Corporate Governance for Employee’s Welfare

Abstract

The debate about Corporate Social Responsibility (CSR) to stakeholders is a fairly lengthy debate in the repertoire of the development of company law. At least there are two fundamentally different views to interpret the corporate social responsibility.The views, Firstly, cling to the belief that the concept of corporate social responsibility is counterproductive in the business world. According to Milton Friedman, a corporation are naturally only have a goal to generate economic objectives for shareholders. A prominent liberal economics is very pessimistic and tend to oppose any attempt to make the company as a social purpose. Furthermore, in Capitalism and Freedom (1962) Milton Friedman clearly states that in a free society there is one and only one social responsibility of businesses that utilize the company's resources and engage in activities that aim to maximize profits. If this goal is achieved by the company, it actually functions, and corporate social goals have been achieved, namely to improve the welfare of society.The doctrine of the social responsibility in business, damage the free market economic system.Acknowledging social responsibility that will lead to an economic system leads to the direction of the economic plans of the Communist Countries. In the writings, published in the New York Times Magazine on September 13th, 1970, with the title: "The Social Responsibility of Business is to Increase Its Profits". This reasoning is supported by Joel Bakan, which teaches that if the company gives some of its profits to the community, the company has violated his nature. Business sustainability can take place in the long term if the company is able to provide an answer to the needs of stakeholders and give them what they need.Second views, with the increasing importance of the role and position of all stakeholders in the Good Governance management of the company, and surely, the second thought, extremely gave rise to the contradicts of the first view. The second view was expressly acknowledged the existence of corporate social responsibility towards stakeholders. R. Edward Freeman in, “A Stakeholder Theory of the Modern Corporation”, offers an alternative to the theory of Friedman. On the view Freeman, Friedman wrong to assume that the main task is the company's executive moral fiduciary issue to their shareholders and that in fulfilling this obligation they act socially responsible. Freeman takes issue with dissention of opinion and the opinion: 1 "That the company's managers have a duty to all groups and individuals who own shares (a stake) in or claim on the company (Freeman refer to groups and individuals as 'stakeholders'); 2 That there was no stakeholder groups should be given primacy over the other when the company mediate the competition claims of stakeholders; and 3 That company law should be changed to require executives to manage their enterprise in accordance with the principles of the theory of stakeholders, namely, Freeman stated that the executive should be notified (legal / official) to manage their company in the interests of their stakeholders ". Regardless of whether the stakeholder management leads to improved financial performance, managers must manage the business for the benefit of all of stakeholders. It looked at the company rather than as a mechanism to improve the financial returns of stockholders,but as a vehicle for coordinating of stakeholders interests and view management as having a fiduciary relationship not only for shareholders, but for all of stakeholders. According to the normative of stakeholders theory, management must give equal consideration to the interests of all stakeholders, while a conflict of interest, to manage the business so as to achieve the optimum balance between them. This, of course, implies that there will be a time while management is obliged to at least partially sacrificing the interests of the stockholders to those of other stakeholders.In line with this thinking, John Hasnas,stated that "management's fundamental obligation is not to maximize the firm's financial success, but to Ensure its survival by balancing the conflicting claims of multiple stakeholders." John Elkington in Cannibal with Forks: The Triple Bottom Line Twentieth Century Business (1997) says that if a company wants to remain sustained, then he needs to consider not only the interests of the shareholders (profit), but also must pay attention to the welfare of the people which were in it and around (peoples) and environmental sustainability (planet). Stakeholder theory states that the basic duty of management is not to maximize the financial success of the company, but to ensure its survival by balancing the conflicting demands of various stakeholders. The Company shall be managed for the benefit of stakeholders, customers, suppliers, owners, employees, and local communities.The rights of these groups must be ensured and, further, the group must participate, in some sense, in decisions that substantially affect their welfare. Apart from the conceptual debate about the Corporate Social Responsibility (CSR). CSR in Indonesia has been acknowledged.Article 88, Law No. 19 of 2003 on State-Owned Enterprises (SOE Act), firmly establish the SOEs can set aside part of its profits for the purposes of development small businesses, cooperatives and community development around the SOE. Then, Act No. 40 Year 2007 on Limited Liability Companies, Article 74, confirms the existence of Corporate Social Responsibility in Limited Liability company in Indonesia. In fact, Article 74 is more advanced conceptually by putting social and environmental liability in limited liability company as a social mandatory, not just a moral and ethical responsibility. Article 74 has a power that can be enforced against a limited liability company to implement social and environmental liability. Shifting the paradigm of the management company which is intended only to the interests of shareholders (profit) in the direction of the management of the company, to consider the interests of all stakeholders, and environmental interests, assessed constitutional by theConstitutional Court on legal considerations in the Constitutional Court Decision 53 / PUU-VI / 2008, is explained, That the Indonesian economy system as set forth in Article 33 of the 1945 Constitution: The economy shall be organized as a common endeavour based upon the principles of the family system. Sectors of production which are important for the country and affect the life of the people shall be controlled by the state. The land, the waters and the natural riches contained therein shall be controlled by the State and exploited to the greatest benefit of the people. That understanding individualistic and liberalism in the economy was not fit, even contrary to economic democracy embraced by the nation of Indonesia. Earth, water and natural resources contained in it not only for the prosperity of the few entrepreneurs who have capital, but rather for the prosperity of the people. The economy as a joint venture, not only between employers and the state, but also collaboration between employers and the community, especially the surrounding community. Genuine concern of employers on their social environment will provide a secure business environment for the surrounding community feel cared by the employer, so it will strengthen the fabric of the relationship between employers and society. Based on the Decision of the Constitutional Court concluded that the Good Governance management company solely devoted to the interests of shareholders, are not in accordance with democratic principles adopted by the State Indonesian economy. Good Governance Management companies must instead be directed to the welfare of the people of Indonesia. Therefore, companies must be managed with due regard to the interests of all stakeholders, no exception labor / employees of the company. Thus, the management of the company to consider the interests of all stakeholders not only a moral responsibility of the company, but it is mandate in the company law. Oriented company management efforts to improve the welfare of all stakeholders, including workers / employees of the company is the embodiment of company's contribution to the mutual obligations between the government and the business community to improve the welfare of the community. Implementation of the Good Governance management company, for the benefit of stakeholders, did not specifically aimed at corporate responsibility efforts to improve the welfare of employees. Article 74 of the Limited Liability Company Law does not specifically direct the implementation of corporate social responsibility to the interests of employees. However, it does not mean that the discussion of social regulation of corporate governance efforts directed at improving the welfare of the employees concerned becomes unimportant. The ambiguity of Article 74 of the Limited Liability Company Law actually cause the position of employees as part of an internal stakeholders or primary stakeholders of the limited liability company grow weary and still received less attention.On 4th April 2012, the Government enacted Government Regulation No. 47 of 2012 on Social and Environmental Responsibility Company Limited. As the implementation of Article 74 of the Limited Liability Company Law, Government Regulation 47 of 2012 is focused on regulating the use of a limited liability company expense budget has been earmarked as the cost of social and environmental responsibility.However, this rule did not set out clear, the allocation of the budget, the amount of the budget and the subject use of the budget. Thus, it would be difficult to expect the implementation of this government regulation to improve the lives and welfare of labor as the company's internal stakeholders. Therefore, regulation of corporate g