CORPORATE GOVERNANCE POLICY

KTKP is the main policies applicable within the Company, it is observed periodically in order to adap to developments and internal as well as external issues within the company. It is contained the general principle in conducting the Company’s activity.

Further provision of the KTKP set forth in separate manual owned by related each work unit. Each manual shall not contravene with the KTKP.

KTKP shall be the reference for Board of Commissioner, Board of Directors and any work unit below, in conducting activities within the Company, as well shall be the guidelines to implement GCG within the Company 

Code of Corporate Governance (KTKP)  

Garuda Indonesia always supports compliance with Garuda Indonesia's Code of Business Ethics and Work Ethics, and is committed to implementing it, also requires all Executive Employees from every level in the company to be responsible for ensuring that Garuda Indonesia's Code of Business Ethics and Work Ethics is followed and implemented properly by all elements of Garuda Indonesia. Furthermore, every Garuda Indonesia employee is required to sign a commitment to comply with Garuda Indonesia's Code of Business Ethics and Work Ethics periodically every year. 

Garuda Indonesia's Code of Business Ethics and Work Ethics will always be adjusted to the development of legal, social, norms, regulations and business developments of Garuda Indonesia, and will be delivered within Garuda Indonesia so that all elements can understand and actively support the implementation of the Company's Business Ethics and Work Ethics Guidelines can run well. 

Garuda Indonesia personnel are obliged to implement Garuda Indonesia's Code of Business Ethics and Work Ethics, so that the moral values adopted by the company can be reflected in attitudes, behaviors and actions. Therefore, this guideline is equipped with examples of behavior that can and cannot be displayed by Garuda Indonesia personnel. 

Business and Work Ethics 

Nomination

The company provides the opportunity for all employees to be able to reach a certain level in the company in accordance with their performance and potential. The company carries out the transfer of personnel from one department to another in order to give the employees the opportunity to increase their potentials. The process of determining the transfer and promotion of personnel shall be done through the mechanism of the Human Capital Committee . Such committee is formed in several levels following the rank levels in the organization. The company has established 4 Human Capital Committee levels whose governance implementation contained in the human capital manual.

For pilots, the process of promotion and demotion determination shall be conducted through the Board of Cockpit Crew Assessors. The Board of Cockpit Crew Assessors uses a bidding system for this process. The procedure of the Board of Cockpit Crew Assessors is contained in the manual for flight operating unit procedure and also in Pilot’s Manual.

As for the cabin crew, the promotion is also conducted through a bidding system publicly announced. The procedure of this bidding system is contained in the procedure manual for cabin service unit and Cabin Crew Manual.

Remuneration

The management of remuneration shall include Compensation and Benefits & Perk Components. The company uses the principle of MMC (Meritocracy, Market, Company Capability) in setting this transactional reward.

Salary scheme shall be determined based on the position, competence and accountability by creating internal equity based on objective criteria and also by considering external competitiveness (market price) in accordance with the Company's ability. Salaries in the Company are grouped based on professional groups namely pilots, cabin crew and Head Office - Branch Office (HO-BO) staff with salary components that consist of fixed pay and variable pay.

The company will conduct a review on the remuneration and communicate to the workers’ union so as to create mutually beneficial conditions.

The company gives authority to official one level below the Director level to do reviews and salary adjustment for officials who have been promoted or transferred to a new position and for employees under specified term employment contract or contract employees appointed as permanent employees. The remuneration procedure is contained in the human capital manual.

Pilot’s salary is determined based on competency. The company set up a layer system for Captain’s group and First Officer’s group that applies to all types of aircraft. Adjustments to higher-layer will be applied automatically every year.

Pilots and cabin crew are entitled to a variable pay component in the form of production allowance (PA) that consists of flight allowance (FA) and travel allowance (TA). The PA component shall depend on flight hours productivity of the crew per month.

With evolving aviation industry in Indonesia, of course, the pressure in the business competition is even greater. This rapid development is also followed by external factors contributing to good or bad conditions of the Company. Such factors include macro-economic conditions, fuel price fluctuations, foreign currency fluctuations and lacking of infrastructures. The uncertainty of such factors will lead to higher risks in the aviation industry.

To overcome such challenge, it requires the implementation of Enterprise Risk Management (ERM) in the Company. As a whole, the risks that occur in an aviation company will have an impact on flight operations, customers, the company’s value, security and safety. With the implementation of risk management in every part of the Company, it is expected that the risks can be managed and controlled effectively and efficiently so as not to interfere with the achievement of the Company’s target.

Effectiveness of the Company's Risk Management System

The effectiveness of the risk management has been reviewed on a regular basis (quarterly). This review is conducted with the Company’s various lines contribution through PRO Team (Performance and Risk Officer Team) workshops, focus group discussions, and sharing sessions. The implementation of ERM is integrated with the corporate strategy. Therefore, any decision of the Company is made by considering and responding to the uncertainties in the business. Such implementation is carried out with the purpose of providing an overview of the risks that may occur so that the risk mitigation measures can be well implemented as an attempt to maintain the achievement of the Company’s expected goals.

To improve the effectiveness and efficiency of the risk management, the Company performs continuous improvement. Each year, the Company makes an assessment on the level of maturity of ERM roadmap implementation. In addition, to improve risk awareness throughout the Company’s human resources, there are some efforts that have been made. Such efforts include workshops, risk management forums with subsidiaries, banners, PRO Team certification and brochures.

In line with the implementation of Good Corporate Governance (GCG) including enforcement of business and work ethics, eradication of corruption, collusion, and nepotism (KKN) as well as bribery practices, PT Garuda Indonesia (Persero) Tbk ("the Company") is committed to creating the Company's operational activities that uphold business ethics and work ethics and are free from KKN and bribery practices.

In its implementation, the Company has built a web-based whistleblowing system known as the Whistleblowing System ("WBS"). The implementation of the Company's WBS was ratified based on the Decree of the Company's President Director.

The implementation of WBS is one of the Company's efforts to uphold business ethics and work ethics, as well as efforts to eradicate KKN whose application refers to the Regulation of the Minister of SOEs of the Republic of Indonesia Number PER-2 / MBU / 03/2023 concerning Guidelines for Governance and Significant Corporate Activities of State-Owned Enterprises and Their Development. The WBS system allows all Garuda Indonesia personnel and other stakeholders to submit reports of alleged violations and fraud and other forms of ethical violations that occur in the Company.

Whistleblowers can report online through a web-based system with address https://whistleblowing.tips/wbs/@skygaruda In implementing WBS, the Company has a policy that guarantees the protection of the reporter's identity and will use various means to maintain the confidentiality of the reporter's identity and the content of the report submitted by the reporter. This is intended to encourage reporting of violations that occur in the Company and ensure the safety of the whistleblower and his family.

Anti-Corruption Policy

The Company establishes Business Ethics and Work Ethics Guidelines, one of which contains anti-corruption. This anti-corruption policy has been agreed between the management and the employee union with the inclusion in one of the articles in the Collective Labor Agreement regarding the rights and obligations of the parties. Meanwhile, the consequences of violating the anti-corruption policy are regulated in the human capital manual. Corruption-related offences can be categorized into level II or even level III disciplinary offences.

The Company has signed a Memorandum of Understanding with the Corruption Eradication Commission ("KPK") on February 10, 2011, to implement the Gratification Control Program (PPG) within the Company, and the Company and its Subsidiaries have also signed a Statement of Commitment to the Implementation of the Anti-Corruption Program on December 5, 2023. The Anti-Corruption Program is a commitment to support efforts to eradicate corruption within the Company and its Subsidiaries in line with the AKHLAK values of the Ministry of SOEs of the Republic of Indonesia and the principles of corporate culture "The Garuda Way".

The gratification control policy is based on the provision that every Garuda Indonesia employee is not allowed to give and/or receive gratuities and must make a report (disclosure) to the Company (if they receive any form of giving because they are faced with difficult conditions to refuse and/or refusal). The Company has issued provisions regarding gratification control through the Decree of the President Director of the Company.

LHKPN (State Administrator Asset Report)

The Board of Commissioners, Board of Directors, Structural Officers 1 (one) level below the Board of Directors, General Managers at branch offices, Employees who carry out the procurement process at the procurement unit, as well as the Board of Directors and Board of Commissioners at Subsidiaries and Affiliated Companies are required to submit their asset reports to the KPK.

Conflict of Interest

In order to build harmonious cooperation and increase the value of the Company, the Company's business activities cannot be separated from relationships and interactions with Stakeholders and other parties. However, in carrying out these relationships and interactions, there is always the potential for conflict of interest situations that may be inevitable between one party and another

Conflict of Interest or Conflict of Interest is a situation or condition where there are differences in interests between the Company and Garuda Indonesia personnel either individually or in groups that have the potential to abuse their position/position and/or affect the quality and objectivity of the tasks carried out or decisions taken so as to harm the Company.

The Company has issued provisions regarding Guidelines for Handling Conflicts of Interest. Forms of conflict of interest situations in the Company include acceptance/gratuity, misuse of confidential company information, prohibited concurrent positions, abuse of position, commercialization in services and others. Garuda Indonesia personnel must know the various forms of conflicts of interest, their causes, how to prevent them and what actions should be taken as well as how to report if there is a conflict of interest situation.

In order to ensure that the handling of conflicts of interest can be known by all Garuda Indonesia personnel and all stakeholders related to the Company, all Leadership Employees within the Company act as role models in enforcing conflict of interest handling, conducting socialization and coaching as well as supervising the implementation of the Conflict of Interest Handling Guidelines.

Violations of the provisions in the Conflict of Interest Handling Guidelines will be subject to applicable sanctions as stated in the Collective Labor Agreement (PKB) and/or applicable laws and regulations.

Guidelines for the Handling of Conflict of Interest 

The rights of creditors

• To receive annual consolidated financial statements that have been audited, semi-annual consolidated financial statements, and quarterly consolidated financial statements in an agreed period in accordance with the agreement with each creditor.
• To receive a financial covenant compliance certificate in accordance with the provisions stipulated in the agreement with each creditor.
• To get information about court proceedings or ongoing disagreement that could potentially have a material adverse impact on the Company.
• To receive a written notice concerning, as stipulated in the agreement with each creditor:
  • Any occurrence that may affect the smoothness of payment obligations
  • Delay in payment obligations
  • Any occurrence of default, which could potentially lead to events of default or change of control
  • Change of the company’s status
  • Business consolidation, capital investment or shares purchase from other companies
  • Dividends or profit distribution of more than 50% to the shareholders
  • Investment/business expansion outside the Company’s business field, according to the Articles of Association will be done by transferring share ownership to the subsidiary, so that share ownership of the subsidiary is up to 51% of the paid up capital in the subsidiary concerned.


• At any time after an event of default or event of potential default, creditors or their representatives may have an access to the Company’s and its subsidiaries’ books of account at any reasonable time during normal working hours, and will only use such information in accordance with the transaction documents/loan agreements and applicable law.
• To receive information as required by the Creditor in the implementation of functions and duties in accordance with the transaction documents/loan agreement and applicable law.
• To receive a certificate stating the absence of events of default and the list of main subsidiaries by complying with the provisions set forth in the agreement with each creditor.
• To examine the business and financial activities of the Company, as well as to review the business premises.
• To receive information in writing concerning General Meeting of Shareholders that will be conducted with the agenda of the amendment of the Articles of Association, shareholders and/or the members of the Board of Directors and/or the Board of Commissioners.
• To receive alerts when the Company will be generally subject to the jurisdiction of taxation in any region/ political sub-division or any institution in that jurisdiction or when the Company has an authority over taxes other than or in addition to the territory of the Republic of Indonesia.
• To receive a list of authorized representatives of the Company whenever there are changes to the list.

Supplier Selection

Garuda’s policy in the procurement of goods/services is to prioritize direct procurement to the manufacturer, authorized distributor or sole agent and to avoid using intermediaries who do not add value.

Small and medium enterprises, the use of domestic production, nasional design and engineering shall be prioritized provided that the quality, price, capabilities and qualifications are in accordance with the Company’s requirements and can be accounted for.

Suppliers involved in the procurement process of goods/ services must meet the requirements as follows:

• Preferably in the form of a legal entity
• Meet the legality aspect in accordance with its business field
• Have expertise, experience and technical capabilities and management in accordance with its business field.
• Have necessary resources required in the procurement of goods/services
• Not engaged in or still undergoing criminal sanctions.

Suppliers wishing to enroll as Garuda’s partners are required to register through the website http://eproc.garuda-indonesia.com/and must meet all the requirements, further evaluation and selection of candidates is done through due diligence or pre-qualification process.

Garuda has the policy and the rights to set the number of suppliers in Garuda’s Partner List of as well as the suppliers in Garuda’s Partner List of that will be evaluated on a periodic basis.

Vendor’s Capacity Building

In an effort to promote the ability of vendors and also as part of supplier management, Garuda set a Supplier Performance Assessment System that aims to ensure the quality, transparency and continuous improvement in the relationship between suppliers and Garuda.

Garuda will evaluate the performance of its partners on a periodic basis based on criteria that has been set including, among other things, aspects of quality, innovation, compliance with obligations under the agreement, as well as active participation in the procurement process in Garuda.

Supplier performance evaluation results will be the basis for the determination of rewards and also consequences for suppliers and also as the basis for the evaluation of Garuda’s Partner List.

As a follow-up to the Letter of the Minister of SOEs Number S-35 / MBU / 01/2020 concerning the Implementation of an Anti-Bribery Management System in SOEs as an Implementation of Presidential Regulation Number 54 of 2018 concerning the National Strategy for Corruption Prevention and the Letter of the Secretary of the Minister of SOEs Number S-17 / S.MBU / 02/2020 concerning Anti-Bribery Management System Certification, PT Garuda Indonesia (Persero) Tbk (the "Company") has built, implement and certify the Anti-Bribery Management System SNI ISO 37001: 2016 ("ISO 37001").

ISO 37001 is an international standard on anti-bribery management systems designed to instill an anti-bribery culture and provide appropriate controls to prevent, detect and respond to bribery risks in an organization / company.

The Company has implemented an Anti-Bribery Management System ("ABMS") since 2020 and has renewed the SMAP Certificate based on ISO 37001 on the Company's General Goods and Services Procurement Process and Aircraft Procurement issued by the Certification Institution PT TUV Nord Indonesia and the National Accreditation Committee (KAN) with a validity period until 2027.

With the certification of SMAP based on ISO 37001 in the Company, this certification can provide assurance to customers, business partners and other stakeholders that the Company has implemented internationally and nationally recognized anti-bribery control practices.

Furthermore, the Company will conduct an ABMS conformity assessment (Surveillance) which is assessed by the Certification Institution every year until the validity period of the certificate to ensure the Company's consistency in implementing the ABMS.

The Company is committed to conducting business activities with integrity to realize a transparent and clean company through the implementation of ABMS and the application of the 4 No's principle, namely No Bribery, No Kickback, No Gift, and No Luxurious Hospitality.
 

Anti-Bribery Management System  

Certificate Anti-Bribery Management System as per SNI ISO 37001:2016