Implementation of the equity-based trust in the state-owned enterprises in Indonesia

Abstract

Purpose: State-owned enterprise directors in Indonesia function as management and as the representation of the company based on the principle of fiduciary duty in good faith and trust. The director also function as public official, where mistakes in actions that could harm the state finance can be categorized as corruption. In this role ambiguity, this study seeks to investigate the implementation of the concept of trust in the legal system in Indonesian state-owned enterprises. Approach/Methodology/Design: The research in this study uses the doctrinal method, known as the normative research method, to explain the role of the director in the implementation of trust in a state-owned enterprise. Findings: The results showed that the implementation of trust can be done through equity, in which a person has an object for the benefit of the other party. Equity requires the fulfilment of obligations based on trust, which makes the person who has the object in the law as the legal owner, to the beneficial owner. Practical Implications: The The application of the concept of trust in SOE directors as a public official needs to be clarified because state-owned enterprises are state-owned legal entities which must also be financially accountable. Originality/value: The study first analyze the trust in SOEs in relation with the function of board of directors in carrying out the obligations as stipulated in the LLC Law, and being responsible for the management of the company, with the aim of generating profits with the good corporate governance.