Business Judgment Rule Crucial for State-Owned Enterprise Transformation, Says Researcher

The Business Judgment Rule (BJR) is a critical legal principle for enhancing the governance of Indonesian state-owned enterprises (BUMN), according to Satya Arinanto, a researcher at Nagara Institute. He explained that this legal doctrine empowers directors to make professional business decisions while adhering to principles of prudence and good governance.

"This legal protection aims to provide certainty for management in making business decisions that carry business risks," Satya stated during a discussion in Jakarta. He noted that the BJR is supported by three main legal frameworks: Law No. 16 of 2025 on State-Owned Enterprises, Law No. 40 of 2007 on Limited Liability Companies, and Law No. 21 of 2021 on the Eradication of Criminal Acts of Corruption.

Satya emphasized that directors cannot be blamed for decisions made without fraud, conflicts of interest, or illegal actions. He also pointed out that recent regulations in Law No. 16 of 2025 clarify the management of assets based on limited liability company principles, separating company wealth from state finances while maintaining oversight and accountability.

Hotasi Nababan, former CEO of PT Merpati Nusantara Airlines, stressed the importance of harmonizing various legal regimes governing BUMN. He believes legal certainty will enable state company managers to perform their business functions more effectively. "We live in two regimes with different characteristics. Therefore, clarity and consistency of rules are needed so that company management can run effectively and remain accountable," Hotasi said.

Both experts agreed that a strong legal framework is essential for BUMN to support national economic growth targets. Clarifying the line between reasonable business risk and legal violations will provide directors with sufficient room to make strategic decisions that drive economic expansion.