Governance and performance of third sector organisations : credit unions in Indonesia

Publication Type:
Thesis
Issue Date:
2010
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This research investigates governance discourse and its mechanism in Third Sector Organisations (TSOs) in Indonesia, which consist of foundation (Yayasan); association (Perkumpulan): educational legal entity (Badan Hukum Pendidikan): labour union (Serikat Buruh); mass organisation (Organisasi Massa) and cooperative (Koperasi) . The main reasons of the research are because TSOs' activists do not have clear understanding about governance and the knowledge about how to run the organisations which will lead to good governance is lacking. Another cause is there has been no such research in Indonesia. In particular my research covers Credit Unions (CUs), that comprised of Modem CU and Traditional Women Credit Union, namely Tanggung-Renteng CU (TRCU). Since this is the first study, I employed multiple theoretical perspectives to observe the extent to which some relevant theories can explain governance mechanism in Indonesia TSOs. I used agency theory to find out how the board members ensure that executive's interests coalesce with the founders'; the costs for this activity; the relationship between board and executive; and the transparency system. Since Indonesia has collectivistic culture I employed stewardship theory to explain the board's role as partner with the executive. I drew on group decision process theoty to explain the process of decision making. To elucidate how the organisation gets resources and whether it relies on board I employed resource dependency theory. Because Indonesia has strong cultural values, I observed how local wisdoms are applied in governance practices. The sample of this thesis consists of TSOs and CUs. For TSOs, I did legal environment research; key informant survey; and organisation survey. For CUs, I carried out focus group discussions; financial performance analysis using PEARLS ratios; and questionnaire surveys to measure board performance and qualitative organisational performance. In addition I did statistical test to find out the relationship between board performance and organisational performance. I found that are there are four aspects regarding board in governance mechanism, to wit: its structure; roles and responsibilities; process; and relationship with the executive. Another important aspect is that governance principles must be present in governance mechanism which at least should consist of accountability and transparency. Lastly I proposed a new model of governance that is "systemised culture model of governance".
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