BOARD MANUAL - pertamina.com · MAHMUDDIN YASIN Commissioner [signature] MUHAMMAD HUSEIN Upstream Director [signature] BAMBANG PS BRODJONEGORO Commissioner [signature] HARI KARYULIARTO

Compliance Function – Corporate Secretary PT PERTAMINA (PERSERO) Semangat Terbarukan

BOARD MANUAL

1 Board Manual

INTRODUCTION

INTRODUCTION

The aims and objectives of PT Pertamina (Persero) (“The Company/Pertamina”) is to

run a business in the energy sector, namely oil and natural gas, new and renewable

energy, both domestically and overseas as well as other related activities or to support

businesses in the energy sector, including oil and natural gas, new and renewable

energy and the development of resources optimization of the Company in order to

produce high quality and competitive goods and/or services and to make profit in order

to increase the value of the Company by implementing the principles of limited liability

companies.

Pertamina must carry out its business activities under the principles of good corporate

governance, in order to be consistent with its aims and objectives.

In order to the achievee excellent performance and in the efforts to increase the quality

and effectiveness of relationship between the Board of Directors and Board of

Commissioners as the Company’s organs, through the application of Good Corporate

Governance (GCG) principles such as Transparency, Accountability, Responsibility,

Independency and Fairness, the working relationship between the Board of Directors

and Board of Commissioners shall be created in such a way so as to be harmonious,

mutually supportive and mindful in order to promote continuos and strong determination

and commitment towards one direction of the Company.

Therefore, the Board of Directors and Board of Commissioners consider it very

necessary to have a guideline on the mechanism of a clear working relationship

2 Board Manual

between the Board of Directors and Board of Commissioners so that every step taken

by the Board of Directors will be in harmony with what is expected by the Board of

Commissioners and the Shareholders.

In line with the implementation of GCG in the Company which is based on Regulation of

the State Minister of State-Owned Enterprises No. Per-01/MBU/2011 dated 1 August

2011 in conjunction with Regulation of the State Minister of State-Owned Enterprises

No. Per-09/MBU/2012 dated 6 July 2012 on the Implementation of Good Corporate

Governance at the State-Owned Enterprises (BUMN), a guideline that regulates

effective working relationship between the Board of Directors and Board of

Commissioners is required, therefore the Company has created a format of working

relationship between the Board of Directors and Board of Commissioners, called Board

Manual.

This Board Manual is a revised edition of the previous one. The purpose of this Board

Manual is to explain the form of standard working relationship between the Board of

Directors and Board of Commissioners in performing their tasks, in order to manage the

Company professionally, transparently, effectively and efficiently by upholding high

integrity and honesty in running the Company’s business activities.

With the availability of this Board Manual, the Board of Directors and Board of

Commissioners are committed to carry out the mandate given by the Company

seriously with high dedication and responsibility based on the principles of good

corporate governance.

3 Board Manual

Statement of Mutual Commitment of Pertamina’s Board of Directors and Board of Commissioners

STATEMENT OF MUTUAL COMMITTMENT OF PT PERTAMINA (PERSERO)’S

BOARD OF DIRECTORS AND BOARD OF COMMISSIONERS

This Board Manual constitutes one of the soft structures of Good Corporate

Governance, and the simplification of Code of Corporate Governance which is based

on the Company’s Articles of Association.

This Board Manual which serves as an agreement/commitment between the Board of

Directors and Board of Commissioners is intended for:

1. To serve as a reference/guideline concerning the primary tasks and function of

each organ,

2. To improve the quality and effectiveness of inter-organ working relationship,

3. To implement the principles of GCG, i.e. Transparency, Accountability,

Responsibility, Independency and Fairness.

With the application of the Board Manual in the working relationship between the two

(2) organs of the Company, all Company's business activities can be carried out

harmoniously by refering to the principles of Good Corporate Governance.

In the efforts to reach the Company’s vision and mission, the Board of Directors and

Board of Commissioners are committed to develop clean Pertamina, which is based on

the principle of honesty and transparency and to refrain from any conflict of interest.

This commitment between the Board of Directors and Board of Commissioners has

been drawn up as the foundation towards a better and clean Pertamina.

4 Board Manual

Statement of Mutual Commitment of Pertamina’s Board of Directors and Board of Commissioners

Jakarta, 17 September 2013

BOARD OF COMMISSIONERS, BOARD OF DIRECTORS,

SUGIHARTO

President Commissioner/

Independent

[signature] KAREN AGUSTIAWAN

President Director

[signature]

NURDIN ZAINAL

Independent Commissioner

[signature] M. AFDAL BAHAUDIN

Director of Planning

Investment & Risk

Management

[signature]

MAHMUDDIN YASIN

Commissioner

[signature] MUHAMMAD HUSEIN

Upstream Director

[signature]

BAMBANG PS

BRODJONEGORO

Commissioner

[signature] HARI KARYULIARTO

Director of Gas

[signature]

A. EDY HERMANTORO

Commissioner

[signature] CHRISNA DAMAYANTO

Director of Processing

[signature]

HANUNG BUDYA

YUKTYANTA

Director of Marketing & Trade

[signature]

LUHUR BUDI DJATMIKO

Director of General Affairs

[signature]

EVITA M. TAGOR

Director of Human Resources

[signature]

ANDRI T. HIDAYAT

Director of Finance

[signature]

5 Board Manual

Table of Content

TABLE OF CONTENT

INTRODUCTION 1

CHAPTER I GENERAL 12

A. BACKGROUND 13

B. AIMS AND OBJECTIVES 14

C. SCOPE 15

D. LIST OF TERMINOLOGIES 15

E. REFERENCE/GUIDELINE 20

CHAPTER II BOARD OF DIRECTORS 24

A. GENERAL POLICY 24

B. REQUIREMENTS AND COMPOSITION, MEMBERSHIP AND TERM OF

OFFICE OF THE BOARD OF DIRECTORS

24

1. Requirements for the Board of Directors 24

2. Composition and Membership of the Board of Directors 25

3. Term of Office of the Board of Directors 26

C. FAMILIARISATION AND CAPABILITY IMPROVEMENT PROGRAMS 26

1. Familiarization Program 26

2. Capability Improvement Program 27

D. INDEPENDENCY OF THE BOARD OF DIRECTORS 28

E. ETHICS OF THE BOARD OF DIRECTORS’ POSITION 28

1. Ethics Related to Role Model 28

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2. Ethics related to Compliance with Laws and Regulations 29

3. Ethics Related To the Confidentiality and Disclosure of Information 29

4. Ethics Related To Company Opportunities 29

5. Ethics Related To Personal Advantage 30

6. Ethics Related to Conflict of Interest 30

7. Ethic in Doing Business and Anti Corruption 31

8. Ethics Related to Post Directorship Position 31

F. STRUCTURE, DUTIES AND AUTHORITY OF THE BOARD OF

DIRECTORS

31

1. Structure of the Board of Directors 32

2. Duties and Collegial Authority of the Board of Directors 32

3. Duties and Authority of Each Director 35

4 Duties and Authority of the Board of Directors 35

a. Related to General Meeting of Shareholders (RUPS) 35

b. Related to Strategy and Work Plan 37

c. Related to Risk Management 38

d. Related to Information Technology 38

e. Related to Human Resources 39

f. Related to Ethics in Doing Business and Anti Corruption 40

g. Related to Internal Control System 41

h. Related to Disclosure and Confidentiality of Information 41

i. Related to GCG Implementation 42

j. Related to Relationship with Stakeholders 43

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k. Related to Accounting and Bookkeeping Systems 43

l. Related to Other Duties and Responsibilities 44

5. Restrictions on the Authority of the Board of Directors 44

a. Board of Directors’ actions which require the approval of RUPS

after obtaining a written response from the Board of Commissioners

44

b. Board of Directors’ actions which require the approval of RUPS 49

c. Board of Directors’ actions which require Board of Commissioner’s

Approval

49

6. Board of Directors' Rights 53

G BOARD OF DIRECTORS’ MEETING 54

1. General Provision 54

2. Meeting Procedures 56

3. Attendance Mechanism and Meeting Validity 57

4. Decision Making Process 58

5. Minutes of Board of Directors' Meeting 61

H. BOARD OF DIRECTORS’ PERFORMANCE APPRAISAL 63

1. General Policy 63

2. Criteria for the Board Of Directors’ Performance Appraisal 63

I. SUPPORING FUNCTIONS 64

1. Corporate Secretary 64

2. Internal Supervisory Unit (SPI) 65

3. Compliance Officer

J. RELATIONSHIP BETWEEN THE COMPANY AND ITS SUBSIDIARIES 66

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CHAPTER III BOARD OF COMMISSIONERS 68

A. FUNCTION OF THE BOARD OF COMMISSIONERS 68

B. REQUIREMENTS AND COMPOSITION, MEMBERSHIP AND TERM OF

OFFICE OF THE BOARD OF COMMISSIONERS

68

1. Requirements for the Board of Commissioners 68

2. Composition of the Board of Commissioners 71

3. Term of Office 72

C. FAMILIARISATION AND CAPABILITY IMPROVEMENT PROGRAMS 73

1. Familiarization Program 73

2. Capability Improvement Program 74

D. ETHICS OF THE BOARD OF COMMISSIONERS’ POSITION 75

1. Ethics Related to Role Model 75

2. Ethics Related to Compliance with Laws and Regulations 75

3. Ethics Related to the Confidentiality and Disclosure of Information 75

4. Ethics Related to Company Opportunities and Personal Advantage 76

5. Ethics Related to Conflict of Interest 76

6. Ethics in Doing Business and Anti Corruption 77

7 Ethics Post Board of Commissioners Position 78

E. DUTIES AND OBLIGATIONS OF THE BOARD OF COMMISSIONERS 78

1. Related to General Meeting of Shareholders (RUPS) 80

2. Duties and Obligations Related to Supervisory Function 82

3. Duties and Obligations Related To Nomination and Remuneration of

Members of the Board of Directors.

84

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4. Duties and Obligations Related to Performance Appraisal of the Board

of Commissioners and Board of Directors

85

5. Duties and Obligations Related to Supervision on the Implementation of

Risk Management

87

6. Duties and Obligations Related to Internal Control System 87

7. Duties and Obligations Related to Ethics in Doing Business and Anti

Corruption

88

8. Duties and Obligations Related to Disclosure and Confidentiality of

Information

88

9. Duties and Obligations Related to Working Relationship Among

Members of the Board of Commissioners

89

F. BOARD OF COMMISSIONERS’ AUTHORITY 89

G. RIGHTS OF THE BOARD OF COMMISSIONERS 94

H. BOARD OF COMMISSIONERS’ MEETING 94


2. Meeting Procedures 96

3. Attendance Mechanism and Meeting Quorum 98

4. Decision Making Procedures 99

5. Preparation of Minutes of Meeting 101

I. BOARD OF COMMISSIONERS’ PERFORMANCE APPRAISAL 104


2. Board of Commissioners’ Performance Appraisal Criteria 105

J. SUPPORTING ORGANS 106

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1. Board of Commissioners’ Committees 106

2. Board of Commissioners’ Secretary 106

K. WORKING RELATIONSHIP BETWEEN THE BOARD OF

COMMISSIONERS AND BOARD OF DIRECTORS

107

CHAPTER IV CLOSURE 111

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CHAPTER I

GENERAL

12 Board Manual

CHAPTER I General

CHAPTER I

GENERAL

In line with the implementation of GCG in the Company which is based on Regulation of

the State Minister of State-Owned Enterprises No. Per-01/MBU/2011 dated 1 August

2011 in conjunction with Regulation of the State Minister of State-Owned Enterprises

No. Per-09/MBU/2012 dated 6 July 2012 on the Implementation of Good Corporate

Governance at the State-Owned Enterprises (BUMN) which requires a guideline that

regulates effective working relationship between the Board of Directors and Board of

Commissioners, this Board Manual has been prepared.

The purpose of this Board Manual is to explain the form of standard working relationship

between the Board of Directors and Board of Commissioners in performing their tasks,

in order to manage the Company professionally, transparently, effectively and

efficiently.

The Board Manual is a guideline for the Board of Directors' and Board of

Commissioners’ works which explains the steps of structured, systematic, easily

understood activities and can be carried out consistently, so it becomes the reference of

working relationship for the Board of Directors and Board of Commissioners in carrying

out their tasks for the optimum achievement of the Company’s vision and mission.

The Board Manual was prepared based on the prevailing laws and regulations, articles

of association, the principles of corporate law, directives from the shareholders as well

as the Good Corporate Governance best practices.

13 Board Manual

The nature of this Board Manual is dynamic and it continues to develop in line with the

changes that occur and are faced by the Company. Therefore, if deemed necessary,

this Board Manual may be reviewed for further perfection.

Improvements in the Board Manual may always be made in accordance with the

Company’s needs and changes made shall be based on the prevailing laws and

regulations and shall not contravene with the provisions of the articles of association

and shall be based upon the agreement between the Board of Directors and Board of

Commissioners.

Considering that the Board Manual constitutes a compilation of the principles of

corporate law, in its implementation it must continue to refer to the prevailing laws and

regulations. Some detailed provisions contained in the articles of association, directives

from the shareholders as adopted in a General Meeting of Shareholders (RUPS) and

various other legal provisions shall remain binding although not specifically described in

this Board Manual.

The principles of good faith, responsibility, fiduciary duties, skill and care attached to the

holders of Board of Directors’ and Board of Commissioners’ positions are general

principles that shall be respected by the two organs of the Company, who are tasked to

supervise and manage the Company.

A. BACKGROUND

The preparation of this Board Manual is one of the realizations of Company’s

commitment in implementing the Good Corporate Governance (GCG) consistently

14 Board Manual

for the management of the Company in order to carry out its mission and achieve

its vision.

This Board Manual which contains practical guidelines for the Board of Directors

and Board of Commissioners is the realization of the implementation of the Board

of Commissioners’ and Board of Directors’ commitment in the implementation of

GCG in the Company.

This Board Manual is a dynamic document, therefore it must be reviewed regularly

and adjusted with the prevailing laws and regulations.

B. AIMS AND OBJECTIVES

This Board Manual is a guideline which outlines matters related to the Board of

Directors’ and Board of Commissioners’ work procedures and the process of

functional relationship between the Board of Directors, Board of Commissioners

and between the two organs of the Company.

This Board Manual constitutes one of the soft structures of GCG, as the

clarification of codes of company governance which is based on the articles of

association and the prevailing laws and regulations.

This Board Manual was prepared with the purpose:

1. To become a reference/guideline concerning the primary duties and functions

of the Board of Directors and Board of Commissioners.

2. To increase the quality and effectiveness of working relationship between the

Board of Directors and Board of Commissioners.

15 Board Manual

3. To consistently implement the principles of GCG namely transparency,

accountability, responsibility, independency, and fairness in all Company’s

activities.

C. SCOPE

This Board Manual regulates and explains the form of standard working

relationship between the Board of Directors and Board of Commissioners in

performing their tasks and responsibilities, in order to manage the Company

professionally, transparently, effectively and efficiently. This Manual applies

specifically to PT Pertamina (Persero).

D. LIST OF TERMINOLOGIES

Terms used in this Board Manual, except as otherwise specified, shall have the

following meaning:

1. Subsidiary Company is a company which:

a. more than 50% of its share is owned by PT Pertamina (Persero); or

b. more than 50% votes in the RUPS is controlled by PT Pertamina

(Persero); or

c. the operation of the company, appointment and termination of the Board of

Directors and Board of Commissioners are controlled by PT Pertamina

(Persero).

2. The Articles of Association (AD) are the articles of association/provisions

contained in the Deed of Establishment of PT Pertamina (Persero) which

were lastly amended by Deed No. 01 dated 1 August 2012, drawn up by

16 Board Manual

Lenny Janis Ishak, Bachelor of Law (Sarjana Hukum), Notary Public in

Jakarta, which have been endorsed by the Minister of Law and Human

Rights of the Republic of Indonesia No. AHU-43594.AH.01.02. dated 10

August 2012.

3. Member of the Board of Commissioners is a member of the Board of

Commissioners which refers to an individual (not as a Board).

4. External Auditor is an independent and professional auditor from outside

the Company who provides audit as well as non audit services to the

Company.

5. Internal Auditor (Internal Supervisory Unit) is a structural function within

the Company, which is tasked to carry out audits and to ensure the

Company’s internal control system runs effectively.

6. Conflict of Interest is the difference between the economical interest of the

Company and the economical interest of an individual member of the Board

of Directors, member of the Board of Commissioners, Board of

Commissioners' supporting organs, employees, and other parties working for

and on behalf of the Company that might damage the Company.

7. Board of Commissioners is a Company’s organ which covers the entire

Members of the Board of Commissioners as one Board which is tasked to

provide general and/or specific supervision as well as to give advice to the

Board of Directors in accordance with the Articles of Association and the

prevailing laws and regulations.

17 Board Manual

8. Board of Directors is a Company’s organ which includes all Members of the

Board of Directors as one Board which is authorized and fully responsible for

the management of the Company for the interest of the Company, based on

the aims and objectives of the Company and to represent the Company, both

within and outside a court in accordance with the provisions of the Articles of

Association and the prevailing laws and regulations.

9. Member of the Board of Directors is a member of the Board who manages

one Directorate and is responsible for the operation of the Directorate under

his/her responsibility. It refers to an individual and not as a Board.

10. Independent Commissioner is a member of the Board of Commissioners:

a. From outside the Company;

b. Not affiliated with the Director, other members of the Board of

Commissioners and Shareholders;

c. Free from a business relationship or other relationships that could affect

his ability to act independently or who acts solely for the interest of the

Company.

11. Audit Committee is a committee formed by the Board of Commissioners in

order to assist with the performance of the Board of Commissioners’ duties

and functions, to study and ensure the effectiveness of internal control

system, and the effectiveness of performance of the internal and external

auditors’ duties.

18 Board Manual

12. Commissioners’ Committee is a committee established by the Board of

Commissioners to assist the Board of Commissioners in carrying out the

supervisory duties on the management of Company carried out by the Board

of Directors.

13. Nomination and Remuneration Committee is a committee that may be

formed by the Board of Commissioners to assist the performance of the

Board of Commissioners’ duties and functions in preparing the systems and

procedures for nomination and selection of candidate Members of the Board

of Commissioners and candidate Director, to give recommendation

concerning the number of Members of the Board of Commissioners and

Directors as well as to develop a remuneration system for Members of the

Board of Commissioners and Directors.

14. Committee for Risk Management Monitoring is a committee that can be

formed by the Board of Commissioners to assist the performance of the

Board of Commissioners’ duties and function to regularly monitor and give

recommendations for the improvement of risk management carried out and

developed by the Company.

15. Other Board of Commissioners’ Supporting Committee is a committee

that can be formed by and is responsible to the Board of Commissioners in

order to assist the performance of the Board of Commissioners’ duties and

functions to carry out development and supervision on the management of

the Company.

19 Board Manual

16. Material Value is the value which meets one of the following (the smallest

figure):

a. equals to or more than 2.5 % (two and a half percents) of the Company’s

revenues; or

b. equals to or more than 5% (five percents) of total equity.

17. Company Organ is the General Meeting of Shareholders (RUPS), Board of

Directors and Board of Commissioners.

18. Shareholder is a person or legal entity who legally owns one or more share

with the Company. In this case the Company's shareholder is the Republic of

Indonesia.

19. Employee is everyone who is formally bound in an employment relationship

with the Company as a permanent employee, from the lowest position up to

the highest position that is one (1) level below the Board of Directors.

20. The Company is PT Pertamina (Persero).

21. Company refers to company in general.

22. General Meeting of Shareholders (RUPS) is a Company Organ which has

the authority not given to the Board of Commissioners and Board of Directors

pursuant to the prevailing laws and regulations and the Company's Articles of

Associations.

23. Secretary of the Board of Commissioners (Sesdekom) is an official

appointed by the Board of Commissioners who is assigned to carry out

20 Board Manual

administrative and secretarial duties related to all Board of Commissioners’

activities.

24. Corporate Secretary is a structural function in the company which is tasked

to give supports for the Board of Directors in the performance of its duties

and to act as a liaison between the Shareholders, Board of Commissioners,

Board of Directors, Business Units and Stakeholders.

E. REFERENCE/GUIDELINE

This Board Manual is prepared based on:

1. Laws, including:

a. Indonesian Law Number 28 of 1999 on State Organizer who is Clean and

Free of Corruption, Collusion and Nepotism;

b. Indonesian Law Number 20 of 2001 on the amendment to Law Number 31

of 1999 concerning Eradication of Corruption;

c. Indonesian Law Number 19 of 2003 on State-owned Enterprises;

d. Indonesian Law Number 40 of 2007 on Limited Liability Companies.

2. Government Regulation Number 45 of 2005 dated 25 October 2005 on the

Establishment, Management, Supervision, and Dissolution of State-owned

Enterprises (BUMN).

3. Regulations of the State Minister of BUMN, including:

a. Regulation of the State Minister of State-Owned Enterprises Number:

PER-07/MBU/2010 in conjunction with Regulation of the State Minister of

21 Board Manual

State-Owned Enterprises Number: PER-04/MBU/2013 on Guidelines for

Determination of Salaries for the Board of Directors, Board of

Commissioners and Board of Supervisors of State-owned Enterprises;

b. Regulation of the State Minister of State-Owned Enterprises Number:


State-Owned Enterprises Number: PER-09/MBU/2012 on the

Implementation of Good Corporate Governance at the State-owned

Enterprises (BUMN);

c. Regulation of the State Minister of State-Owned Enterprises Number:


State-Owned Enterprises Number: PER-06/MBU/2012 in conjunction with

Regulation of the State Minister of State-Owned Enterprises Number:

PER-16/MBU/2012 on the Requirements and Procedures for the

Appointment and Termination of Members of the Board of Directors of

State-owned Enterprises;

d. Regulation of the State Minister of State-Owned Enterprises Number:

PER-12/MBU/2012 on the Supporting Organs for the Board of

Commissioners/Board of Supervisors of State-owned Enterprises;

e. Regulation of the State Minister of State-Owned Enterprises Number:

PER-03/MBU/2012 on the Guidelines for the Appointment of Members of

the Board of Directors and Subsidiaries of State-owned Enterprises.

4. Decisions of the State Minister of State-owned Enterprises, including:

22 Board Manual

a. Decision of the Minister of State-owned Enterprises No. Kep-

09A/MBU/2005 on Fit and Proper Test for Candidate Members of the

Board of Directors of State-owned Enterprises;

b. Decision of the Minister of State-owned Enterprises No. Kep-

100/MBU/2002 on the Assessment of Health Level of State-owned

Enterprises;

c. Decision of the Minister of State-owned Enterprises No. Kep-

101/MBU/2002 on the Preparation of Company’s Work Plans and Budget

(RKAP);

d. Decision of the Minister of State-owned Enterprises No. Kep-

102/MBU/2002 on the Preparation of Long-term Plans (RJP);

e. Decision of the Minister of State-owned Enterprises No. Kep-

103/MBU/2002 on the Formation of Audit Committee for State-owned

Enterprises;

f. Decision of the Minister of State-owned Enterprises No. Kep-

104/MBU/2002 on the Assessment of Candidate Members of the Board of

Directors of State-owned Enterprises;

5. General Guidelines on Good Corporate Governance Indonesia by the Policy

Committee of Governance Committee.

6. The prevailing PT PERTAMINA (Persero)’s Articles of Association.

7. Codes of Corporate Governance.

23 Board Manual

CHAPTER II BOARD OF DIRECTORS

24 Board Manual

CHAPTER II Board Of Directors

CHAPTER II

BOARD OF DIRECTORS

A. GENERAL POLICY

The Board of Directors is a Company’s organ which is fully responsible for the

management of the Company for the interests of and to meet the objectives of the

Company and to represent the Company both in and out of a court in accordance

with its Articles of Association.1

B. REQUIREMENTS AND COMPOSITION, MEMBERSHIP AND TERM OF OFFICE

OF THE BOARD OF DIRECTORS

1. REQUIREMENTS FOR THE BOARD OF DIRECTORS

a. Formal Requirements 2

Those who are eligible to be appointed as Members of the Board of

Directors are individuals who are able to conduct legal actions, except that

within five (5) years prior to their appointments:

1) Were declared bankrupt.

2) Became Members of the Board of Directors or Members of the Board of

Commissioners and Board of Supervisors who were declared guilty of

causing and/or the Company to be declared bankrupt.

1 Article 1 paragraph (5) of Law No. 40 of 2007

2 Article 10 paragraph (2) of the Articles of Association

25 Board Manual

3) Were punished for committing a criminal act which inflicted loss to the

state’s, BUMN’S, Company’s finance, and/or which is related to the

Financial sector.

b. Other requirements as may be stipulated in the Articles of Association and

laws and regulations3.

2. COMPOSITION AND MEMBERSHIP OF THE BOARD OF DIRECTORS

The provisions on composition and membership of the Company’s Board of

Directors are as follows:

a. Number of the Board of Directors shall be at least one (1) person and to be

adjusted with the needs, level of complexity, and Company's strategic

plans.

b. In the event the Board of Directors comprises of more than one (1)

members, one of them may be appointed as the President Director.

c. The distribution of tasks as well as authority of the Board of Directors

based on the Company’s organizational structure shall be determined by

the General Meeting of Shareholders (RUPS). If the distribution of tasks

among the Board of Directors is not determined by the RUPS, it shall be

determined based on a Decision of the Board of Directors4.

3 Article 10 paragraph (4) of the Articles of Association 4 Article 92 paragraph (5) and paragraph (6) of Law No. 40 of 2007

26 Board Manual

d. Members of the Board of Directors shall be appointed and terminated by

the RUPS5.

3. TERM OF OFFICE OF THE BOARD OF DIRECTORS

a. The term of office of Members of the Board of Directors shall be five (5)

years and may be re-appointed thereafter for one (1) more term6.

b. The position of a Member of the Board of Directors shall end if he/she7:

1) Passes away.

2) His/her term of office has ended.

3) Is terminated based on decision of a General Meeting of Shareholders.

4) No longer meets the requirements as a member of the Board of

Directors based on the provisions of the Articles of Association and the


5) Resigns8.

C. FAMILIARISATION AND CAPABILITY IMPROVEMENT PROGRAM

1. FAMILIARIZATION PROGRAM

The provisions on familiarization program cover the following9:

a. For newly appointed members of the Board of Directors, must be given a

Familiarization Program concerning the general condition of the Company.

5 Article 10 paragraph (6) of the Articles of Association 6 Article 10 paragraph (6) of the Articles of Association 7 Article 10 paragraph (29) of the Articles of Association 8 Article 10 paragraph (27) of Articles of Association 9 Article 43 of the Regulation of the Minister of Manpower No PER-01/MBU/2011 dated 1 August 2011

27 Board Manual

b. The person responsible for the familiarization program is the Corporate

Secretary or anyone performing the function as Corporate Secretary.

c. The familiarization program covers:

1) The implementation of Good Corporate Governance principles in the

Company.

2) The picture of the Company with regards to the purpose, nature, scope

of activities, financial and operational performance, strategies, short-

term and long-term business plans, competitive position, risks, internal

control and other strategic issues.

3) Explanations regarding the obligations, duties, responsibilities and

rights of the Board of Directors and Board of Commissioners.

d. The familiarization program may take the form of presentation, meeting,

visit to branch offices/ operational units/business units, Company’s

facilities, study of Company’s documents or other programs considered

suitable with the needs.

2. CAPABILITY IMPROVEMENT PROGRAM

Capability improvement is considered essential in order for the Board of

Directors to be kept updated with the information on the latest developments

of the Company’s core business, to anticipate problems that might arise in

the future for the continuation and advancement of the Company.

The provisions on capability improvement program for the Board of Directors

are as follows:

28 Board Manual

a. Capability improvement program is carried out in order to increase the

effectiveness of the Board of Directors’ work.

b. Plans to carry out the capability improvement program shall be included in

the Company’s work plans and budget.

c. Each Member of the Board of Directors attending the capability

improvement programs such as seminar and/or training shall be required

to give a presentation to the other Members of the Board of Directors for

information and knowledge sharing.

d. The said member of the Board of Directors shall prepare a report on the

Capability Improvement Program and submit it to the Board of Directors.

D. INDEPENDENCY OF THE BOARD OF DIRECTORS

In order that the Board of Directors can act properly for the interest of the

Company as a whole, independency of the Board of Directors constitutes one of

the important factors that must be maintained. To maintain independency, it is

necessary to set out the following provisions:

a. Other than the Board of Directors, any other party is not allowed to interfere with

the management of the Company.

b. Every Member of the Board of Directors shall not be allowed to carry out

activities that might influence his independency in managing the Company.

E. ETHICS OF THE BOARD OF DIRECTORS’ POSITION

1. ETHICS RELATED TO ROLE MODEL

29 Board Manual

Each Member of the Board of Directors shall promote ethical conducts and

uphold the highest ethical standards at the Company. One of the ways to do

this is by making himself as a good model for all Company's Employees.

2. ETHICS RELARED TO COMPLIANCE WITH LAWS AND REGULATIONS

Every Member of the Board of Directors is required to comply with the

prevailing laws and regulations, the Articles of Association and Codes of

Good Corporate Governance as well as other Company policies.

3. ETHICS RELATED TO CONFIDENTIALITY AND DISCLOSURE OF

INFORMATION

Every Member of the Board of Directors shall disclose information in

accordance with the prevailing laws and regulations and shall keep the

confidentiality of information entrusted to him in accordance with the

provisions of the laws and regulations and/or Company regulation.

4. ETHICS RELATED TO COMPANY’S OPPORTUNITIES

While in the position, every Member of the Board of Directors shall not:

a. Take any Company’s business opportunities for his own interest, and for

the interest of his family members, business group and/or other parties.

b. Use Company’s properties, information or his position as Member of the

Board of Directors for personal interest against the provisions of the

applicable laws and regulations as well as Company policies.

c. Compete with the Company, that is using inside knowledge/information to

obtain profits for the interest other than of the Company.

30 Board Manual

5. ETHICS RELATED TO PERSONAL ADVANTAGE

Every Member of the Board of Directors shall not be allowed to take personal

advantage either directly or indirectly of Company’s activities other than the

formal income.

6. ETHICS RELATED TO CONFLICT OF INTEREST

Every Member of the Board of Directors shall comply with the ethics related

to conflict of interest as follows:

a. It is not allowed to take actions which have conflicts of interest, and to take

personal advantage, either directly or indirectly of the decision making and

relevant Company's activities other than the formal income.

b. Not to use his position for personal interest or for the interest of persons or

other parties which are in conflict with the Company's interest.

c. Is required to complete a special register containing his and/or his family’s

share ownership with another Company, including if not having any share

ownership, and to regularly at the beginning of each year update and

report to the Company if there are any changes in the data, in accordance

with the prevailing laws and regulations10.

d. Among Members of the Board of Directors it is not allowed to have a family

relationship up to the third degree either based on vertical or horizontal

lines, including relationship due to marriage11.

10 Article 19 Paragraph (4) of The Ministerial Regulation No. PER-01/MBU/2011 dated 1 August 2011

11 Article 10 Paragraph (22) Pertamina’s Articles of Association

31 Board Manual

e. To comply with the applicable laws and regulations, including by not

getting involved in the insider trading to obtain personal advantage.

7. ETHICS IN DOING BUSINESS AND ANTI CORRUPTION

It is not permitted to give, offer, or receive either directly or indirectly anything

of value to the customers or government officials in order to influence them or

as gratification for what they have done and other actions in accordance with

the prevailing laws and regulations.12

8. ETHICS REGARDING POST DIRECTORSHIP POSITION

When no longer holding the directorship position, Members of the Board of

Directors shall:

a. Return all documentation related to the positions they previously held to

the Company within thirty (30) calendar days.

b. If a Member of the Board of Directors passes away during his/her service,

the heir of the said Member shall return the documents referred to in point

a above.

c. Prepare form B LHKPN (State Organizer’s Wealth Report) within sixty (60)

calendar days of handover of position13.

Any violation to the ethics committed by each member of the Board of

Directors shall be treated the same as violation against the Code of Conduct.

F. STRUCTURE, DUTIES AND AUTHORITY OF THE BOARD OF DIRECTORS

12 Article 40 Paragraph (1) of the Regulation of the Minister No. PER-01/MBU/2011 dated 1 August 2011 13 Article 1 Paragraph (5) in conjunction with Article 2 Paragraph (6) of the Decision of Corruption Eradication

Commission of the Republic of Indonesia Number:Kep.07/ IKPK/02/ 2005

32 Board Manual

1. STRUCTURE OF THE BOARD OF DIRECTORS

The Board of Directors shall comprise of:

a. President Director

b. Director of Investment Plan and Risk Management

c. Director of Upstream Activities

d. Director of Processing

e. Director of Marketing and Trade

f. Director of Gas

g. Director of Finance

h. Director of Human Resources

i. Director of General Affairs

2. DUTIES AND COLLEGIAL AUTHORITY OF THE BOARD OF DIRECTORS

Duties and collegial authority of the board of directors are:

a. To set out Company’s vision, mission and strategies.

b. To set out Company's policies which are applicable corporate-wise

including Subsidiary Companies.

c. To propose Company management which requires the approval of Board

of Commissioners and/or requires a written response from the Board of

Commissioners and approval of a General Meeting of Shareholders and to

implement it in accordance with the provisions as set forth in the Articles of

33 Board Manual

Association, approval of the Board of Commissioners as well as decision

of a General Meeting of Shareholders.

d. To attempt for the achievement of target indicator of financial, operational

and administrative aspects used as the basis for the assessment of

Company’s health rate in accordance with the performance as set out in

the General Meeting of Shareholders on the Approval for Company’s Work

Plans and Budget (RKAP).

e. To give recommendations and make changes to the Company’s long-term

plans and the Company’s work plan and budget in accordance with the

prevailing regulations.

f. To set out performance targets as well as evaluation of Company's and

Subsidiary Company’s performance including dividends for the

Subsidiaries in accordance with the prevailing regulation.

g. To attempt for the achievement of performance target used as the basis

for the assessment of Company’s health level in accordance with the

performance agreement as set out in the RUPS for RKAP Approval.

h. To set out the approval for non routine investment projects which are

beyond the authority of Members of the Board of Directors/Director and to

monitor their implementation.

i. To set out the approval for investment projects based on the Board of

Directors’ authority after obtaining the approval in RKAP, to monitor and

make corrections on its implementation.

34 Board Manual

j. To set out cooperation activities or contract with a contract value or

utilization/acquisition of assets beyond the authority of a member of the

Board of Directors/Director as set out in the financial authorization policy.

k. To set out the organizational structure and assignment of Company's

officials up to certain level which are arranged through a decision of the

Board of Directors.

l. To perform all acts and conducts related to the arrangement and ownership

of Company’s assets, to bind the Company with other parties and/or other

parties with the Company, and to represent the Company in or out of a

Court regarding any matters and any events, with some restrictions as

provided for in the laws and regulations, Articles of Association and/or

resolution of RUPS.

m.To appoint the President Director to represent the Board of Directors to

sign a Special Letter of Attorney to represent the Company in or out of a

Court.

n. As long as not specified by the RUPS, the Board of Directors may

determine the distribution of tasks and authority among the Board of

Directors in a decision of the Board of Directors, without limiting the tasks,

authority, and responsibilities as a Member of the Board of Directors in

accordance with the provision in the Articles of Association, in order to

35 Board Manual

carry out the main tasks as a member of the Board of Directors effectively

and efficiently14.

o. Each Member of the Board of Directors shall be personally responsible if

he is in default or fails to carry out his duties for the interest and business

of the Company, except if such Member can prove that15 :

1) such loss is not due to his fault or negligence.

2) he has carried out the management in good faith and prudence for the

interest and in accordance with the Company's aims and objectives.

3) he does not have any conflict of interest either directly or indirectly in

the management’s action which causes loss.

4) he has taken some actions to prevent the continuation of such loss.

3. DUTIES AND AUTHORITY OF EACH MEMBER OF THE BOARD OF

DIRECTORS

Duties and authority of each Member of the Board of Directors/Director shall

be further arranged in a Decision of the Board of Directors16.

4. DUTIES AND AUTHORITY OF THE BOARD OF DIRECTORS

A. RELATED TO GENERAL MEETING OF SHAREHOLERS (RUPS)

14 Article 92 paragraph 5 and 6 of Law no 40-2007

15 Article 97 paragraph 5 of Law No 40-2007

16 Article 11 Paragraph (24) of the Articles of Association

36 Board Manual

1. To provide the accountabilities and all information regarding the

Company’s condition and operation in the form of annual reports including

financial reports to the RUPS17.

2. To provide periodic reports based on the method and time as set out in

laws and regulations as well as other reports as requested by the

Shareholders18.

3. To prepare an annual report and submit it to the RUPS after being

reviewed by the Board of Commissioners within five (5) months of the end

of Company’s book year19.

4. To give explanations to the RUPS regarding the annual report20.

5. To summon and hold an Annual General Meeting of Shareholders and/or

an Extraordinary General Meeting of Shareholders21.

6. To prepare materials for the General Meeting of Shareholders for the

Shareholders at the Company's office.

7. To prepare minutes of the General Meeting of Shareholders which shall at

least contain the time, agenda, participants, opinions given at the Meeting,

and resolutions of the Meeting22.

8. To deliver a copy of the minutes of Meeting to the Shareholders23. 17 Article 11 Paragraph (2) letter b point 5 of the Articles of Association

18 Article 11 Paragraph (2) letter b point 14 of the Articles of Association

19 Article 23 Paragraph (1) of Law No. 19 of 2003


21 Article 79 of Law No. 40 of 2007

22 Article 6 Paragraph (4) of the Regulation of the Minister No. PER-01/MBU/2011 dated 1 August 2011

37 Board Manual

9. To keep in the Company’s domicile all such documents as Register of

Shareholders, Special Register, Minutes of General Meeting of

Shareholders, Minutes of Meeting of the Board of Commissioners and

Minutes of Meeting of the Board of Directors, Annual Reports and

Company’s financial document as well as other documents24.

B. RELATED TO STRATEGIES AND WORK PLANS

1. To prepare the Company’s vision, mission, aims, objectives, strategies and

culture.

2. To make all efforts and to ensure that the Company’s business and

activities run in accordance with the Company’s aims and objective25.

3. To prepare, when the time comes, Company’s work plans and budget

(RKAP) and its changes (if any) and deliver it to the Board of

Commissioners for their review and then submit it to the Shareholders to

obtain the approval from RUPS26.

4. To prepare draft Company Long-term Plans (RJPP) which constitute the

strategic plans that contain the aims and objectives of the Company to be

achieved within five (5) years27.






38 Board Manual

5. To ensure the achievement of long-term targets as contained in the Long-

term Plans (RJPP).

6. To ensure the achievement of short-term targets as contained in the Long-

term Plans through the setting out of performance target passed down to

the work unit levels and positions in the Company’s organizational

structure.

C. RELATED TO RISK MANAGEMENT28

1. To develop and implement an integrated corporate risk management

program which is a part of the implementation of Good Corporate

Governance program by forming a separate work unit under the Board of

Directors or assigning the existing and relevant work unit to carry out the

function of risk management.

2. The Board of Directors shall build and carry out a corporate risk

management program integratedly which is a part of the implementation of

Good Corporate Governance.

3. To submit a report on risk management profile and how this is handled

together with the Company’s regular reports.

D. RELATED TO INFORMATION TECHNOLOGY29

1. To determine effective information technology governance.

28 Article 25 of the Regulation of the Minister No. PER-01/MBU/2011 dated 1 August 2011


39 Board Manual

2. To submit a report on the implementation of information technology

governance periodically to the Board of Commissioners.

3. To maintain and evaluate the quality of information technology governance

function in the Company.

E. RELATED TO HUMAN RESOURCES

1. To prepare Company’s organizational structure complete with its

specifications and duties.

2. To prepare and carry out guidelines for human resources management

system which includes manpower planning, recruitment, selection,

deployment of employees and positions in the Company’s organizational

structure, promotion and demotion as well as transfer.

3. To ensure that manpower deployment is in accordance with the job criteria

in the Company’s organizational structure.

4. To submit a planned organizational structure of two (2) levels below the

Board of Directors’ position to the Board of Commissioners.

5. To obtain the approval of the Board of Commissioners related to the

appointment of the Head of Internal Supervisory Unit and Corporate

Secretary30.

6. To ensure that education and training are provided to Employees in

accordance with position competencies.

30 Article 28 Paragraph (3) in conjunction with Article 29 Paragraph (3) of the Regulation of the Minister No. PER-

01/MBU/2011 dated 1 August 2011

40 Board Manual

7. To carry out performance appraisal and measurement for the work units

and positions within the organization objectively and transparently.

8. To make the provisions on Company personnel including the setting out of

salary, pension or old age benefits and other income for Employees based

on the prevailing laws and regulations and resolutions of RUPS.

9. To appoint and terminate Employees based on the prevailing laws and

regulations as well as Company's personnel regulation.

F. RELATED TO ETHICS IN DOING BUSINESS AND ANTI CORRUPTION

1. To develop and lead the implementation of Codes of Good Corporate

Governance.

2. To prepare the provisions which regulate the mechanism for reporting

alleged deviations in the Company31.

3. It is not permitted to give, offer, or receive either directly or indirectly,

anything of value to and/or from government officials and/or other parties

which influence them or as gratification for what they have done and other

actions in accordance with the prevailing laws and regulations32.

4. To ensure that all the requirements for submitting a Report of State

Organizer’s Wealth to the competent government institution is complied

with by all those who are required to report as determined in the Company.



41 Board Manual

5. To disseminate information and implement the gratification control

program in accordance with the applicable laws and regulations.

G. RELATED TO INTERNAL CONTROL SYSTEM

1. To make the policy on effective internal control system in order to secure

investment, business activities and Company’s assets

2. To give inputs on the internal control system applied by the Company and

to follow up and monitor recommendations given by the internal control

unit in order to ensure an effective internal control system.

3. To carry out internal control by establishing an Internal Supervisory Unit

(SPI). Further explanation on the duties and function of the Internal Control

Unit is contained in the Internal Supervisory Unit Charter which is set out

in a Decision of the Board of Directors33.

4. To submit a report of the performance of internal supervisory function

periodically to the Board of Commissioners34.

5. To maintain and evaluate the quality of internal supervisory function in the

Company35.

H. RELATED TO DISCLOSURE AND CONFIDENTIALITY OF INFORMATION

1. To disclose the implementation of Good Corporate Governance in the

Company and important information in an annual report and financial




42 Board Manual

report and other information to another party timely, accurately, clearly and

objectively, in accordance with the prevailing laws and regulations36.

2. Confidential information obtained when holding the position of Member of

the Board of Directors must continue to be kept in accordance with the


3. In keeping the Company’s confidential information, the Board of Directors

is required to prioritize Company's interests over individual’s or group's

interests.

I. RELATED TO THE IMPLEMENTATION OF GOOD CORPORATE

GOVERNANCE

1. To measure the implementation of Good Corporate Governance (GCG) in

the form of37:

a) assessment, that is a program to identify GCG in the Company through

measurement of the implementation of GCG in the Company carried out

regularly every two (2) years.

b) review, that is a program to describe the follow up on the

implementation of GCG in State-owned Enterprises (BUMN) carried out

in the following year after the assessment referred to in point a), which

covers evaluation of the assessment results and follow up on the

recommended improvements.



43 Board Manual

2. The results of assessment and evaluation must be reported to the RUPS

together with the presentation of annual reports38.

3. To appoint one of the Directors as the person in charge of the

implementation and monitoring of GCG in the Company through the

mechanism of Board of Directors meeting39.

4. Related to the supervision of Company’s compliance, this should be

carried out together with the related functions in the Company.

J. RELATED TO THE RELATIONSHIP WITH STAKEHOLDERS

1. To ensure security of stakeholders’ rights which arise based on the

prevailing laws and regulations and/or agreement made by the Company

and Employees, service users, suppliers and other stakeholders40.

2. To ensure that Company carries out its social responsibility in accordance

with the programs that have been prepared.

3. To ensure that the assets and business location as well as other

Company’s facilities, fulfill the laws and regulations with regards to

occupational health and safety as well as conservation of the environment.

K. RELATED TO ACCOUNTING AND BOOKKEEPING SYSTEMS




44 Board Manual

1. To prepare accounting systems based on the principles of internal control,

especially division of management, recording, storing, and supervision

functions41.

2. To prepare financial reports based on financial accounting standards and

submit them to a public accountant for audit42.

3. To make available and maintain the bookkeeping and administration of the

Company in order to produce proper bookkeeping, working capital

sufficiency with efficient cost, good and strong balance sheet structure,

timely and accurate presentation of reports and financial analysis as well

as other principles based on a common practice applicable in a Company.

L. RELATED TO OTHER DUTIES AND RESPONSIBILITIES

To carry out other obligations in accordance with the provisions set forth in

the Articles of Association or as determined by the RUPS and laws and

regulations43.

5. RESTRICTIONS ON THE AUTHORITY OF THE BOARD OF DIRECTORS

A. BOARD OF DIRECTORS’ ACTIONS WHICH REQUIRE THE APPROVAL

OF RUPS AFTER OBTAINING A WRITTEN RESPONSE FROM THE

BOARD OF COMMISSIONERS




45 Board Manual

The following actions may only be taken by the Board of Directors after

obtaining a written response from the Board of Commissioners and approval

from RUPS:

1. To determine the requirements, number, and price of shares in portfolio.

2. To transfer the rights to shares.

3. To make capital participation in another company which value is equal to

or greater than the Material Value.

4. To establish a Subsidiary Company and/or a joint venture company which

value is equal to or more than the Material Value.

5. To subscribe either in part or in whole or to participate in the interest on

condition that against such participating interest or establishment of a

Subsidiary Company for the management of upstream oil and gas work

area that has been acquired, the approval for the establishment of a

Subsidiary Company is deemed to have been given at the time of approval

for the investment plan of the upstream work area in the Company Work

Plan and Budget, which value is equal to or greater than the Material

Value.

6. To release part or whole of Company’s participation in the interest which

value is equal to or greater than the Material Value.

7. To release capital participation in another company which value is equal to

or greater than the Material Value.

46 Board Manual

8. To perform merger, dissolution, acquisition, separation, and liquidation of a

Subsidiary Company which value is equal to or greater than the Material

Value.

9. To establish licensing cooperation, management contract, asset leasing,

operational cooperation and other cooperation agreement which value is

equal to or greater than the Material Value.

10.Changes in the utilization of investment budget that has been set out in

the Company’s Work Plan and Budget.

11.To put Company’s fixed assets as capital participation in another

company or for the establishment of a Subsidiary Company, which value is

equal to or greater than the Material Value.

12.To bind the Company as a guarantor which creates financial liabilities

which value is equal to or greater than the Material Value.

13.To receive a short-term loan from a bank or other financial institution


14.To provide short-term, non operational loans which value is equal to or

greater than the Material Value.

15.To receive or provide mid-term/long-term loans which value is equal to or

greater than the Material Value, except for loans which arise due to the

performance of business activities.

16.To buy or sell commercial papers in a capital market/other financial

institutions which value is equal to or greater than the Material Value,

47 Board Manual

except for commercial papers issued by the Indonesian Government and

to buy back commercial papers issued by the Company taking into

account the Company’s interest.

17.To pledge fixed assets needed in making short-term credit withdrawal

which value is equal to or more than the Material Value.

18.To write off from the bookkeeping uncollectible receivables and dead

stocks which value is equal to or greater than the Material Value.

19.To release and write off movable fixed assets with economic life normally

applicable in the industry in general up to five (5) years which annual book

value is equal to or greater than the Material Value.

20.To release and write off immovable fixed assets which value is equal to or

greater than the Material Value.

21.Stop stop collecting uncollectible receivables which have been written off


22.To release and write off Company’s movable fixed assets, except

movable fixed assets with economic life normally applicable in the industry

in general up to five (5) years which value is equal to or greater than the

Material Value.

23.To carry out actions referred to in paragraph 8 of Company’s Articles of

Association and other actions not yet specified in the Company’s current

year Work Plan and Budget which value is equal to or greater than the

Material Value.

48 Board Manual

24. Changes in the utilization of investment budget for a different investment

account, that has been set out in the Company’s Work Plan and Budget.

25. Draft of Company’s Work Plan and Budget (RKAP)44.

26. Draft of Company’s Long-term Plan (RJPP)45.

27.Draft of Annual Report including Financial Reports that have been audited

by a Public Accountant Firm (KAP) 46.

The approval of RUPS for Board of Directors’ actions requiring the approval

of RUPS may be carried out circularly, that is decision making by

Shareholders without convening a meeting physically, but must be furnished

with a written response from the Board of Commissioners.

Procedures for a request of the Board of Directors to obtain a written

response from the Board of Commissioners and Approval from RUPS:

1. The Board of Directors shall prepare the material on activities that require

a written response from the Board of Commissioners and approval from

RUPS.

2. The Board of Directors shall send the draft/proposed material to the Board

of Commissioners.

3. If within thirty (30) calendar days of receipt of such request or complete

explanation or additional data from the Board of Directors, the Board of




49 Board Manual

Commissioners has not given its written response, then RUPS may make

a decision without any written response from the Board of

Commissioners47.

4. After obtaining or not obtaining the written response from the Board of

Commissioners, the Board of Directors shall deliver the proposed material

to the RUPS to obtain the approval.

5. RUPS shall give a decision on the proposed material submitted by the

Board of Directors.

B. BOARD OF DIRECTORS’ ACTIONS THAT MUST OBTAIN THE

APPROVAL OF RUPS

The Board of Directors’ actions that must obtain the approval of RUPS48:

1. To transfer Company’s assets; or

2. To put as security Company's assets which is more than 50% (fifty

percent) of Company's net assets in one (1) transaction or more, either

interrelated or not.

C. BOARD OF DIRECTORS’ ACTIONS WHICH REQUIRE BOARD OF

COMMISSIONERS’ APPROVAL

The following actions may only be taken by the Board of Directors after

obtaining the approval from the Board of Commissioners and which have

been included in the Company's WP&B (RKAP) for the current year49:



50 Board Manual

1. To open a branch office or a representative office in another place, either

in Indonesia or overseas.

2. To make capital participation in another company which value does not

exceed the Material Value.

3. To establish a Subsidiary Company and/or joint venture company which

value does not exceed the Material Value.

4. To subscribe either in part or in whole or to participate in the interest on


Subsidiary Company for the management of an upstream oil and gas work


Subsidiary Company is deemed to have been given at the time of approval

for the investment plan of the upstream work area in the Company’s Work

Plan and Budget, and which value does not exceed the Material Value.

5. To release part or whole of Company’s participation in the interest which


6. To release capital participation in another company which value does not


7. To perform merger, dissolution, acquisition, separation, and liquidation of a

Subsidiary Company which value does not exceed the Material Value.

49 Article 11 Paragraph(8) of the Articles of Association

51 Board Manual

8. To carry out a licensing cooperation, management contract, asset leasing,

operational cooperation and other cooperation agreements which exceed

certain values as set out by the Board of Commissioners.

9. Changes in the utilization of investment budget that has been set out in the

Company’s Work Plan and Budget and which value does not exceed 10%

(ten percent) of total Company’s Work Plan and Budget.

10.To put the Company’s fixed assets as capital participation in another

company or for the establishment of a Subsidiary Company, which value

does not exceed the Material Value.

11.To bind the Company as a guarantor that carries financial consequences

that exceed a certain amount as set out by the Board of Commissioners.

12.To receive a short-term loan from a bank or other financial institutions

which exceeds a certain amount as set out by the Board of

Commissioners.

13.To give a short-term, non operational loan which exceeds a certain

amount as set out by the Board of Commissioners.

14.To receive or provide a mid-term/long-term loan which value does not

exceed the Material Value, except for a loan which arises due to the


15.To buy or sell commercial papers at a capital market/other financial

institutions that exceeds a certain amount as set out in the Company's

Work Plan and Budget, except for commercial papers issued by the

52 Board Manual

Indonesian Government and to buy back commercial papers issued by the

Company taking into account the Company's interest which value does not


16.To pledge the fixed assets needed in making short-term credit

withdrawals that exceeds a certain amount as set out by the Board of

Commissioners.

17.To pledge the fixed assets needed in making mid-term/short-term credit

withdrawal which value does not exceed the Material Value.

18.To write off from the bookkeeping record uncollectible receivables and

dead stocks which value does not exceed the Material Value.

19.To release and write off movable fixed assets with economic life normally


value exceeds certain amount as set out by the Board of Commissioners.

20.To release and write off immovable fixed assets which value does not


21.To recommend Company’s representatives to become candidate

members of the Board of Directors and Board of Commissioners in a

Subsidiary Company.

22.To prepare and adjust the organizational structure up to two (2) levels

below the Board of Directors.

23.Management of reserve funds by the Board of Directors in order for the

funds to generate profits.

53 Board Manual

Procedures for the request of Written Approval from the Board of

Commissioners:

1. The Board of Directors shall prepare materials for the activities that require

a written approval from the Board of Commissioners.

2. The Board of Directors shall send the materials to the Board of

Commissioners.

3. If within thirty (30) calendar days of receipt of such request or explanation

and complete document from the Board of Directors, the Board of

Commissioners has not given its decision, then the Board of

Commissioners is considered to approve the Board of Directors’

proposal50.

6. BOARD OF DIRECTORS' RIGHTS

a. The Board of Directors for certain actions at its own account, shall also

have the right to appoint one person or more as a deputy or power, by

granting upon him/them the power for such actions as set out in the power

of attorney51.

b. Members of the Board of Directors are provided with salaries and

allowances as well as facilities including post-service benefits which type


51 Article 11 Paragraph (2) letter a point 2 of the Articles of Association

54 Board Manual

and amount shall be determined by the RUPS taking into account the

provisions in the applicable laws and regulations52.

c. If the Company achieves a profit level, the Board of Directors may recieve

bonus as a reward for their performance which amount shall be decided by

RUPS53.

d. Use the Company’s facilities for activities related to the Company's affairs,

in accordance with the laws and regulations and Company's policies54.

e. Obtain a copy of minutes of Board of Directors’ Meeting, whether the

member concerned was present or not in the Board of Directors’

Meeting55.

G. BOARD OF DIRECTORS’ MEETING

1. GENERAL PROVISION

a. The Board of Directors’ meeting shall be held regularly at least once a

month.

b. Board of Directors may hold a meeting outside this schedule if deemed

necessary by56:

1) One or more members of the Board of Directors.

2) Board Of Commissioners



54 Article 15 Paragraph (2) Letter a point 1 and 2 of the Articles of Association

55 SK-16/S-MBU/2012 dated 6 June 2012


55 Board Manual

3) At a written request of one (1) or more Shareholders collectively holding

1/10 (one tenth) or more of the total shares with valid voting rights.

c. Summons to the Board of Directors’ Meeting shall be served by a

registered mail or by letter and hand delivered to each member of the

Board of Directors with a receipt or by facsimile or other electronic media

at least three (3) days prior to the meeting57.

d. The summons to the Board of Directors’ Meeting shall specify the date,

time, agenda and venue of the Meeting58.

e. The Board of Directors’ Meeting shall be held at the place of domicile of

the Company or at the main business place of the Company within the

territory of the Republic of Indonesia59.

f. If all Members of the Board of Directors are present or represented, such

advance summons shall not be required and the Board of Directors’

Meeting may be held at any time, provided that it is within the territory of

the Republic of Indonesia and the Meeting is entitled to adopt valid and

binding resolutions60.

g. The Board of Directors’ Meeting may be held by way of conference among

Members of the Board of Directors from different places, through

telephone conference, video conference or other communication devices





56 Board Manual

which enable each Member to hear/communicate and participate in the

Meeting.

h. Materials for the meeting shall be prepared by the Corporate Secretary.

Materials for the meeting can be given at the same time as the invitation.

2. PROCEDURES OF THE MEETING

a. The Corporate Secretary receives the materials/documents/management

reports from the Board of Directors. The materials/documents/

management reports shall be used as materials for the Board of Directors’

meeting. Such materials include: Company’s Monthly Report, Quarterly

Report, and Annual Report as well as other reports.

b. The Corporate Secretary shall submit these materials/documents/reports

to the President Director.

c. The President Director shall examine these materials and give directives

to the Corporate Secretary to be followed up.

d. The Corporate Secretary shall distribute an agenda for the meeting

together with the materials/documents/reports to be discussed to the

members of the Board of Directors/ Directors to obtain inputs on the

agenda.

e. Each Member of the Board of Directors shall receive, read and study the

agenda and materials.

f. The Corporate Secretary shall prepare an invitation letter for the meeting

after receiving all inputs from Members of the Board of Directors.

57 Board Manual

g. In the invitation letter, the Corporate Secretary shall prepare points of

issues to be discussed in the meeting.

h. If the meeting also invites other parties, the Corporate Secretary shall

make an invitation letter to those parties. If the other parties are from the

Management who are officials from one (1) level and/or two (2) levels

below the Board of Directors, this should be with the knowledge of the

related Directors.

i. The meeting participants shall receive the invitation and materials for the

meeting.

j. If the Board of Directors’ Meeting is held through a conference, the

following provisions shall apply:

1) Each Member of the Board of Directors who participates is considered

present at the Meeting in order to determine the fulfilment of attendance

quorum and resolutions of the Board of Directors’ Meeting.

2) The place where the Chairperson participates shall be considered as

the venue of the Board of Directors' Meeting.

3) Minutes of Meeting shall be submitted and signed by all Members of the

Board of Directors whether or not they were present in the Meeting.

3. ATTENDANCE MECHANISM AND VALIDITY OF A MEETING

a. A Board of Directors’ Meeting is valid and entitled to adopt valid and

binding resolutions if more than a half (1/2) of the total Members of the

Board of Directors are present or validly represented in the meeting.

58 Board Manual

b. In the miscellaneous item of the agenda, the Board of Directors’ Meeting

shall have no right to make a decision unless all Members of the Board or

their valid representatives are present and approve the additional agenda

item.

c. A Member of the Board of Directors may be represented in the Board of

Directors’ Meeting only by another Member of the Board based on a power

of attorney given specifically for that purpose, and such power of attorney

may be delivered through facsimile, e-mail, or other electronic means of

communication (if delivered via facsimile, e-mail or other electronic means

of communication, it shall be immediately followed by the original or a copy

that has been declared to conform with the original, delivered with a

receipt or by a registered mail or by an internationally recognized courier

service).

d. The Board of Directors’ Meeting shall be chaired by the President Director

and in the event the President Director is prevented or absent for any

reason which shall not necessarily be proven to third parties, the Board of

Directors' Meeting shall be chaired by a Member of the Board of Directors

elected from amongst the members present at the meeting.

e. The Board of Directors’ Meeting shall be attended by Members of the

Board of Directors, unless if required, may be attended by officials from

one level below the Board of Directors or other officials assigned by the

President Director.

4. DECISION MAKING PROCESS

59 Board Manual

a. Before discussing the agenda of Meeting, the chairman of meeting shall

explain the rules of meeting among others concerning the use of

communication devices in the meeting, the mechanism of question and

answer/giving of opinions, the mechanism for casting votes (if there is

voting).

b. All Board of Directors’ resolutions shall be based on good will, rational

considerations and have gone through indepth investigations on various

relevant issues, sufficient information and free from any conflicts of interest

and shall be made independently by each member of the Board.

c. Resolutions of the Board of Directors’ meeting shall be adopted amicably

for deliberation. In the event resolutions adopted in this manner fails,

resolutions shall be adopted by voting based on favorable votes of more

than one half (½) of the total votes validly cast in the Meeting.

d. If the event of a tie vote, the chairman of Board of Directors’ meeting shall

decide.

e. To maintain independency and objectivity, each Member of the Board of

Directors having a conflict of interest in a transaction, contract or proposed

contract, where the Company is a party shall be required to declare such

matter and shall not participate in the casting of votes for decision making.

This fact shall be recorded in the minutes of meeting.

60 Board Manual

f. Every Member of the Board of Directors present shall be entitled to cast

one (1) vote and an additional one (1) vote for each other Member of the

Board of Directors he/she represents.

g. Voting concerning an individual shall be made in a closed ballot bearing no

signature, whereas voting concerning other matters shall be made verbally

unless the chairman of the meeting decides otherwise without any

objections based on the majority votes from those present.

h. In the event of more than two (2) alternatives are proposed and the results

of voting have not obtained one (1) alternative with votes of more than a

half (1/2) portion of the total votes cast, then the second voting may be

held on the two (2) alternatives which receive most votes so that one (1)

proposed alternative would receive votes of more than one-half (1/2)

portion from the total votes cast.

i. Blank votes and invalid votes are deemed not validly cast and shall not be

considered and not counted in the total votes cast.

j. The Board of Directors may also adopt valid resolutions without convening

a meeting on condition that all members of the Board of Directors have

been notified in writing regarding the proposed resolutions and all

members of the Board have given their approval by signing the same.

Resolutions adopted in this manner shall have the same power as those

validly adopted in a Board of Directors’ meeting.

61 Board Manual

k. Decisions related to strategic aspects shall be made through a Board of

Directors' meeting. Those strategic aspects include all actions of the Board

of Directors that must obtain the approval of RUPS after obtaining a

written recommendation from the Board of Commissioners as well as all

actions of the Board of Directors that must obtain a written approval from

the Board of Commissioners.

5. MINUTES OF THE BOARD OF DIRECTORS' MEETING

a. The minutes of Board of Directors' meeting shall be prepared for each

Board of Directors' meeting and these minutes shall contain any dissenting

comments against what is decided in the Board of Directors' meeting (if

any).

b. The minutes of meeting shall reflect the dynamics in the meeting, that is it

shall contain matters discussed (including statements of disagreement of a

Member of the Board, if any) and matters being resolved. This is important

in order to be able to see the process of decision making and at the same

time this will become a legal document to determine the accountability of

the result of a decision.

Therefore, the minutes of meeting shall include;

1) Venue, date and time of meeting.

2) Agenda being discussed.

3) Attendance list signed by every participant of the meeting.

4) Duration of the meeting.

62 Board Manual

5) Evaluation of follow up of the results of previous meeting (if any).

6) Various opinions brought forward in the meeting.

7) Who gave the opinion.

8) Decision making process.

9) Resolutions adopted.

10) Statement of objection against the meeting resolutions if there is a

dissenting opinion.

c. The minutes of meeting shall be attached with a power of attorney given

specifically by Members of the Board who are not present to the other

Members of the Board (if any).

d. Each Member of the Board of Directors is entitled to receive a copy of the

minutes of Board of Directors’ meeting, whether or not the Member

concerned was present at the meeting.

e. The minutes of Board of Directors’ meeting shall be delivered to all

Members of the Board of Directors and one (1) copy to the Board of

Commissioners.

f. Within fourteen (14) days of date of delivery of the minutes of meeting,

each Member of the Board of Directors present and/or represented in the

Board of Directors’ meeting shall give his approval or objection and/or

recommendation for correction, if any, on what are contained in the

minutes of meeting to the chairman of the meeting.

63 Board Manual

g. If the objections and/or recommended corrections on the minutes of

meeting have not been received within that period, it can be concluded

that there is no objection and/or correction on the Minutes of the Board of

Directors' Meeting.

H. BOARD OF DIRECTORS’ PERFORMANCE APPRAISAL61

1. GENERAL POLICY

a. The Board of Directors’ and each Member’s performance shall be

evaluated by the Board of Commissioners and submitted to the

Shareholders at a RUPS.

b. In general, the Board of Directors' performance hall be determined based

on the duties contained in the prevailing laws and regulations and the

Company's Articles of Association as well as the mandate of

Shareholders. The criteria of formal evaluation shall be given openly to the

Member of the Board of Directors concerned as of the date of his

appointment.

c. The results of evaluation on the Board of Directors' performance as a

whole and each Member's performance individually shall become an

integral part in the compensation scheme and in the awarding of

incentives for the Board Members.

2. CRITERIA FOR THE BOARD OF DIRECTORS’ PERFORMANCE

APPRAISAL

61 Decision-16/S-MBU/2012 dated 6 June 2012

64 Board Manual

The criteria for evaluation of the Board of Directors’ performance shall be

determined in a RUPS based on the Key Performance Indicator (KPI). In

addition, the criteria for the Board of Directors’ performance can also be

made individually which shall be proposed by the Nomination and

Remuneration Committee (if formed) or by the Board of Commissioners to be

decided in a RUPS at least as follows:

a. Preparation of KPI at the beginning of the year and an evaluation of

achievements.

b. Attendance rate in the Board of Directors’ Meeting as well as meetings

with the Board of Commissioners.

c. Contribution in the Company’s business activities.

d. Involvement in certain assignments.

e. Commitment in promoting Company’s interest.

f. Compliance with the prevailing laws and regulations and Company

policies.

g. Achievement of Company targets as contained in the RKAP and

Management Contract.

I. SUPPORTING FUNCTIONS

1. CORPORATE SECRETARY

The Company Secretarial function is mandatory62.


65 Board Manual

Corporate Secretary shall be appointed and terminated by the President

Director with the approval of the Board of Commissioners63.

Corporate Secretary shall perform the following tasks64:

a. To ensure that the Company complies with the regulation concerning the

requirements for openness in line with the principles of Good Corporate

Governance.

b. to provide information required by the Board of Directors and Board of

Commissioners/Board of Supervisors regularly and/or at any time if

requested.

c. to act as a liaison officer; and

d. to administer and keep Company’s documents, including but not limited to

a Register of Shareholders, Special Register and minutes of Board of

Directors’ meeting, Board of Commissioners’ meeting and RUPS.

2. INTERNAL SUPERVISORY UNIT (SPI)65

(1) Internal supervision of the Company is carried out through:

a. the formation of Internal Supervisory Unit; and

b. making an Internal Supervisory Charter.

(2) The duties of Internal Supervisory Unit are:




66 Board Manual

a. To evaluate the effectiveness of internal control, risk management,

and the process of corporate governance, in accordance with the

laws and regulations and Company policies;

b. To examine and assess the efficiency and effectiveness of the

finance, operation, human resources, information technology and

other sectors;

(3) The Board of Directors shall maintain and evaluate the quality of internal

supervisory function in the Company.

J. RELATIONSHIP BETWEEN THE COMPANY AND ITS SUBSIDIARIES

The control mechanism of working relationship of the Company and its

Subsidiaries shall be arranged further by the Board of Directors.

67 Board Manual

CHAPTER III BOARD OF COMMISSIONERS

68 Board Manual

CHAPTER III Board of Commissioners

CHAPTER III

BOARD OF COMMISSIONERS

A. FUNCTION OF THE BOARD OF COMMISSIONERS

The Board of Commissioners constitutes one of the Company’s organs which

function to provide general or special supervision in accordance with the Articles of

Association and to give advice to the Board of Directors in running the

management of the Company. The Board of Commissioners also has the task to

monitor the effectiveness of Good Corporate Governance implemented by the

Company.

B. REQUIREMENTS, COMPOSITION AND TERM OF OFFICE OF THE BOARD OF

COMMISSIONERS

1. REQUIREMENTS FOR THE BOARD OF COMMISSIONERS

The requirements for a Member of the Board of Commissioners include

formal requirements as the basic requirement as stipulated in the Articles of

Association, and the prevailing laws and regulations, material requirements

as well as other requirements which are alligned with the Company’s

business needs and the nature as a State-owned Enterprise (BUMN) in the

field of energy, as follows:

69 Board Manual

a. Formal Requirements 66

Those who are eligible to be appointed as Members of the Board of

Commissioners are individuals who are able to conduct legal actions,

except that within five (5) years prior to their appointments:

1) were declared bankrupt.

2) became Members of the Board of Commissioners who were declared

guilty of causing the Company to be declared bankrupt;

3) were punished for committing a criminal act which inflicted a loss to the

state’s finance/ related to the financial sector.

b. Material Requirements67

a. have high integrity, dedication and moral, meaning a candidate Member

of the Board of Commissioners has never, either directly or indirectly,

been involved in any bad practices, in default and committed other

conducts that damaged the Company both during his service and in his

previous employment.

b. understand the Company’s management issues related to one of the

management functions.

c. have sufficient knowledge of the Company’s business.

66 Article 110 paragraph (1) of Law No. 40 of 2007 in conjunction with Article 14 Paragraph (4) of the Articles of

Association

67 Article 28 Paragraph (1)of Law No. 19 of 2003 in conjunction with Article 14 (5) of the Articles of Association

70 Board Manual

d. dedicate adequate time to carry out their duties and responsibilities.

c. Other requirements68

1) not a member of management of any Political Party and/or candidate

legislative member and/or legislative member.

2) not a candidate of Head/Deputy Head of a Region and/or the

Head/Deputy Head of a Region.

3) not currently holding the position of Member of the Board of

Commissioners and/or Board of Supervisors in another State-owned

Enterprise, unless he signs a statement letter to willingly resign from the

position of Member of the Board of Commissioners at another State-

owned Enterprise if elected as a Member of the Company’s Board of

Commissioners69.

4) is not currently holding a position which might potentially create a

conflict of interest with the Company unless he signs a statement letter

of his willingness to resign from the said position if he is elected as a

Member of the Board of Commissioners.

5) does not hold the position of Member of the Board of Commissioners

with the Company for two (2) consecutive periods.

68 Article 33 of Law No. 19 of 2003 in conjunction with Pertamina’s Code of Corporate Governance.

69 Letter of Minister of State-owned Enterprise No S-375/MBU.Wk/2011 dated 5 December 2011

71 Board Manual

6) is physically and mentally healthy (is not suffering from any diseases

that may prevent him from performing his duties as a Member of the

Board of Commissioners).

7) has the independency criteria in accordance with the prevailing laws

and regulations, this particularly applies to an Independent

Commissioner, that is:

a) is not holding the position of a Director in an affilliated Company.

b) is not working for the Company or its affiliate during the last one (1)

year.

c) has no financial relationship, either directly or indirectly with the

Company or other Companies which provide services and products

to the Company and its affiliated companies.

d) is free from any conflict of interest and business activities or other

relationship that might hinder or hamper his position as a member of

the Board of Commissioners to act or think freely in the Company.

2. COMPOSITION OF THE BOARD OF COMMISSIONERS

1. The Board of Commissioners shall comprise of one (1) member or more70.

2. In the event the Board of Commissioners consists of more than one (1)

members, one of them may be appointed as President Commissioner71.



72 Board Manual

3. The appointment of Members of the Board of Commissioners is not made

at the same time as the appointment of Members of the Board of

Directors72.

4. The appointment and termination of the Board of Commissioners shall be

made by RUPS73.

5. At least 20% of Members of the Board of Commissioners shall come from

outside the Company (Independent Commissioners)74.

3. TERM OF OFFICE

a. The term of office of Members of the Board of Commissioners shall be five

(5) years and may be re-appointed for one (1) more term75.

b. Members of the Board of Commissioners may be terminated at any time

based on a decision of RUPS giving the reasons therefor. Such

termination is due to the fact that the said Member of the Board of

Commissioners76:

1) is unable to carry out his duties properly.

2) fails to comply with the provisions of laws and regulations and/or

Articles of Association.

3) is involved in an act which damages the Company and/or the state. 72 Article 28 Paragraph (5) of Law No. 19 Tahun 2003

73 Article 27 Paragraph (1) of Law No. 19 Tahun 2003.

74 Article 13 Paragraph (1) of the Regulation of the Minister of State-owned Enterprises No. Per-01/MBU/2011 dated 1 August 2011.


76 Article 14 Paragraph(11) dan (12) of the Articles of Association

73 Board Manual

4) is declared guilty by a court ruling having permanent legal force.

5) Resigns.

C. FAMILIARIZATION AND CAPABILITY IMPROVEMENT PROGRAMS

1. FAMILIARIZATION PROGRAM77

A familiarization program for a new Member of the Board of Commissioners

shall be provided by the Company due to the background of Members of the

Board of Commissioners as representatives of various Shareholders. The

purpose of the familiarization program is to be acquainted with one another

and to create cooperation as one solid, comprehensive and effective team.

The conditions for the familiarization program are as follows:

a. Newly appointed members of the Board of Commissioners, shall be given

a familiarization program concerning general condition of the Company.

b. The person responsible for the familiarization program is the Corporate

Secretary or an official performing the function as Corporate Secretary.

c. The familiarization program shall cover:

1) The implementation of the principles of Good Corporate Governance in

the Company.

2) Description of duties and responsibilities of the Board of Commissioners

and Board of Directors as well as other matters that are not allowed.

77 Article 43 of the Regulation of the Minister of State-owned Enterprise No. Per-01/MBU/2011 dated 1 August

2011.

74 Board Manual

3) The picture of the Company with regards to the purpose, nature, scope

of activities, financial and operational performance, strategies, short-

term and long-term business plans, risks, internal control and other

strategic issues.

4) Explanations regarding delegation of authority, internal and external

audits, system and policy of Internal control and Audit Committee.

d. The familiarization program may take the form of presentation, meeting,

visit to Company’s facilities, visits to branch offices, study of Company

documents or other programs considered suitable with the needs.

2. CAPABILITY IMPROVEMENT PROGRAM78

Capability improvement is considered essential so as the Board of

Commissioners may continously be updated with information regarding the

latest developments and the Company’s core business as well as the


The conditions for capability improvement program for the Board of

Commissioners are as follows:

a. Capability improvement program shall be carried out in order to increase

the effectiveness of the Board of Commissioners’ work.

b. Plans to carry out the capability improvement program shall be included in

the Company’s work plans and budget.

78 Decision-16/S-MBU/2012 dated 6 June 2012

75 Board Manual

c. Each Member of the Board of Commissioners who attends the capability

improvement program such as seminar and/or training shall be required to

make a presentation to the other Members of the Board of Commissioners

for information and knowledge sharing.

d. The Member of the Board of Commissioners concerned shall be

responsible for making a report on the capability improvement program.

The report shall be submitted to the Board of Commissioners.

D. ETHICS OF THE BOARD OF COMMISSIONERS’ POSITION

1. ETHICS RELATED TO ROLE MODEL

The Board of Commissioners shall promote ethical conducts and uphold the

highest ethical standards in the Company, and one of the methods is by

making himself as a good model for the Board of Directors and all Company

Employees.

2. ETHICS RELATED TO COMPLIANCE WITH THE LAWS AND

REGULATIONS

Every Member of the Board of Commissioners shall be required to comply

with the prevailing laws and regulations, the Articles of Association and

Codes of Good Corporate Governance as well as other Company policies.

3. ETHICS RELATED TO CONFIDENTIALITY AND DISCLOSURE OF

INFORMATION

The Board of Commissioners shall disclose information in accordance with

the prevailing laws and regulations and shall maintain the confidentiality of

76 Board Manual

Company’s confidential information entrusted to him in accordance with the

prevailing laws and regulations and Company policies.

4. ETHICS RELATED TO COMPANY OPPORTUNITIES AND PERSONAL

ADVANTAGE

During their service, Members of the Board of Commissioners shall not be

allowed to:

a. Take a Company’s business opportunity for his own interest, and for the

interest of his family members, business group and/or other parties.

b. Use Company’s properties, information or his position as Member of the

Board of Commissioners for personal interest or for the interest of others,

which contravene with the provision of applicable laws and regulations as

well as Company policies.

c. Compete with the Company, that is using inside knowledge/information to

obtain profits for the interest other than the Company’s.

d. Take personal advantage of Company’s activities, other than the salary

and facilities received by him as a member of the Board of Commissioners

as determined by RUPS.

5. ETHICS RELATED TO CONFLICT OF INTEREST

The Board of Commissioners shall always avoid any conflict of interest by;

a. avoiding any conflict of interest.

77 Board Manual

b. avoiding any activities that may influence his independency in carrying out

his tasks.

c. completing a special register containing information on his and/or his

family’s share ownership with another Company, including if not having a

share ownership, and regularly at the end of each year updating and

register and reporting it to the Company if there are any changes in the

data, in accordance with the prevailing laws and regulations.

d. not entertaining any request from any party with any reasons, either direct

requests from certain parties including and not limited to

officials/employees from the government agencies and political parties

related to requests for donation, including those related to goods and

service procurements at the Company for as long as this may influence

decision making.

e. not using his position for personal interest or for the interests of others or

other related parties which is in conflict with the interest of the Company.

f. making a disclosure in the event of a conflict of interest, and the Member

of the Board of Commissioners concerned shall not get involved in the

process of Company’s decision making related to that matter.

6. ETHIC IN DOING BUSINESS AND ANTI CORRUPTION79

Members of the Board of Commissioners shall not be permitted to give or

offer, or receive either directly or indirectly, anything of value to customers or

79 Article 40 Paragraph (1) of the Regulation of the Minister of State-owned Enterprise No. Per-01/MBU/2011

dated 1 August 2011.

78 Board Manual

government officials in order to influence them or as gratifications for what

they have done and other actions in accordance with the prevailing laws and

regulations.

7. ETHICS POST BOARD OF COMMISSIONERS’ POSITION

Members of the Board of Commissioners who no longer hold the position

shall:

a. Return all documentation related to the position they previously held to the

Company within thirty (30) calendar days.

b. If a Member of the Board of Commissioners passes away during his/her

service, the heir of the said Member shall return the documents referred to

in point a above.

c. Prepare form B LHKPN (State Organizer’s Wealth Report) within sixty (60)

calendar days of handover of position80.

Any violation to the ethics committed by members of the Board of

Commissioners shall be treated the same as violation against the Code of

Conduct.

E. DUTIES AND RESPONSIBILITIES OF THE BOARD OF COMMISSIONERS

The Board of Commissioners shall carry out supervision over the management

and, operation in general both concerning the Company and Company’s business

carried out by the Board of Directors and give advice to the Board of Directors

80 Article 1 paragraph 5 and Article 2 Paragraph 6 of the Decision of Corruption Erradication Commission of the

Republic of Indonesia Number: kep.07/ IKPK/02/ 2005

79 Board Manual

including supervision over the implementation of Company’s long-term plans,

Company’s work plans and budget, as well as the provisions of Articles of

Association and resolutions of General Meeting of Shareholders (RUPS), and the

prevailing laws and regulations, for the interest of the Company and in accordance

with the aims and objectives of the Company81.

The Board of Commissioners shall be obliged82:

a. To comply with the laws and regulations, Articles of Associations and

resolutions of RUPS and to act professionally.

b. To supervise the policies made by the Board of Directors in carrying out the

management of Company including the performance of Company's long-term

plans, Company’s work plans and budget as well as the provisions of Articles of

Association and resolutions of RUPS and the prevailing laws and regulations.

c. To give advice to the Board of Directors in managing the Company and shall not

be intended for the interest of a certain party/group83.

d. To prepare the distribution of duties among members of the Board of

Commissioners.

e. To study and review as well as sign Company’s long-term plans and work plans

and budget prepared by the Board of Directors in accordance with the

provisions of the Company’s Articles of Association.

81 Article 15 paragraph (1) of the Articles of Association

82 Article 12 of the Regulation of the Minister No. PER-09/MBU/2012 dated 6 July 2012 on the Amendment to the Regulation of the Minister No. PER-01/MBU/2011 dated 1 August 2011.

83 The Articles of Association Article 15 Paragraph (2) letter b point 1

80 Board Manual

f. To prepare the Board of Commissioners’ annual work programs and to be

included in the Company’s work plans and budget84.

9. To study and review regular reports and annual reports prepared by the Board

of Directors and to sign the annual reports85.

h. To report to the Company of their and/or their family member’s share ownership

in the Company and in other Companies, including any change thereto86.

i. To recommend to a General Meeting of Shareholders of the appointment of an

External Auditor who will audit Company’s books.

j. To monitor the effectiveness of Good Corporate Governance practices including

holding a regular meeting with the Board of Directors to discuss the

implementation of Good Corporate Governance.

k. To carry out other duties for the supervision and giving of advice, as long as not

in contravention with the laws and regulations, Articles of Association and/or

resolutions of RUPS87.

The Board of Commissioners’ duties and obligations can be classified as follows:

1. DUTIES AND OBLIGATIONS RELATED TO SHAREHOLDERS & RUPS

a. To submit a report on the supervision performed during previous book year

to RUPS88.

84 The Articles of Association Article 15 paragraph (2) letter b point 8


86 The Article 12 Paragraph (9) Regulation of the Minister No. PER-09/MBU/2012 dated 6 July 2012 on the Amendment to the Regulation of the Minister No. PER-01/MBU/2011 dated 1 August 2011.


81 Board Manual

b. To propose Key Performance Indicators to be decided by the RUPS89.

c. To submit a quarterly report on the realization of the key performance

indicators to Shareholders90.

d. To propose a public accountant to RUPS based on recommendations from

the Audit committee91.

e. To promptly report to the RUPS if there is any sign of decline in Company

performance92 and recommendations that have been given to the Board of

Directors to deal with the problem.

f. To prepare an annual work plan and include it in the Company’s work plans

and budget (RKAP)93.

g. To give opinions and suggestions to RUPS concerning the Company's

long-term plans and Company's work plans and budget with regards to the

reasons why the Board of Commissioners sign the Company's long-term

plans and Company’s work plans and budget94.

88 Article 12 Paragraph (6) of the Regulation of the Minister No. PER-09/MBU/2012 dated 6 July 2012 on the

Amendment to the Regulation of the Minister No. PER-01/MBU/2011 dated 1 August 2011.

89 Article 15 Paragraph (1) of the Regulation of the Minister No. PER-01/MBU/2011 dated 1 August 2011.


91 The Regulation of Minister of State-owned Enterprise No. PER-01/MBU/2011 on the Implementation of Good Corporate Governance Article 31 paragraph 1

92 Article 15 letter b point 5 of the Articles of Association

93 Article 15 letter b point 8 Pertamina’s Articles of Association.


82 Board Manual

h. To keep abreast with the developments of the Company, to give opinions

and suggestions to RUPS concerning issues considered essential for the

management of the Company95.

i. To give clarifications, opinions and suggestions to RUPS concerning the

annual report, if requested96.

j. To sign the annual report. In the event there is a member of the Board of

Commissioners who is not willing to sign the annual report, the reasons

thereof shall be mentioned in writing97.

2. DUTIES AND OBLIGATIONS RELATED TO SUPERVISORY FUNCTION

a. To study, review and sign for approval and endorsement the Company’s

long-term plans and Company’s work plans and budget prepared by the

Board of Directors, in accordance with the Articles of Association98.

b. To monitor and ensure that Good Corporate Governance has been

implemented effectively and sustainably99.

c. To study and review regular reports and annual report prepared by the

Board of Directors and to sign the annual report100.



97 Law No. 40 of 2007 on Limited Liability Companies Article 67 paragraph (2)

98 Article 15 letter b point 2 of Pertamina’s Articles of Association.

99 Article 12 paragraph (7) of the Regulation of the Minister No. PER-09/MBU/2012 dated 6 July 2012 on the Amendment to Permen No. PER-01/MBU/2011 dated 1 August 2011

100 Article 15 letter b point 6 of Pertamina’s Articles of Association.

83 Board Manual

d. To ensure that the Company’s annual report has contained information

concerning the identity, the principal duties, positions of the Board of

Commissioners in other organizations, including meetings held within one

book year (internal meetings as well as meetings with the Board of

Directors), and the honorarium, facilities, and/or other allowances received

from the Company101.

e. To make a decision on the Board of Directors’ proposal which, based on

the provisions of the Articles of Association, requires the approval of the

Board of Commissioners, within thirty (30) days of receipt of such proposal

or explanation and complete documents from the Board of Directors102.

f. To give a written response to the Board of Directors’ action which, based

on the provisions of the Articles of Association, requires the Board of

Commissioners’ written response, within thirty (30) days of receipt of such

request or explanation and complete documents from the Board of

Directors103.

g. To give directives to the Board of Directors on the implementation of

Company’s plans and policies related to104:

1) Important matters regarding changes in the business environment;

2) Procurement and its implementation;

101 Article 12 Paragraph (8) of the Regulation of the Minister No. PER-09/MBU/2012 dated 6 July 2012 on the

Amendment to the Regulation of the Minister No. PER-01/MBU/2011 dated 1 August 2011.

102 Article 11 Paragraph (8) and (9) of the Articles of Association.

103 Article11 Paragraph (10) and (11) of the Articles of Association.


84 Board Manual

3) Quality and Services;

4) Management of Subsidiary Companies;

5) Information Technology;

6) Human Resources (HR);

7) Accounting and preparation of Financial Reports in accordance with

generally accepted accounting standards in Indonesia (SAK);

8) Performance of agreements with the third parties;

9) Policies and implementation of Health, Safety, Security and

Environment (HSSE).

3. DUTIES AND OBLIGATIONS RELATED TO NOMINATION OF MEMBERS

OF THE BOARD OF DIRECTORS AND REMUNERATION

a. To propose a nomination and selection policy for candidate Members of

the Company’s Board of Directors as well as candidate Members of the

Company’s Board of Commissioners and Board of Directors of Company’s

Subsidiaries, and to propose to the RUPS for endorsement.

b. To propose candidate Members of the Company’s Board of Directors to

the Shareholders.

c. To perform reviews and supervision in order to ensure that the Company

has had a nomination strategy and policy in place which cover the process

of organizational analysis, procedures and criteria for recruitment,

selection and promotion.

85 Board Manual

d. To study the remuneration system which is suitable for Members of the

Board of Commissioners and Board of Directors and propose it to the

RUPS.

e. To ensure that the Company has a transparent remuneration system

including salaries and honorariums, allowances and fixed facilities as well

as variable incentives.

f. To prepare a policy on a proposal for the Board of Directors’ remuneration

to RUPS.

g. To review the proposed remuneration for the Board of Directors together

with the related Committees.

h. To propose a performance incentive/bonus, to consider the Board of

Directors’ performance appraisal and to achieve the Company’s health

level.

i. To propose the Board of Directors’ remuneration (salaries, allowances and

facilities as well as performance bonus/incentives) to the RUPS.

4. DUTIES AND OBLIGATIONS RELATED TO PERFORMANCE APPRAISAL

OF THE BOARD OF COMMISSIONERS AND BOARD OF DIRECTORS105

a. To carry out performance evaluation through the preparation of Key

Performance Indicators (KPI) of the Board of Commissioners with a self-

assessment system or other systems to be further decided in the meeting

of the Board of Commissioners.


86 Board Manual

b. To give a response and recommendation regarding the determination of

Board of Directors’ KPI at the beginning of each business year.

c. To evaluate the performance of every Member of the Board of

Commissioners and include it in the minutes of meeting of the Board of

Commissioners.

d. The performance report of the Board of Commissioners is presented in the

report of the implementation of the Board of Commissioners’ supervisory

function.

e. To prepare a system for measuring and evaluating performance of the

Board of Commissioners and individual Member of the Board of

Commissioners and Board of Directors and propose it to the RUPS.

f. To propose KPI and its targets every year to the RUPS for endorsement.

g. In carrying out the appraisal of the Board of Directors’ performance, the

Board of Commissioners:

1) Prepares a policy on performance appraisal of the Board of Directors

and its reporting to the Shareholders.

2) Reviews the criteria, targets and main performance indicators contained

in the Board of Directors’ management contract/Company’s work plans

and budget both individually and collegially and submit it to the

Shareholders in a report of supervisory duty semi-annually and

annually.

87 Board Manual

5. DUTIES AND OBLIGATIONS RELATED TO SUPERVISON ON THE

IMPLEMENTATION OF RISK MANAGEMENT

a. To study the effectiveness of Company management from the risk

management aspect integratedly as a source of recommendation for the

Board of Commissioners.

b. To evaluate the policy on investment and to identify as well as assess its

potential risks.

c. To evaluate the steps in the process of Company’s investment and risk

management, starting from identification up to disclosure and mitigation of

the risks.

d. To assess the risk of Company’s planned projects and investments, to

further give opinions and or recommendations related to continuation of

the projects.

6. DUTIES AND OBLIGATIONS RELATED TO INTERNAL CONTROL

SYSTEM

a. To ensure the effectiveness of internal control system.

b. To ensure the effectiveness of performance of duties of the Internal

Auditor and External Auditor, through the assessment of competency,

independency as well as the scope of Internal Auditor's and External

Auditor's duties.

88 Board Manual

c. To ensure that the Internal Auditor, External Auditor and Audit Committee

have access to the information concerning the Company required to carry

out their duties.

d. To evaluate the accuracy of information prepared for other parties,

especially in the financial reports and annual reports.

7. DUTIES AND OBLIGATIONS RELATED TO ETHICS IN DOING BUSINESS

AND ANTI CORRUPTION

a. To prioritize the principles of Good Corporate Governance in dealing with

business partners, creditors/investors, government officials/employees as

well as other parties.

b. Not giving or offering, or receiving, either directly or indirectly, anything of

value to or from customers or a government official in order to influence or

as gratification for what they have done and other acts, in accordance with

the laws and regulations.106

c. To avoid corruption, collusion and nepotism practices in accordance with

the laws and regulations.

8. DUTIES AND OBLIGATIONS RELATED TO DISCLOSURE AND

CONFIDENTIALITY OF INFORMATION

a. To ensure that information including, but not limited to, financial reports,

annual reports submitted by the Company to the Company’s shareholders

and stakeholders are made timely, completely and accurately.


89 Board Manual

b. To ensure that data/information provided to the public is in line with the


9. DUTIES AND OBLIGATIONS RELATED TO THE WORKING

RELATIONSHIP AMONG MEMBERS OF THE BOARD OF

COMMISSIONERS

The working relationship among members of the Board of Commissioners is

collective in nature. In carrying out the operational activities, the President

Director shall coordinate with all members of the Board of Commissioners

(first among equals).

F. AUTHORITY OF THE BOARD OF COMMISSIONERS

The Board of Commissioners has the authority107:

1. To have adequate access to Company's information in this case to examine

the books, letters, and other documents, to check the cash for verification

and other commercial papers and to examine Company’s assets.

2. To enter the premises, buildings and offices used by the Company.

3. To ask for clarifications from the Board of Directors and/or other officers

concerning all matters related to the management of Company.

4. To know all policies and actions that have been taken and to be taken by the

Board of Directors.

107 Article 15 Paragraph (2) letter a of the Articles of Association

90 Board Manual

5. To ask the Board of Directors and/or other officials under the Board of

Directors at the Board of Directors’ knowledge to attend a Board of

Commissioners’ meeting.

6. To appoint and terminate the Board of Commissioners' Secretary, if deemed

necessary.

7. To suspend a Member of the Board of Directors in accordance with the

provision of the Articles of Association.

8. To establish other committees other than audit committee, if deemed

necessary, taking into account the Company’s capability.

9. To utilize expert staff for a certain task and for a certain period at the

Company’s expense, if deemed necessary.

10. To manage the Company during certain condition for a certain period in

accordance with the Articles of Association.

11. To attend the Board of Directors’ meeting and give opinions on matters being

discussed.

12. To carry out other supervisory authority as long as not in contravention with

the laws and regulations, Articles of Association and/or resolutions of RUPS.

13. To give a written approval on the Board of Directors’ proposal/actions,

including108:


91 Board Manual

a. To open a branch office or a representative office in another place, either

in Indonesia or overseas.

b. To make capital participation in another company which value does not


c. To establish a subsidiary company and/or a joint venture company which


d. To subscribe either in part or in whole or to participate in the interest on


subsidiary company for the management of upstream oil and gas work


subsidiary company is deemed to have been given at the time of approval

for the investment plan of the upstream work area in the Company’s work

plan and budget, and which value does not exceed the Material Value.

e. To release part or whole of Company’s participation in the interest which


f. To release capital participation in another company which value does not


g. To perform merger, dissolution, acquisition, separation, and liquidation of a

subsidiary company which value does not exceed the Material Value.

h. To carry out licensing cooperation, management contract, asset leasing,

operational cooperation and other cooperation agreements which exceed

a certain value as set out by the Board of Commissioners.

92 Board Manual

i. Any change in the utilization of investment budget that has been set out in

the Company’s work plan and budget and which value does not exceed

10% (ten percent) of the total Company’s work plan and budget.

j. To put Company’s fixed assets as capital participation in another company

or for the establishment of a subsidiary company, which value does not


k. To bind the Company as a guarantor that carries financial consequences

that exceed a certain amount as set out by the Board of Commissioners.

l. To receive a short-term loan from a bank or other financial institutions

which exceeds certain amount as set out by the Board of Commissioners.

m. To give a short-term, non operational loan which exceeds a certain

amount as set out by the Board of Commissioners.

n. To receive or provide a mid-term/long-term loan which value does not

exceed the Material Value, except for a loan which arises due to the


o. To buy or sell commercial papers at a capital market/other financial

institutions that exceeds a certain amount as set out in the Company's

work plan and budget, except for commercial papers issued by the

Indonesian Government and to buy back commercial papers issued by the

Company taking into account the Company's interest which value does not


93 Board Manual

p. To pledge the fixed assets needed in making short-term credit withdrawals

that exceeds a certain amount as set out by the Board of Commissioners.

q. To pledge the fixed assets needed in making a mid-term/short-term credit

withdrawal which value does not exceed the Material Value.

r. To write off from the bookkeeping record uncollectible receivables and

dead stocks which value does not exceed the Material Value.

s. To release and write off movable fixed assets with economic life normally


value exceeds a certain amount as set out by the Board of

Commissioners.

t. To release and write off immovable fixed assets which value does not


u. To recommend Company’s representatives to become candidate members

of the Board of Directors and Board of Commissioners in a Subsidiary

Company.

v. To prepare and adjust the organizational structure up to two (2) levels

below the Board of Directors.

w. Management of reserve funds by the Board of Directors in order for the

funds to generate profits.

If within thirty (30) calendar days of receipt of such request or explanation

and complete document from the Board of Directors, the Board of

94 Board Manual

Commissioners has not given its decision, then the Board of Commissioners

is considered to approve the Board of Directors’ request.

G. RIGHTS OF THE BOARD OF COMMISSIONERS

1. To ask the Board of Directors and/or other officials under the Board of

Directors at the Board of Directors’ knowledge to attend a Board of

Commissioners’ meeting.

2. The Board of Commissioners with a majority vote has the right at any time to

suspend one or more Members of the Board of Directors, if they have

committed acts which contravene with the Articles of Association or there are

indications to have caused loss to the Company or if they have neglected

their obligations or there is an urgent reason for the Company to do so. Such

suspension shall be informed in writing to the member concerned and to the

Shareholders giving the reasons for such suspension.

3. Members of the Board of Directors shall be provided with honorariums and

allowances as well as facilities including post-service benefits which type and

amount shall be determined by RUPS taking into account the provisions in

the applicable laws and regulations109.

4. To obtain timely, measurable and complete information concerning the

Company110.

H. BOARD OF COMMISSIONERS’ MEETING

109 Article 8 of the Regulation of the Minister of State-owned Enterprises No. PER-07/MBU/2010 dated 27

December 2010


95 Board Manual

1. GENERAL POLICY

a. The Board of Commissioners’ meeting is a meeting held by the Board of

Commissioners.

b. The Board of Commissioners’ meeting shall be considered valid if held in

the Company’s place of domicile or its principal business place in the

Indonesian territory. If held in another place, it shall be considered valid

and may make decisions if held within the Indonesian territory and is

attended by all members of the Board of Commissioners111.

c. All resolutions of the Board of Commissioners shall be adopted in the

Board of Commissioners’ meeting. Resolutions of meeting may also be

adopted outside a Board of Directors’ meeting as long as all Members of

the Board of Commissioners approve the method and materials being

decided.112

d. The Board of Commissioners shall hold a meeting at least once a month

and in that meeting the Board of Commissioners may invite the Board of

Directors113.

e. The Board of Commissioners may hold a meeting outside the schedule

that has been set above114:

111 Article 16 Paragraph (6) and (7) of the Articles of Association

112 Article 16 Paragraph (1) and (2) of the Articles of Association

113 Article 14 Paragraph (1) of the Ministerial Regulation No. PER-01/MBU/2011 dated 1 August 2011


96 Board Manual

1) At the request of one (1) or more members of the Board of

Commissioners;

2) At the request of the Board of Directors; or

3) At a written request of one (1) or several Shareholders who represent at

least 1/10 (one tenth) of the number of shares with voting rights, by

mentioning the agenda to be discussed.

f. The number of meetings of the Board of Commissioners and the

attendance of each Member of the Board shall be included in the annual

report115.

2. PROCEDURES OF THE MEETING

a. Summons to the Board of Commissioners’ meeting shall be served in

writing by the President Commissioner or by a Member of the Board of

Commissioners appointed by the President Commissioner and shall be

delivered within three (3) days prior to the meeting or a shorter period if in

urgent condition, excluding the date of summons and date of meeting116.

b. The summons shall include the agenda, date, time and venue of the

meeting117.

c. Such summons to the meeting shall not be required if all Members of the

Board of Commissioners are present in the meeting118.




97 Board Manual

d. The agenda of meeting shall be prepared by the Board of Commissioners’

Secretary. Materials for the meeting shall be given at the same time as the

invitation.

e. Prior to the meeting, the Board of Commissioners’ Secretary shall first

distribute the agenda of meeting to obtain inputs from Members of the

Board of Commissioners concerning the agenda. Such inputs may be in

the form of addition/deletion or intensification of the agenda.

f. Each Member of the Board of Commissioners shall have the right to

propose a meeting agenda to be discussed.

g. Members of the Board of Commissioners may have a dissenting opinion

eventhough as a whole the number of votes in favor is greater. In this

circumstance, such dissenting opinion shall be recorded in the minutes of

meeting.

h. The Board of Commissioners’ Meeting may be held by way of conference

among Members of the Board of Commissioners from different places,

through telephone conference, video conference or other communication

devices which enable each Member of the Board of Commissioners to

hear and communicate as well as participate in the Meeting, provided that;

1) It is held in a situation where it is not possible to hold a meeting in a

forum.


98 Board Manual

2) Each Member of the Board of Commissioners who participates is

considered present at the meeting in order to determine the fulfillment of

attendance quorum and resolutions of the Board of Commissioners’

Meeting.

3) The place where the chairman of the meeting participates in the

conference meeting shall be considered as the venue of the meeting.

4) Minutes of the meeting shall be submitted and signed by all Members of

the Board of Commissioners and Members of the Board of Directors

present in the conference meeting.

3. ATTENDANCE REQUIREMENTS AND QUORUM OF MEETING

a. The Board of Commissioners’ meeting shall be attended by Members of

the Board of Commissioners, Secretary of the Board of Commissioners or

other officials assigned by the President Commissioner, except for special

meetings which may only be attended by Members of the Board of

Commissioners.

b. The Board of Commissioners’ meeting shall be valid and entitled to adopt

binding resolutions if attended or represented by more than a half (1/2) of

the total Members of the Board of Commissioners119.

c. A Member of the Board of Commissioner who is unable to attend a Board

of Commissioners’ meeting may only be represented by another Member

of the Board of Commissioners, by granting a power of attorney with


99 Board Manual

sufficient duty stamp specially made for such purpose. One Member of the

Board of Commissioners may only represent one other Member of the

Board of Commissioners who is unable to attend the meeting120.

d. All meetings of the Board of Commissioners shall be chaired by the

President Commissioner. In the event the President Commissioner is

unable to attend, the meeting shall be chaired by another Member of the

Board of Commissioners appointed by the President Commissioner. In the

event the President Commissioner does not make any appointment, the

Member with the longest service as a Commissioner shall act as chairman

of the meeting. In the event yhere are more than one (1) longest-serving

Members of the Board of Commissioners, the oldest (in age) Member shall

act as the chairman of Meeting121.

e. In the miscellaneous agenda, the Board of Commissioners’ meeting shall

have no right to adopt any resolutions unless all Members of the Board of

Commissioners or their formal representatives are present and agree to

the additional meeting agenda122.

4. DECISION MAKING PROCEDURES

a. All Board of Commissioners’ decisions shall be based on good will, rational

considerations and have gone through indepth investigations on various

relevant issues, sufficient information and free from any conflicts of interest


121 Article 16 Paragraph (17), (18), (19) and (20) of the Articles of Association


100 Board Manual

and shall be made independently by each member of the Board of

Commissioners.

b. All resolutions from the Board of Commissioners’ Meeting shall be adopted

amicably for deliberation123.

c. If no agreement is reached amicably, resolutions of the Board of

Commissioners’ meeting shall be adopted by majority votes124.

d. In the event of a tie vote, the chairman of meeting shall make the decision,

taking into account the provision of Article 15 paragraph (3) of the Articles

of Association, except with regard to an individual, decision of the Meeting

shall be made through a closed voting125.

e. Each member of the Board of Commissioners shall be entitled to cast one

(1) vote plus one (1) other vote for a member of the Board of

Commissioners he represents126.

f. Blank votes shall be deemed to agree with the proposal brought up in the

meeting127.

g. In the event there are more than two (2) alternatives proposed and the

results of voting have not obtained any one (1) alternative with votes of

more than a half (1/2) portion of the total votes cast, then the second

123 Artticle 16 Paragraph (21) of the Articles of Association





101 Board Manual

voting may be held on the two (2) alternatives which receive the majority

votes so that one (1) proposed alternative receives more than one-half

(1/2) portion of the total votes cast128.

h. The Board of Commissioners may also adopt valid resolutions without

holding a Board of Commissioners’ meeting provided that all Members of

the Board have been informed in writing and all of them have given their

approval to the proposal submitted in writing by signing the same.

Resolutions adopted in this manner shall have the same power as those

validly adopted in a Board of Commissioners’ meeting.

Decisions related to strategic aspects shall be made through a Board of

Commissioners' meeting. Those strategic aspects include all actions of the

Board of Directors that must obtain the approval of RUPS after obtaining a

written recommendation from the Board of Commissioners as well as all

actions of the Board of Directors that must obtain a written approval from


5. PREPARATION OF MINUTES OF MEETING

a. At every meeting of the Board of Commissioners, either internal meeting,

combined meeting or meetings with the committees, minutes of meeting

shall be prepared which contain matters discussed, including any

dissenting opinions from the attendants (if any) and matters resolved129.


129 Article 16 Paragraph (2) of Pertamina’s Articles of Association.

102 Board Manual

b. The minutes of meeting shall be signed by the chairman of meeting and all

Members of the Board of Commissioners and/or Board of Directors or

Committee present at the Meeting130.

c. The Board of Commissioners’ Secretary or another official appointed by

the President Commissioner and/or chairman of the meeting shall be

responsible for the preparation and distribution of the minutes of meeting.

d. In the event the meeting is not attended by the Board of Commissioners’

Secretary or other official appointed by the President Commissioners, the

minutes of meeting shall be prepared by one Member of the Board of

Commissioners appointed from among those present.

e. The minutes of meeting shall reflect the situation of meeting. This is

important in order to see the process of decision making and at the same

time become a legal document and valid means of proof to determine the

accountability of the results of the resolutions of meeting.

Therefore, the minutes of meeting shall include;

1) Venue, date and time of meeting.

2) Agenda being discussed.

3) Attendance list signed by every participant of the meeting.

4) Various opinions brought forward in the meeting including dissenting

opinions.

130 Article 16 Paragraph (3) of Pertamina’s Articles of Association.

103 Board Manual

5) Who gave the opinion.

6) Decision making process.

7) Resolutions adopted.

8) Statement of objection against the resolutions of meeting if there is no

unanimous decision.

f. The minutes of meeting shall be attached with a power of attorney given

specifically by Members of the Board of Commissioners who are not

present to the other Members of the Board.

g. Each Member of the Board of Commissioners shall be entitled to receiva a

copy of the minutes of Board’s meeting, whether or not the Member

concerned was present at the Board of Commissioners’ meeting131.

h. A copy of the minutes of Board of Commissioners’ meeting shall be

delivered to all Members of the Board of Commissioners/Board of

Directors/Committees within seven (7) days after the meeting132.

i. Within fourteen (14) days of date of delivery of the minutes of meeting,

each Member of the Board of Commissioners present and/or represented

in the meeting shall give his approval or objection and/or recommendation

for correction, if any, on what is contained in the minutes of meeting to the

chairman of the meeting


132 Code of Corporate Governance.

104 Board Manual

j. If the objection and/or proposed correction is not received during that

period, it shall be concluded that there is no objection and/or revision on

the minutes of meeting.

k. The minutes of meeting shall be signed by all Members of the Board of

Commissioners present at the meeting, and shall be delivered to all

Members of the Board of Commissioners/Board of Directors/Committees

within seven (7) days after the minutes were signed.

l. The minutes of Board of Commissioners’ meeting shall be submitted to the

Board of Directors to be kept and maintained, and a copy shall be kept by


m. To prepare a matrix of follow up on the evaluation of the Board of

Commissioners on the implementation of the resolutions from previous

meetings.

I. BOARD OF COMMISSIONERS’ PERFORMANCE APPRAISAL

1. GENERAL POLICY

a. The Board of Commissioners shall submit a report of Board of

Commissioners' performance and Member of the Board of Commissioners'

performance to be evaluated by the Shareholders in the RUPS.

b. The Board of Commissioners' performance shall be determined based on

the duties contained in the prevailing laws and regulations and the Articles

of Association as well as the mandate of Shareholders. The criteria of a

105 Board Manual

formal evaluation are given openly to the Member of the Board of

Commissioners concerned as of the date of his appointment.

c. The results of evaluation on the Board of Commissioners' performance as

a whole and each Member's performance individually shall become an

integral part in the compensation scheme and in the awarding of

incentives for the Board Members.

d. The results of performance appraisal of each Member of the Board of

Commissioners individually shall become the basis of consideration for the

Shareholders to terminate and/or reappoint the Member of the Board of

Commissioners concerned. The results of performance appraisal shall

become the basis for evaluation and improvement of the Board of

Commissioners effectiveness.

2. BOARD OF COMMISSIONERS’ PERFORMANCE APPRAISAL CRITERIA

Criteria for the Board of Commissioners’ and individual Member of the Board

of Commissioners’ performance appraisal proposed by the Board of Directors

and decided in the General Meeting of Shareholders (RUPS) shall at least

include the following:

a. Preparation of Key Performance Indicators (KPI) at the beginning of each

year and an evaluation of their achievements.

b. Rate of attendance at the Board of Commissioners’ meeting, coordination

meeting, as well as meetings with other existing committees.

c. Contribution in the process of Company supervision.

106 Board Manual

d. Involvement in certain assignments.

e. Commitment in promoting Company’s interest.

f. Compliance with the prevailing laws and regulations, Articles of

Association, RUPS provisions, as well as Company policies.

J. THE BOARD OF COMMISSIONERS’ SUPPORTING ORGANS

1. BOARD OF COMMISSIONERS COMMITTEES

In performing its supervisory task and its function to provide advices, the

Board of Commissioners shall form an Audit Committee and may establish

other committees based on developments in the applicable laws and

regulations and/or based on the Company's needs. Those established

committees have the task related to the supervisory function of the Board of

Commissioners including, but not limited to, the internal control system, the

nomination and remuneration function for the Board of Directors and Board of

Commissioners, the implementation of risk management and the

implementation of Good Corporate Governance principles in accordance with

the prevailing regulations. Further explanations on the Board of

Commissioners’ committees shall be set forth in each Committee’s charter.

2. BOARD OF COMMISSIONERS’ SECRETARY

To assist with the smooth performance of its duties, the Board of

Commissioners shall be entitled to supports from the Secretary of the Board

at the Company’s expense. The Board of Commissioners’ Secretary shall

carry out his/her duties and obligations to assist the Board of Commissioners

107 Board Manual

in the secretarial function, to ensure that the Board of Commissioners’ tasks

have been carried out and all information required by the Board of

Commissioners is available as well as any other duties as provided for in the

applicable laws and regulations. Further arrangement related to the Board of

Commissioners’ Secretary shall be made by the Board of Commissioners.

Further arrangement related to the function, duties, responsibilities and

authority of the Board of Commissioners’ Secretary shall be made by the

Board of Commissioners in a separate document taking into account the

provisions on the Board of Commissioners’ Secretary in the Board Manual.

In the event a definite Board of Commissioners’ Secretary has not been

appointed, the tasks and responsibilities of the Secretary shall be carried out

by the Manager BOC Support.

K. WORKING RELATIONSHIP BETWEEN THE BOARD OF COMMISSIONERS

AND BOARD OF DIRECTORS

Creating a harmonious working relationship between the Board of Commissioners

and Board of Directors is important so as each organ of the Company can work in

accordance with its function effectively and efficiently. For this purpose, the

Company, in order to maintain harmonious working relationship between the

Board of Commissioners and Board of Directors, applies the following principles:

1. The Board of Commissioners shall respect the function and role of the Board

of Directors in managing the Company as has been stipulated in the laws

and regulations and Articles of Association.

108 Board Manual

2. The Board of Directors shall respect the function and role of the Board of

Commissioners to carry out the supervision and to give advice for the

Company’s management policies.

3. Correspondence between the Board of Commissioners and Board of

Directors shall use a letter format which contains explanations regarding the

aim and purpose of the letter.

4. The working relationship between the Board of Commissioners and Board of

Directors shall be formal, which means that it shall always be based on

standard mechanism or accountable correspondence.

5. Each Member of the Board of Commissioners and Board of Directors may

create informal working relationship, but shall not be used as a formal policy

before it passes through the mechanism or accountable correspondence.

6. The relationship between the Board of Commissioners and Board of

Directors is an institutional relationship which means that the Board of

Commissioners and Board of Directors are collective positions which

represent the entire members so the relationship between a Member of the

Board of Commissioners with a Member of the Board of Directors shall be

known by the other Members of the Board of Commissioners and Board of

Directors.

109 Board Manual

CHAPTER IV

CLOSURE

110 Board Manual

CHAPTER IV Closure

CHAPTER IV

CLOSURE

This Board Manual shall be applicable for the implementation of working relationship

between the Board of Commissioners and Board of Directors within PT Pertamina

(Persero) which is based on the provisions contained in the Articles of Association

and/or in the prevailing laws and regulations.

If there is any amendment to the Articles of Association and/or the provisions of the

laws which affect the content and the applicability of this Board Manual, adjustments

shall be made accordingly.

Issued by:

Compliance Function – Corporate Secretary

PT PERTAMINA (PERSERO)

111 Board Manual

I, DRA. NELCE MANOPPO, MBA, a Certified and Sworn Translator by virtue of Jakarta

Governor’s Decree No. 2238/2004, dated 29 September 2004, do hereby certify that the

foregoing is a true and complete translation to the best of my knowledge and belief from

Indonesian into English.

I, H. Arfan Achyar, B.Eng, a Certified Translator by virtue of Himpunan Penerjemah

Indonesia’s Decree No. TSN/2013/1/02U/001, dated 23 February 2014, acting as the

the editor for this document, do hereby certify that the foregoing is a true and complete

translation to the best of my knowledge and belief from Indonesian into English.

Documents

BOARD MANUAL - pertamina.com · MAHMUDDIN YASIN Commissioner [signature] MUHAMMAD HUSEIN Upstream Director [signature] BAMBANG PS BRODJONEGORO Commissioner [signature] HARI KARYULIARTO