Good Corporate Governance Practices in Family Business: A Case Study in Indonesia

Abstract

Good corporate governance (GCG) practices have been broadly acknowledged in both industry and
government these days. In general, good execution and practice of good corporate governance indicate the
health of corporations. The awareness of good corporate governance practice developed among family
business regardless the size of the business. Thus, this research aims to explore the general perception of
family business towards the good corporate governance practices and the importance of good corporate
governance in their business. The focus of this study is family business in Yogyakarta Province, Indonesia.
This research uses descriptive and quantitative model. Every data that was obtained from the respondents will
be described in detail and explained with quantitative model to analysis the implementation of good corporate
governance in SMEs. The results from 60 family businesses show that mostly the SMEs understand that
company financial and non-financial report should be reported on regular basis (mean= 2.83) they also
discloses the internal salary system to the employee (mean= 2.68) it might be due to the direct
communication by the owner or management to the employees. SMEs agree that detailed job description is
necessary (mean= 2.97) as well as standard operational procedure document (mean= 2.67). Also, most of
SMEs agree that a regular payment period is important (mean= 3.58) and reporting the tax on time
(mean=3.27). SMEs agree that the owners or family members should be independent in recruiting employees
(mean=2.55) and deciding company strategies (mean=2.43) and SMEs perception of fairness showed that
family member have limited opportunity to work at the company (mean=3.30).