FINANCIAL SERVICES AUTHORITY

REPUBLIC OF INDONESIA

COPY

FINANCIAL SERVICES AUTHORITY REGULATION

NUMBER 34/POJK.04/2014

CONCERNING

THE NOMINATION AND REMUNERATION COMMITTEE OF ISSUERS OR PUBLIC COMPANIES

BY THE GRACE OF GOD THE ALMIGHTY,

THE BOARD OF COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering: that in order to improve the implementation of good corporate governance principles for Issuers or Public Companies related to the transparency of the Nomination and Remuneration process and to improve the quality, competence, and responsibility of the Board of Directors and Board of Commissioners, it is necessary to establish a Financial Services Authority Regulation concerning the Nomination and Remuneration Committee of Issuers or Public Companies;

Recalling: 1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608);
2. Law Number 40 of 2007 concerning Limited Liability Companies (State Gazette of the Republic of Indonesia Year 2007 Number 106, Supplement to the State Gazette of the Republic of Indonesia Number 4756);
3. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement...

Supplement to the State Gazette of the Republic of Indonesia Number 5253);

RESOLVES:

Establishing: A FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING THE NOMINATION AND REMUNERATION COMMITTEE OF ISSUERS OR PUBLIC COMPANIES.

CHAPTER I

GENERAL PROVISIONS

Article 1

In this Financial Services Authority Regulation, the following terms are defined as:

1. The Nomination and Remuneration Committee is a committee formed by and responsible to the Board of Commissioners to assist in carrying out the functions and duties of the Board of Commissioners related to the Nomination and Remuneration of members of the Board of Directors and members of the Board of Commissioners.
2. Nomination is the proposal of a person to be appointed to a position as a member of the Board of Directors or a member of the Board of Commissioners.
3. Remuneration is the compensation determined and given to members of the Board of Directors and members of the Board of Commissioners due to their position and role as assigned in accordance with the duties, responsibilities, and authority of members of the Board of Directors and members of the Board of Commissioners.
4. The Board of Directors is the organ of the Issuer or Public Company that has the authority and full responsibility for the management of the Issuer or Public Company for the benefit of the Issuer or Public Company, in accordance with the purpose and objectives of the Issuer or Public Company and represents the Issuer or Public Company, both inside and outside the court, in accordance with the provisions of the Articles of Association.
5. The Board of Commissioners is the organ of the Issuer or Public Company tasked with carrying out general and/or specific supervision in accordance with the Articles of Association and providing advice to the Board of Directors.
6. Independent Commissioner is a member of the Board of Commissioners who comes from outside the Issuer or Public Company and meets the requirements as an independent commissioner.

Article 2

(1) Issuers or Public Companies are required to have a Nomination and Remuneration function.
(2) The implementation of the function referred to in paragraph (1) must be carried out by the Board of Commissioners.
(3) In carrying out the function referred to in paragraph (2), the Board of Commissioners may form a Nomination and Remuneration Committee.
(4) The Nomination and Remuneration Committee referred to in paragraph (3) may be formed separately.

CHAPTER II

MEMBERSHIP

Article 3

(1) The Nomination and Remuneration Committee must consist of at least 3 (three) members, with the following provisions:
a. 1 (one) chairperson who also serves as a member, who is an Independent Commissioner; and b. other members who may come from:
1. members of the Board of Commissioners;
2. parties from outside the Issuer or Public Company in question; or
3. parties holding managerial positions below the Board of Directors specializing in human resources.
(2) Other members of the Nomination and Remuneration Committee as referred to in paragraph (1) letter b must mostly not come from parties holding managerial positions below the Board of Directors specializing in human resources. (3) Members of the Nomination and Remuneration Committee coming from outside the Issuer or Public Company as referred to in paragraph (1) letter b number 2 must meet the following requirements:
a. do not have an Affiliation relationship with the Issuer or Public Company, members of the Board of Directors, members of the Board of Commissioners, or the Principal Shareholders of the Issuer or Public Company; b. have experience related to Nomination and/or Remuneration; and
c. do not hold concurrent positions as members of other committees owned by the Issuer or Public Company.
(4) Members of the Board of Directors of the Issuer or Public Company cannot become members of the Nomination and Remuneration Committee.

Article 4

(1) Members of the Nomination and Remuneration Committee as referred to in Article 3 paragraph (1) are appointed and dismissed based on a decision of the Board of Commissioners meeting. (2) Members of the Nomination and Remuneration Committee as referred to in paragraph (1) are appointed for a specific term and may be reappointed. (3) The term of office of members of the Nomination and Remuneration Committee as referred to in paragraph (2) shall not be longer than the term of office of the Board of Commissioners as regulated in the Articles of Association. (4) Replacement of members of the Nomination and Remuneration Committee who do not come from the Board of Commissioners must be done no later than 60 (sixty) days from the date the member in question can no longer perform their functions.

Article 5

Issuers or Public Companies are required to document the decision to appoint and dismiss members of the Nomination and Remuneration Committee as referred to in Article 4 paragraph (1).

Article 6

Provisions regarding membership and appointment of members of the Nomination and Remuneration Committee as referred to in Article 3 and Article 4 apply mutatis mutandis to the Nomination and Remuneration Committee formed separately by the Board of Commissioners.

CHAPTER III

DUTIES AND RESPONSIBILITIES

Article 7

(1) The Nomination and Remuneration Committee must act independently in carrying out its duties.
(2) In carrying out its duties, the Nomination and Remuneration Committee is responsible to the Board of Commissioners.

Article 8

The Nomination and Remuneration Committee has at least the following duties and responsibilities:
a. related to the Nomination function:
1. provide recommendations to the Board of Commissioners regarding:
a) the composition of positions of members of the Board of Directors and/or members of the Board of Commissioners; b) policies and criteria needed in the Nomination process; and c) performance evaluation policies for members of the Board of Directors and/or members of the Board of Commissioners;
2. assist the Board of Commissioners in performing performance evaluations of members of the Board of Directors and/or members of the Board of Commissioners based on established benchmarks as material for evaluation;
3. provide recommendations to the Board of Commissioners regarding capability development programs for members of the Board of Directors and/or members of the Board of Commissioners; and
4. propose candidates who meet the requirements as members of the Board of Directors and/or members of the Board of Commissioners to the Board of Commissioners to be submitted to the General Meeting of Shareholders (GMS).
b. related to the Remuneration function:
1. provide recommendations to the Board of Commissioners regarding:
a) Remuneration structure; b) policies on Remuneration; and c) the amount of Remuneration;
2. assist the Board of Commissioners in performing performance evaluations regarding the suitability of Remuneration received by each member of the Board of Directors and/or members of the Board of Commissioners.

Article 9

In carrying out the Nomination function as referred to in Article 8 letter a, the Nomination and Remuneration Committee must carry out the following procedures:
a. compile the composition and Nomination process for members of the Board of Directors and/or members of the Board of Commissioners; b. compile policies and criteria needed in the Nomination process for candidates for members of the Board of Directors and/or members of the Board of Commissioners;
c. assist in the implementation of evaluations of the performance of members of the Board of Directors and/or members of the Board of Commissioners;
d. compile capability development programs for members of the Board of Directors and/or members of the Board of Commissioners; and e. review and propose candidates who meet the requirements as members of the Board of Directors and/or members of the Board of Commissioners to the Board of Commissioners to be submitted to the GMS.

Article 10

(1) In carrying out the Remuneration function as referred to in Article 8 letter b, the Nomination and Remuneration Committee must carry out the following procedures:
a. compile the Remuneration structure for members of the Board of Directors and/or members of the Board of Commissioners; b. compile policies on Remuneration for members of the Board of Directors and/or members of the Board of Commissioners; and
c. compile the amount of Remuneration for members of the Board of Directors and/or members of the Board of Commissioners.
(2) The Remuneration structure as referred to in paragraph (1) letter a may consist of:
a. salary; b. honorarium;
c. incentives; and/or
d. allowances that are fixed and/or variable.
(3) The compilation of the structure, policies, and amount of Remuneration as referred to in paragraph (1) must take into account:
a. Remuneration applicable in the industry according to the business activities of similar Issuers or Public Companies and the business scale of the Issuer or Public Company in its industry; b. the duties, responsibilities, and authority of members of the Board of Directors and/or members of the Board of Commissioners linked to the achievement of objectives and performance of the Issuer or Public Company;
c. performance targets or the performance of each member of the Board of Directors and/or members of the Board of Commissioners; and
d. the balance of allowances between those that are fixed and those that are variable.
(4) The structure, policies, and amount of Remuneration as referred to in paragraph (1) must be evaluated by the Nomination and Remuneration Committee at least 1 (one) time in 1 (one) year.

Article 11

In the event that a Nomination and Remuneration Committee is not formed, the Nomination and Remuneration procedures as referred to in Article 9 and Article 10 paragraph (1) must be carried out by the Board of Commissioners.

CHAPTER IV

CONDUCTING MEETINGS

Article 12

(1) Meetings of the Nomination and Remuneration Committee are held periodically at least 1 (one) time in 4 (four) months.
(2) Meetings of the Nomination and Remuneration Committee may only be held if:
a. attended by a majority of the number of members of the Nomination and Remuneration Committee; and b. one of the majority of the number of members of the Nomination and Remuneration Committee as referred to in letter a is the Chairperson of the Nomination and Remuneration Committee.

Article 13

(1) Decisions of the Nomination and Remuneration Committee meeting are made based on consensus.
(2) In the event that a decision based on consensus as referred to in paragraph (1) is not reached, decision-making is carried out based on the majority vote.
(3) If in decision-making carried out by voting there is an equal number of votes, the decision is taken through a mechanism regulated in the Nomination and Remuneration Committee guidelines. (4) In the event that there are differing opinions in the decision-making process, the differing opinions must be included in the meeting minutes along with the reasons for the differing opinions.

Article 14

(1) The results of the Nomination and Remuneration Committee meeting must be recorded in meeting minutes and documented by the Issuer or Public Company.
(2) The meeting minutes of the Nomination and Remuneration Committee as referred to in paragraph (1) must be submitted in writing to the Board of Commissioners.

Article 15

In the event that a Nomination and Remuneration Committee is not formed, meetings with agendas regarding Nomination and/or Remuneration must be held by the Board of Commissioners.

Article 16

(1) Meetings as referred to in Article 15 are held periodically at least 1 (one) time in 4 (four) months.
(2) Meetings with agendas regarding Nomination and/or Remuneration may only be held if:
a. attended by a majority of the number of members of the Board of Commissioners; and b. one of the majority of members of the Board of Commissioners as referred to in letter a is an Independent Commissioner.

Article 17

(1) Decisions of meetings as referred to in Article 15 are made based on consensus.
(2) In the event that a decision based on consensus as referred to in paragraph (1) is not reached, decision-making is carried out based on the majority vote.
(3) In the event that there are differing opinions in the decision-making process, the differing opinions must be clearly included in the meeting minutes along with the reasons for the differing opinions.

Article 18

The results of meetings as referred to in Article 15 must be recorded in meeting minutes and documented by the Issuer or Public Company.

CHAPTER V

GUIDELINES FOR THE NOMINATION AND REMUNERATION COMMITTEE

Article 19

(1) The Nomination and Remuneration Committee must compile guidelines that are binding for every member of the Nomination and Remuneration Committee.
(2) The Nomination and Remuneration Committee guidelines as referred to in paragraph (1) must contain at least:
a. duties and responsibilities; b. composition and membership structure;
c. work procedures and methods;
d. conducting meetings; e. activity reporting system; f. member replacement procedures; and g. term of office.
(3) The guidelines as referred to in paragraph (1) are established by the Board of Commissioners.

Article 20

(1) In the event that a Nomination and Remuneration Committee is not formed, the guidelines for implementing the Nomination and Remuneration functions must be created by the Board of Commissioners with the provision that they contain at least:
a. duties and responsibilities related to Nomination and Remuneration; b. work procedures and methods;
c. conducting meetings; and
d. activity reporting system.
(2) The guidelines as referred to in paragraph (1) must be included in the Board of Commissioners guidelines.

CHAPTER VI

DISCLOSURE AND REPORTING

Article 21

(1) The Nomination and Remuneration Committee must report the implementation of duties, responsibilities, and Nomination and Remuneration procedures carried out as referred to in Article 8, Article 9, and Article 10 to the Board of Commissioners. (2) The report as referred to in paragraph (1) is part of the report on the implementation of the Board of Commissioners' duties and is submitted at the General Meeting of Shareholders.

Article 22

(1) Issuers or Public Companies are required to disclose the implementation of functions related to Nomination and Remuneration in:
a. annual reports; and b. the website of the Issuer or Public Company.
(2) Information regarding the implementation of functions related to Nomination and Remuneration disclosed in the annual report of the Issuer or Public Company must contain at least:
a. a statement that the Issuer or Public Company has guidelines as referred to in Article 19 paragraph (1) or Article 20 paragraph (1); and b. a brief description of the implementation of duties and responsibilities of the Nomination and Remuneration Committee in the fiscal year. (3) Information regarding the implementation of functions related to Nomination and Remuneration disclosed on the website of the Issuer or Public Company as referred to in paragraph (1) letter b must include at least:
a. guidelines as referred to in Article 19 paragraph (2) or Article 20 paragraph (1); and b. a brief description of the implementation of duties and responsibilities of the Nomination and Remuneration Committee in the fiscal year.

Article 23

In the event that a Nomination and Remuneration Committee is not formed, the Issuer or Public Company is required to disclose information in the annual report and website of the Issuer or Public Company containing at least:
a. an explanation regarding the non-formation of the Nomination and Remuneration Committee; and b. a description of the implementation of Nomination and Remuneration functions carried out in the fiscal year.

CHAPTER VII

PROHIBITIONS

Article 24

(1) Every member of the Nomination and Remuneration Committee is prohibited from taking personal benefits, directly or indirectly, from the activities of the Issuer or Public Company other than lawful income. (2) Members of the Board of Commissioners who serve as Chairperson or members of the Nomination and Remuneration Committee are not given additional income other than income as members of the Board of Commissioners.

CHAPTER VIII

SANCTION PROVISIONS

Article 25

(1) Without prejudice to criminal provisions in the Capital Market field, the Financial Services Authority has the authority to impose administrative sanctions on any party that violates the provisions of this Financial Services Authority Regulation, including parties who cause the violation to occur, consisting of:
a. written warning; b. fine, namely the obligation to pay a certain amount of money;
c. restriction of business activities;
d. suspension of business activities; e. revocation of business license; f. cancellation of approval; and g. cancellation of registration.
(2) Administrative sanctions as referred to in paragraph (1) letter b, letter c, letter d, letter e, letter f, or letter g may be imposed with or without prior imposition of administrative sanctions in the form of a written warning as referred to in paragraph (1) letter a. (3) Administrative sanctions in the form of a fine as referred to in paragraph (1) letter b may be imposed separately or together with the imposition of administrative sanctions as referred to in paragraph (1) letter c, letter d, letter e, letter f, or letter g.

Article 26

In addition to administrative sanctions as referred to in Article 25 paragraph (1), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.

Article 27

The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 25 paragraph (1) and specific actions as referred to in Article 26 to the public.

CHAPTER IX

TRANSITIONAL PROVISIONS

Article 28

Issuers or Public Companies are required to adjust to the provisions of this Financial Services Authority Regulation no later than 1 (one) year from the date this Financial Services Authority Regulation is promulgated.

CHAPTER X

CLOSING PROVISIONS

Article 29

Provisions in other legislation regulating the Nomination and Remuneration Committee remain applicable to Issuers or Public Companies as long as they do not conflict with the provisions in this Financial Services Authority Regulation.

Article 30

This Financial Services Authority Regulation comes into force on the date of its promulgation.

To ensure that everyone knows it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta
On 8 December 2014

CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY,

Signed,

MULIAMAN D. HADAD

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2014. NUMBER 376……

Promulgated in Jakarta
On 8 December 2014

MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,

Signed,

YASONNA H. LAOLY

Copy in accordance with the original
Director of Law 1
Department of Law,

Signed,

Tini Kustini