Indonesia’s state-owned enterprises currently manage assets totaling 10.4 trillion rupiah (around $670 billion) and play a strategic role in critical sectors such as infrastructure, energy and transportation. However, legal uncertainties and governance issues have hampered the growth of state-owned enterprises and their ability to compete globally. The seminar aimed to identify concrete solutions to these challenges, highlighting the importance of legal protection through the Business Judgment Rule (BJR) and governance improvements to improve the flexibility and innovation of public enterprises in the face of competition.

Keynote speakers Professor Hikmahanto Juwana, SH, LL.M., PhD; Amien Sunaryadi, Ak. MPA.CISA; Dr. Oki Ramadhana, MBA; and Dr. Soebowo Musa, MBA, discussed how mergers and acquisitions could help public companies expand their operational scale and strengthen their international competitiveness, although legal uncertainties remain a major obstacle.

Professor Sari Wahyuni, M.Sc., Ph.D., President of ISMS, and Dr. Ardan Ardiperdana, MBA, President of IAI, emphasized that the results of the seminar should serve as a basis for reform recommendations legal framework to accelerate the effective implementation of mergers and acquisitions strategies while protecting decision-makers in public companies against the risks of unjustified criminalization.

The “Building the Nation” discussion series, initiated by FEB UI, ISMS and IAI, aims to foster interdisciplinary and professional collaboration to provide practical solutions supporting Indonesia’s sustainable economic development. With appropriate governance and legal reforms, state-owned enterprises can increasingly play a leading role in Indonesia’s economic growth.

Optimizing Mergers and Acquisitions for Public Company Growth

One of the main strategies to improve the competitiveness of state-owned enterprises is through mergers and acquisitions. Through mergers and acquisitions, public companies can increase their market share, optimize their resources and increase their operational scale. Sectors such as banking and telecommunications in Indonesia have shown great potential for mergers and acquisitions; however, legal uncertainty often poses an obstacle. Inconsistent regulations make SOE executives reluctant to make strategic decisions due to potential legal risks. Without legal certainty, SOEs and acquisition-targeted private firms tend to avoid M&As, ultimately limiting the growth potential of SOEs (Wijayati et al., 2021).

Furthermore, several fundamental challenges in the legal framework affect the implementation of mergers and acquisitions, such as the contradictions between Law No. 17/2003 on State Finance and Law No. 19/2003 on Enterprises. concerning the interpretation of “separate public finances”. Judgment No. 48/PUU-XI/2013 of the Constitutional Court further added to the uncertainty by declaring that state assets invested in state-owned enterprises continue to be part of state finances.

Strengthening the Business Judgment Rule (BJR) in Indonesia

To protect SOE executives from unwarranted criminalization, a robust BJR framework is essential. In countries like Australia, the BJR provides legal protection to executives who make business decisions in good faith and with due diligence, helping to allay concerns about criminal charges (Nicolson, Wilcock, & White, 2021). In Germany, the BJR helps mitigate hindsight bias, which often leads to criminal prosecution for managers when business decisions yield unfavorable results (The “Business Judgment Rule” and the problem of hindsight bias, 2016).

Clarify protections for administrators

For the BJR to be effective in Indonesia, a clear distinction is needed between errors in business decisions and criminal liability. This standard may be aligned with that of other countries, such as the United States and Germany, to reduce excessive risk of prosecution and allow executives to make decisions without fear of personal legal repercussions.

Establish standards for fiduciary duties and due diligence

Indonesia must establish clear standards for fiduciary duties and due diligence. These standards aim to protect directors as long as they act in the best interests of the company, consistent with international standards such as the Corporations Act in Australia (Tan & Associates, 2020).

Improving judicial understanding and consistent application of the BJR

Comprehensive training on the principles of BJR for stakeholders, including judges, legal practitioners and executives, is essential to ensure consistent application. For example, in Germany, intensive training of judges on the BJR has strengthened fair protection for executives, allowing them to focus on innovation without the risk of being criminalized for good faith business decisions. Consistent application of the BJR will strengthen a culture of measured risk-taking, enabling Indonesian SOEs to be more competitive in global markets.

Additionally, this educational program would ensure that the judiciary can clearly distinguish between unintentional strategic errors and deliberate criminal acts. This consistency gives managers strong legal assurance, allowing them to make strategic decisions in the best interests of the company without undue concern for personal legal repercussions (Asian Development Bank, 2021).

Leaders must also understand the principles of BJR to know the limits of their legal responsibilities, allowing them to act with confidence, knowing that prudent, good faith decisions will be legally protected. This understanding encourages them to make bolder strategic decisions, thereby fostering sustainable growth for public companies.

Conclusion: the importance of collaboration, legal reform and monitoring for the growth of public enterprises

Close collaboration between regulators, public company executives, academics and legal practitioners provides a solid foundation for implementing effective and sustainable M&A strategies and legal reforms. Through this partnership, SOEs can overcome legal and governance barriers that hinder growth, allowing them to take innovative steps without undue risk of criminalization.

Legal reforms that strengthen the BJR framework and raise fiduciary standards are urgently needed. With the government’s policy support, these reforms will create an enabling business environment, support the sustainable growth of state-owned enterprises, and accelerate the implementation of mergers and acquisitions to improve global competitiveness.

The seminar also presented concrete follow-up plans, including risk mitigation, post-acquisition preparation and monitoring, to ensure that each merger and acquisition generates long-term value for SOEs and the Indonesian economy .