability Company and Fundamental Budget of Company. Board of Commissioners is responsible to supervise the management policies. Generally, the implementation of maintenance is good, both of the Company and also the Company's business which conducted by the 6 person Board of Directors and provide advice to the Board of Directors, including the implementation oversight of Long Term Plan, Work Plan and Budget of the Company, the provisions of Fundamental Budget and the Decision of shareholders general meeting, as well as legislation, for the company’s benefit and in accordance with the aims and the objectives of Company.

Audit Committee
The Audit Committee is an integral part of company’s efforts to realize the Good Corporate Governance (GCG). The Audit Committee is responsible to provide independent professional opinion to the Board of commissioners, and perform other tasks given by the Board of Commissioners under the provisions of the applicable legislation.

Nomination and Remuneration Committee
Nomination and Remuneration Committee assists the Board of Commissioners to meet its obligations toward shareholders in terms of:

• The arrangement of selection criteria and nomination procedures for the members of Board of Commissioners, Directors and other company executives.
• The arrangement of assessment system and provide the recommendations about the number of Company’s Commissioners and Directors.
• Monitoring the member nomination process of Board of Commissioners, Directors and other corporate executive.
• Submission of recommendations concerning the process and the organizational structure of Commissioners and Directors.
• The arrangement of Payroll System and the provision of allowance and recommendations about valuation of its system.

Investment and Business Risk Committee
Established by Decree of BOC KEP-01/KOM-KS/I/2010 dated January 4th, 2010, Investment and Business Risk Committee is responsible in assisting the Board of Commissioners to manage the Company’s investment and business risks in accordance to the competencies independently. The main task of the Investment and Business Risk Committee are:

• Analyze and evaluate the business risk of the entire company’s investment plan and its subsidiaries which are considered to provide significant impact to the corporation.
• Recommend the Commissioner about an investment that provides maximum benefit to the company.
• Identify the business and investment risks that require the attention of the Board of Commissioners.
• Carry out other tasks given by the Board of Commissioners as long as still within the scope and obligations of the Board of Commissioners under the provisions of applicable legislation.

3) GCG Implementation Report
Post-establishment of Audit Committee on 2002, PT Krakatau Steel began a Self Assessment of GCG implementation. Later in 2003, GCG Audit was conducted by an independent appraisal where the company received a score of 77.8. In 2004, GCG Committee of PT Krakatau Steel (Persero) turned into a structural organization, the same level as division that is responsible directly to the President Director.
To measure the effectiveness of Good Corporate Governance Principles implementation and to know the aspects that need to be perfected, every year PT Krakatau Steel followed the torch Corporate Governance Perception Index (CGPI) held by the Indonesian Intitute for Coperate Governance (IICG) and SWA magazine, where the acquisition CGPI assessment are:

RELIABLE COMPANY Award from the Indonesian Institute for Corporate Governance (IICG) was achieved since 2006 which then becomes an indication that the company has implemented the principles of GCG consistently. In the future, it has become a commitment throughout the ranks of corporate leadership to make the GCG principles as a fundamental of long-term corporate development. 

4)  Development of GCG Implementation
Continuous improvement program became a routine agenda in improving company performance in all areas of activities to evaluate the effectiveness of company’s internal management systems,
To know the valid fulfillment and compliance of regulations and legislation, the company developed a Compliance Information System on Rules and Regulations (SIKAPP). This information system is dedicated to ensure that the internal management systems of company has aligned with the valid rules and regulations, both in terms of business practices, environmental management, job safety and health, as well as management practices in general.
Internalization of GCG principles in company business process was done through the outreach programs, training, and integrating it with the company’s internal management systems and the annual audit activities. As an application guide of Good Corporate Governance Principles for all levels of leadership, the company has formulated and set the guidelines for Good Krakatau Steel Governance, internal evaluation control based on the COSO Framework as well as evaluation and improvement of Krakatau Steel Management System (SMKS)