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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