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Australian Journal of Asian Law

Abstract from Volume 2 No 2 (2000)

Governance and Companies Law in Indonesia

Paul H Brietzke BA (Econ) (Lake Forest, WI), PhD (Law) (London). Former Legal Advisor, Ministry of Law and Legislation, Government of Indonesia, and Professor, Valparaiso University School of Law. Email:

Many reforms are needed on developmental grounds, concerning the incentives in, and organi-sation of, Indonesian enterprises. This article discusses Companies Law revisions and the Draft Corporate Governance Code, as the furthest advanced of these reforms. Relatively modest reforms of the Companies Law would serve to redesign these enterprises along economically rational and culturally appropriate lines. The focus should be on more 'default' rules that permit participants to 'customise' their enterprise by contractual means, on better flows of information around the enterprise, and on self-enforcing remedies: injured participants act directly against miscreants wherever possible, without interposing the company or the courts. The Draft Corporate Governance Code takes a distinctive yet complementary approach: educative, ethics-driven, relying on informal sanctions, but also emphasising improvements in the flow of information that (economists would argue) is vital to enterprise success. The Code will introduce reforms that the more regulatory, Dutch-oriented Companies Law Drafting Team will omit.

(2000) 2(1) Asian Law 193

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