Abstract

In the Indonesian Capital Market, normatively, the position of independent shareholder in conflict of interest transaction is as strong party that approves or disapproves the conflict of interest transaction. However, the substance of the regulation regarding to conflict of interest transaction from 1991 to 2020 has not protected independent shareholders. Where, the approval of independent shareholders is not always identical to their strong position, which in practice the Director, Commissioner, or Major Shareholder overrides the provisions of the conflict of interest transaction, namely without prior approval from independent shareholders. Apart from that, there are six other factors that indicate that independent shareholder in conflict of interest transaction have a weak position. The weakness arises usually because the independent shareholders only learn about the loss of the transaction after the conflict of interest transaction has been carried out. These weakness include: 1) the concentrated shareholdings system that adopted by indonesia; 2) the difficulty of  Bapepam (now Financial Service Authority) FSA)) to monitor the public company before conducting a conflict of interest; 3) the occurrence of nominee practices in conflict of interest transaction; 4) no matter how many independent shareholders are present, they are unable to affect the continuity of general meeting of shareholder (GMS) and voting keep been carried out; 5) not fulfilling the applicable conflict of interest procedures and regulations, especially the approval of independent shareholders in the GMS; and 6) law enforcement against public companies who violate the provisions of conflict of interest transaction so far does not provide a deterrent effect. Thus, it is urgent for Capital Market regulators to be able to make a clear and specific arrangement for independent shareholders to be protected from all transaction decisions containing conflict of interest that are dominated by subjective elements of the Board of Directors to the detriment of independent shareholders and the company.

Keywords: Indonesian Capital Market, Conflict of Interest, Independent Shareholder