Shareholder activism in Indonesia: revisiting shareholder rights implementation and future challenges

Abstract

Purpose This paper aims to elaborate on the extent to which the Indonesian legal framework has provided room for shareholder activism and the extent to which shareholder activism has been implemented in Indonesia. Design/methodology/approach This study combines normative and empirical legal research methods. Indonesian laws and regulations are analyzed aside from the analysis of empirical data and court decisions on shareholder activism implementation. Findings Indonesian laws and regulations have accommodated shareholders’ activism and shareholders have started to rectify mismanagement and abuse of power that causes loss to the company through derivative lawsuits. Despite this, Indonesian shareholders are still passive, shown by the number of questions asked in the general meetings of shareholders despite the high attendance percentage. Shareholders have also formed associations to gather more influence on the company’s decision-making process. Research limitations/implications The empirical observation in this study was limited to LQ45 companies of the February to July 2021 period. This study can be useful to improve corporate governance and corporate communication in a company to encourage higher participation of individual/minority shareholders. This study also serves as an extension to numerous studies on shareholder protection, corporate governance and corporate law in Indonesia. Originality/value Study on shareholder activism in Indonesia is still rare, despite the rising urgency of company supervision and monitoring to prevent mismanagement. To fill in that gap, this research hopes to initiate discussion on shareholder activism in relation to shareholder protection, corporate governance and corporate law implementation.