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Author	Prof Dan W Puchniak
Organisation/Institution	Singapore Management University, School of Law
Country	SINGAPORE
Panel	Corporate Law and Governance
Title	The Abolition of Independent Directors in Indonesia: Rationally Autochthonous or Foolishly Idiosyncratic?
Abstract	This Article examines Indonesia’s unprecedented 2018 decision to abolish the requirement for independent directors on the boards of its listed companies, a move that contradicts global corporate law and governance norms. Our empirical analysis of annual reports revealed that by 2023 there was not a single reported independent director in Indonesia’s 20 largest listed companies. This conspicuous departure from global corporate law and governance norms reflects a pivot towards reliance on independent commissioners within Indonesia’s ostensibly “two-tier board” system, to align with Indonesia’s unique civil law traditions. It also represents Indonesia’s desire to reassert its regulatory autonomy in the wake of the International Monetary Fund’s imposition of the Anglo-American concept of independent directors as a conditionality for its economic lifeline to Indonesia in the wake of the 1997 Asian Financial Crisis. Based on empirical evidence, in-depth interviews, and legal analysis, we argue that while Indonesia’s abolition of independent directors has some tenuous theoretical validity, it presents significant corporate governance risks. Independent commissioners provide only a partial substitute for independent directors, with their effectiveness potentially compromised by controlling shareholders’ influence, limited legal authority, and potential pressure from corrupt government practices. Moreover, our hand collected data on political connections between independent commissioners and the government raises concerns about their true independence, particularly in state-owned enterprises. Drawing on our findings, we propose bespoke reforms tailored to Indonesia’s controlling shareholder dominated context, which is defined by powerful state-owned enterprises and family firms in a system plagued by corruption. The aim of our reforms is to transform Indonesia’s independent commissioner system into an effective autochthonous corporate governance mechanism so that it can realize its enormous potential as the world’s fourth most populous country and seventh largest economy. We conclude by situating Indonesia’s approach within the broader evolution of corporate law and governance globally, suggesting that as regionalization supplants globalization, this departure from Anglo-American-cum-global “good” corporate governance norms may signal a shift towards more localized governance solutions in an increasingly multipolar global economy.
Biography	Dr. Dan W. Puchniak is a Professor in the Yong Pung How School of Law (YPHSL) at Singapore Management University, the Director of the YPHSL Centre for Commercial Law in Asia, the Inaugural Director of the Asian Corporate Law Forum, and a Research Member of the European Corporate Governance Institute (ECGI). Dan is an internationally recognized scholar in the field of comparative corporate law and governance, with a focus on Asia. He has received numerous domestic and international awards for his academic research and teaching – most recently, the 2023 ECGI Cleary Gottlieb Law Prize. Dan’s research has been profiled in The Economist, The Japan Times, and The Business Times. Dan has taught and given over 100 invited lectures at leading universities, government institutions, international organizations, stock exchanges, and companies around the world on comparative corporate law and governance. He has advised international organizations on the development of corporate law in Asia, served as an expert in high stakes complex corporate law disputes in Asia, and previously practiced corporate commercial litigation in one of Canada’s leading law firms.