As a form of the implementation of Good Corporate Governance, the Company has established and ratified the Corporate Governance Policy, which represents guidelines on the implementation of Corporate Governance; Board Manual, which represents guidelines for the Board of Directors and the Board of Commissioners in carrying out their duties and responsibilities; Work Ethics & Business Ethics, which represents guidelines for every Garuda Indonesia’s individual on the code of conduct and in implementing the Company’s business activities with the stakeholders. The Company has also determined and continuously improved the operational procedures and technical manuals on all lines of the organization so that each function of the organization is being guided by and subject to the rules and policies that have been determined in carrying out its duties.
The main objectives of Corporate Governance Policy to be as follow:
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
The company’s Code of Conduct is set forth in the PT Garuda Indonesia (Persero) Tbk., Business and Work Ethics which was inaugurated on February 10, 2011 that was marked by the signing of the commitment by the Board of Directors, Board of Commissioners, Vice President and General Managers of Branch Offices. The Business and Work Ethics handbook has been authorized by Decision Letter of the President & CEO of the Company on March 11, 2011 and update by Decision Letter of the President & CEO of the Company on October 07, 2015.
Enforcement of Business and Work Ethics
TheBusiness and Work Ethics shall apply to every level of the organization from the Board of Commissioners, Board of Directors, structural officers and all of non structural staff. The Business and Work Ethics shall be communicated to all levels of the organization through direct face to face events, writings on intra personnel media and the company's official website.
Implementation and Enforcement of Business and Work Ethics
The cultural values of the company (SINCERITY) is the root of the implementation and enforcement of business & work ethics in the company. The company shall perform socialization, internalization, and consistent monitoring in order for the Business and Work Ethics to become the foundation of the employees’ working attitudes and behavior.
People Manager acts as a role model in the enforcement and implementation of the code of ethics. A reporting system for the enforcement of business conduct shall also be built so that all Garuda Indonesia employees may be avoided from conducting things which are unpermitted by the company through the implementation of Whistle Blowing System (WBS).
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.
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.
Whistle Blowing System
Since 2010, the Company has built a web-based violations reporting system known as WBS (Whistle Blowing System). The implementation of the Company's Whistle Blowing System was authorized based on letter of decision of the President & CEO of the Company dated 13 August 2012 and was completed by letter of decision of the President & CEO dated 30 January 2014.
WBS (Whistle Blowing System) is a refinement system for handling reports of alleged corruption, collusion and nepotism, which has been implemented since 2006 and is adapted to the WBS Guidelines issued by the National Committee on Governance. WBS Development is one of the Company's efforts to uphold business ethics, work ethics, as well as an effort to combat corruption. The WBS system allows Insan Garuda Indonesia and other stakeholders to report alleged violations and fraud and other forms of ethical violations that occurred in the Company.
People can make an online report through a web-based system in website address: whistleblower.garuda-indonesia.com In the implementation of WBS, the Company has a policy that guarantees the protection of the identity of the complainant and will use a variety of ways to maintain the confidentiality of the identity of the complainant. This protection guarantee is intended to encourage reporting of violations that occurred in the Company and to ensure the safety of the complainant and his/her family.
The Company has established Business and Work Ethics that among others regulating anti-corruption. The anti-corruption policy has been agreed between the management and workers' union with the inclusion of one article in the Collective Bargaining Agreement regarding the rights and obligations of the parties. While the consequences for violations of anti-corruption policy are set in the human capital manual. Corruption-related violations can be categorized as disciplinary violation level II or even level III.
The Company has also signed a Memorandum of Understanding between the Company and the Corruption Eradication Commission (KPK) on 10 February 2011, to implement the Gratuity Control Program in the Company. Gratuity Control Program is an initiative program that has been implemented in order to internalize the values of SINCERITY, especially the values of honesty and integrity as well as good corporate governance principle.
Gratuity Control policy is based on the provision that each employee of the company is not allowed to accept gratuities and must make a report (disclosure) to the Company (when receiving any form of gifts since in difficult situation to refuse or decline). The Company has issued regulations concerning gratuity control through the Decision Letter of the President & CEO of the Company.
Wealth Report of State Officials (LHKPN)
Board of Commissioners, Board of Directors, Vice President, General Managers of Branch Offices, Officers and Chairmen of Procurement Units and the Board of Directors of Subsidiaries, are obliged to submit a wealth report to the Corruption Eradication Commission (KPK).
The Handling of Conflict of Interest
In light of the efforts to implement Good Corporate Governance (GCG), including the implementation business and work ethics as well as the efforts to eradicate corruption, collusion and nepotism (KKN) within the premises of Company, the Company is determined to create the company's operations which upholds business and work ethics and practices and which is free from corruption and conflicts of interest.
Conflict of Interest is a circumstance or condition in which there is a discrepancy between the interests of the Company and Garuda Indonesia's Personnel in individual or collective manner which potentially leads to abuse of position/title and/or which may affect the quality and objectivity of the tasks performed or decisions made that could be detrimental to the Company.
The Company has issued regulations concerning Guidelines for Handling of Conflict of Interest. The types of conflict of interest situations in the Company shall include, among others, gratification, misuse of company's confidential information, prohibited concurrent holding of positions, abuse of office, commercialization of the services, and so on. Garuda Indonesia's personnel must be familiar with various types of conflict of interests, the causes of which, how to prevent it and what actions should be taken and how to report conflict of interest situations.
In order to ensure that the handling of conflicts of interest is brought to the attention of all Garuda Indonesia's Personnel and all stakeholders associated with the Company, all Senior Staff in the Company shall act as a role model in enforcing the handling of conflicts of interest, and shall socialize and supervise and monitor the implementation of the Guidelines for Handling of Conflict of Interest.
Any violation to the provisions of the Guidelines for Handling of Conflict of Interest will be subject to sanctions applying as provided for in the Collective Employment Agreement (PKB) and/or the prevailing regulations.
The rights of creditors
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:
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.