CORPORATE GOVERNANCE AND ENVIRONMENTAL PERFORMANCE IN THE CONTEXT OF ASEAN ECONOMIC COMMUNITY

Abstract

ASEAN economic community is the opportunity for Indonesia to integrate the economy. This encourages Indonesian companies to have superiority to competing in the ASEAN. The objective of this study is to describe corporate governance and environmental performance in terms of AEC. This study used literature review as the research method. The data were collected from various references toward the practice of Asean Economic Community (AEC). The result shows that there is an increase of corporate governance index and the achievement of environmental performance rating from various companies assessed by Corporate Environmental Performance Ratings (PROPER) in 2014-2015 and Environmental Performance Index (EPI). This proves that Indonesian companies have been ready to face the AEC. KEY WORDS AEC, corporate governance, environmental performance. Corporate governance is still a hotspot among shareholders, regulators, and the community and it significantly increases attention during the last decade (Smolo and Smajic, 2011). Good corporate governance will elevate the investor confidence, help small shareholders, and encourage good decision-making process. In addition, it also repairs the relationship between workers, creditors, and the other stakeholders (Yacob and Basiuni, 2014). According to Nurhaida (2015), corporate governance with the best standard will be one of the determinant factors for the issuer to face the AEC (www.ojk.go.id). AEC will be an opportunity and threat for companies in the ASEAN. Companies which have good governance will treat AEC as the opportunity, but those with poor governance will see it as a threat. Public awareness of the importance of environmental management makes companies pay attention the corporate governance considering environmental issues. Information of environmental performance of ASEAN countries has been getting attention from researchers like Ab-Rahim (2014); Said (2014). Environment condition will affect investor to make a decision (Said et.al. 2014). Environmental information is useful for policy makers to repair their design of environmental policy and for long-terms sustainability of a nation. Ab-Rahim (2014) stated that countries with smaller economies like Laos, Cambodia, and Brunei are a country with efficient environmental management. In accordance with economic efficiency, countries with larger economies like Malaysia, Indonesia, Philippines, and Singapore is more efficient than the small countries (except Brunei). This study will discuss the problem of corporate governance and environmental performance in the AEC. METHODS OF RESEARCH