FIVE IMPORTANT PRINCIPLES OF GOOD CORPORATE GOVERNANCE

Term "good corporate governance" (GCG) was introduced for the first time in 1970 in the United States, it emerged after the corporate scandal and corrupt practices committed in a company. GCG raised because of the demands of external parties so that companies do not commit fraud against the public, namely the company's financial statements that are presented can be trusted to make decisions.In Indonesia the issue of GCG began in 1999 after the monetary crisis hit Indonesia, it was discussed by Indonesian government and the International Monetary Fund (IMF) for economic recovery. The monetary crisis wassorrowful for Indonesian economy. Many companies and banks had gone intobankruptcy, they must be liquidated. This condition is basis for the formation of National Committee on Corporate Governance policy based onthe decree from Coordinating Minister in Economics, Finance and Industry NO: KEP-10 / M.EKUIN / 1999 dated August 19^th, 1999, that issued Code of Good Corporate Governance. The government officially issued regulations relating to GCG, namely the Decree of the State Minister of Investment and the Establishment of State Owned Enterprises Number: KEP.23 / M-PM.PBUMN / 2000 regarding the application of GCG practices in SOEs, subsequently accomplished by KEP.117 / M-PM PBUMN / 2002.

GCG is a concept of decent corporate governance, this concept is expected to protect shareholders and creditors in order to regain their investment, which consists of five principles (abbreviated as TARIF), namely transparency, accountability, responsibility, independence, and fairness. Therefore, the purpose of GCG is to maximize the value of the company and shareholders by developing transparency, trust and accountability, and establishing a management system that encourages and promotes progressive creativity and entrepreneurship. The five GCG principles can be explained as follows. (1) The principle of transparency is the disclosure of information on corporate performance in an accurate, timely, clear, consistent and comparable manner. To maintain objectivity in conducting business, companies must provide material and relevant information in a way that is easily accessible and understood by stakeholders. The company must take the initiative to disclose not only the problems required by legislation, but also the things that are important for decision making by shareholders, creditors and other stakeholders. (2) The principle of accountability explains that a company must be able to account for its performance transparently and fairly. The company must be managed properly, measured and in accordance with the interests of the company while taking into account the interests. Management accountability is carried out through effective control based on clarity of functions, rights, obligations, authority, and responsibilities between shareholders, management, supervisors and auditors. (3) The principle of responsibility implies that companies must comply with laws and regulations and carry out responsibilities to the community and the environment so that business continuity can be maintained in the long term and be recognized as a good corporate citizen. Companies as economic agents must always comply with applicable laws and regulations in the fields of taxation, industrial relations, environmental protection, health, occupational safety, study standards, and fair competition. (4) The principle of independence discloses that companies must be managed independently so that each party of the company does not dominate each other and cannot be intervened by other parties. (5) The principle of fairness explains that the company in carrying out its activities, the company must always pay attention to the interests of shareholders and other stakeholders based on the principle of fairness and equality. The principle of justice relates to the protection of all the interests of shareholders equally, including the interests of minority shareholders.

Several research results have proven that the application of GCG principles is influential in improving the performance of a company. Implementation of good corporate governance or corporate governance can reduce the risk of conflicts of interest between agents as company management and principals as company owners or shareholders of the company. Opportunistic behavior from management can be minimized so that the company's goals to increase company value can be achieved and there is sustainability of the company. The application of GCG has been announced in various organizations both profit-oriented and non-profit-oriented companies. As in private companies, State-Owned Enterprises, universities, and government. There are several familiar terms related to good governance, they are good corporate governance, good university, and good government governance.