Corporate Social Responsibility (CSR) and Its Current ...

Corporate Social Responsibility (CSR) and Its Current Practices in Indonesia CSR Practices in Three Large Indonesian Companies Andree Emmanuel Widjaja Institute International Management National Cheng Kung University, Tainan, Taiwan

Corporate Social Responsibility (CSR) and Its Current Practices in Indonesia CSR Practices in Three Large Indonesian Companies “As its best, CSR is defined as the responsibility of a company for the totality of its impact, with a need to embed society’s values into its core operations as well as into its treatment of its social and physical environment. Responsibility is accepted as encompassing a spectrum – from the running of a profitable business to the health and safety of staff and the impact on the societies in which company operates.”

-Sir Geoffrey Chandler -

Abstract Corporate Social Responsibility (CSR) is considered as the common term for company’s practices in contributing to their stakeholders in the positive ways. These stakeholders comprise of everything that the company has relation with, such as customers, suppliers, workers, societies, government, and etc. Actually, CSR has various definitions, a long history and many theories as fundamental argument for supporting its practices, as well as prolong debates throughout the years concerning its validity. In spite of CSR complex nature, most large companies in the world, particularly in Indonesia are practicing CSR for whatever the reasons are. Two of the common reasons are for gaining more profits and complies with the government regulations. However, the company’s motive in doing CSR is at best dwelled in company’s purity in ethical and social awareness as well as responsibility concerning its surroundings. This paper will describe the actual CSR practices in Indonesia briefly by taking three samples of large companies, owned by Indonesians. These three large companies are as follows: PT HM Sampoerna Tbk, PT Matahari Putra Prima Tbk, and PT Bakrie & Brothers Tbk. These samples should be able to represent or model the CSR practice of all company in Indonesia generally. In addition, this paper will also discuss briefly regarding the culture of Indonesian owned companies, for instance whether the culture would affect their CSR practices. Lastly, in discussion and evaluation part, the trend of CSR practices in large companies in Indonesia will be concluded based on the common CSR practices done by those samples.

INTRODUCTION Initially, Corporate Social Responsibility (CSR) in Indonesia in fact had not been a vast concern for the companies until some issues concerning workers abused and severe environment destruction had shockingly emerged in 1990si (Kemp, 2001). At that time many large companies were being exposed and questioned, by local or even international societies in regards of their absence in CSR practices. Thus, since 1990s until present time CSR has become very essential since the company’s conducts have been carefully observed by societies. In order to alleviate CSR practices, the government had been intervened by writing CSR related laws in 2007 in which the company has to comply, and also Indonesia chamber of commerceii had suggested that the company has to amortize at least two point five percent of its profits for CSR. Nowadays the trend in large companies in Indonesia to practice CSR as the integral part of the company’s daily operational business is on the rise. We can find out many of their CSR practices simply through their official corporate Internet websites or publicize through the news in the popular Medias such as television and newspapers. In addition, as it was written in Jakarta Post in 2004, in the global economy these CSR practices have also become very important factors for company’s evaluation or performance other than its financial status (Jakarta Post, 2004).

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This paper will describe about what CSR exactly is and particularly its current practice in Indonesia by taking the sample of CSR practices in the three large companies as the representation of CSR practices in Indonesian large companies in general. The methods used of this paper are literature study through several sources such as books, Internet, journal, and articles. The paper will be divided in four parts. The first part will describe CSR definition, a brief history of CSR, and CSR theories. The second part will describe the business overview in Indonesia; including Indonesian business culture and current CSR related Indonesian laws. The third part will describe the CSR practices of each company and the last part will describe the discussion and conclusion of the paper.

CSR DEFINITION There is one of the most important questions if we talk about CSR. What is exactly the definition of CSR? Even though there have been many CSR related debates for several years, due to its complex nature still one might encounter difficulties in defining CSR and also its substantial purposeiii. We may find abundant definitions while we search “CSR definition” through business ethics books or all over the Internet. Each definition that I found may have similar or different explanation regarding CSR definition. The following definition was written by Sir Geoffrey Chandler that I found so far as the most universally suitable to define CSR. “As its best, CSR is defined as the responsibility of a company for the totality of its impact, with a need to embed society’s values into its core operations as well as into its treatment of its social and physical environment. Responsibility is accepted as encompassing a spectrum – from the running of a profitable business to the health and safety of staff and the impact on the societies in which company operates”.

The other CSR definition that I found supplemental to Chandler definition is based on the World Business Council for Sustainable Development in its publication “Making Good Business Sense” written by Lord Holme and Richard Watts. “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”.

At first in the United States, CSR was considered as the act for donating the company’s share profits for charitable reasons. It was hoped that the company could have the benefit from the giving. Gaining such benefits seemed becoming the main purpose of CSR for many companies in the world. For example, the benefits such that increasing the company’s brand awareness, hence were generating more profit. This argument was also supported by Milton Friedman’s comments on CSR. “The social responsibility of business is to increase its profits…to make the most money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in law and those embodied in ethical culture”.

Contrary from United States, European CSR model was focused on solid business case reason (social ethical responsibility) which was running the core business in socially responsible ways. The following is the definition of European Commission regarding CSR: “A concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. A concept whereby companies integrate social and environmental concerns in their business operations and in their interaction with their stakeholders on a voluntary basis”.

I believe CSR definition would be mainly affected by the various perspectives in which we want to view CSR. We might encounter different definition for correlating CSR with certain religion, social or culture in different companies or even countries. For example, in general, Asia’s culture has been greatly influenced by Confucianism philosophy and Islam ideology. While in the west, Greek Philosophers iv and Christianity teachings v as well as capitalism have widely influenced the west culture and thinking. These different perspectives might cause different CSR definition. Nevertheless, 2

there is one common ground or understanding of CSR definition which I believe as a common core, which is contributing socially in positive ways to all company’s stakeholders. Therefore, as my own understanding, CSR could be defined as the management for utilizing company’s resources as a response of ethical and social responsibility for contributing to the overall stakeholders in positive ways.

A BRIEF HISTORY OF CSR Initially CSR history could be traced as a product of industrialization and globalization of mega companies in the late 1800s. Many mega companies had emerged along with the growth of supporting infrastructure such as petroleum, railroads, etc. At that time, there was also a growth trend of corporation toward monopoly status which had intensified public debate regarding the correctness of their actions. Later, from 1870 to World War I (early 1900s) could be characterized as climax of economic globalization (Cheney, 2007). Since then, the development of such companies had caused social business issues eventually emerged, few example of these issues were: the using of child labor and safety issues in the various industries. After the World War II the view concerning social controls during the great depression in various fields, such as labor protection, banking reform, and public utility control were becoming the roots of CSR (Cheney, 2007). One of the earliest concepts of CSR was introduced by Howard R. Bowen who was the economics professor at William College in Massachusetts. Bowen (1953) argued: “we are entering an era when private business will be judged solely in terms of its demonstrable contribution to the general welfare….The acceptance of obligations to workers, consumers, and the general welfare”(p. 52).

The other scholar was Keith Davis (1960) who had expansive understanding regarding CSR. He argued that the CSR created social goods whose impact must be understood within the whole social system. Afterward, in 1970 the focus regarding the responsibility of corporation was shifted to corporate responsiveness. It was emphasizing on making the world better rather than ensuring the company’s survival. In order to challenge this idea, Milton Friedman (1970) argued in her classic essay in the New York Times, “The Social Responsibility of Business Is to Increase Its Profits”. His essay has been widely used as supported arguments that the first duty of business was to increase shareholder value, which could be satisfied by increasing profits. In 1980s, scholar Archie Carrol (1979) and Thomas M. Jones (1980) extended the profit motive by adding the range of social issues which concerned the public. The issues included the broader stakeholders, such as employees, customers, distributors, competitors, and communities. During this time, there was also an ideology shift from controlled market to free market, popularly known as neo-liberal economyvi. This new ideology had changed most of the world fundamental economic structure, such as deregulation of financial market and privatization of public companies. By the late 1980s, the negative effects of neo-liberal economy were evident, causing massive devastation effects to the entire country economic structure. For example, the transformation caused unemployment rates rose, enormous environmental damages done by companies, different gap between rich and poor in many countries. Afterwards, from this time until the mid of 1990s, the increasing numbers of corporate scandals and behavior began to appear. In the late 1990s, there was a demonstration against globalization and WTO for the purpose of calling better balance between government, the economy and civil society (Cheney, 2007). As a result, according to most CSR scholar (Carroll, 1999), 1990s was considered as a decade of intensified debate and discussions of CSR, mostly related with terms of profound effect on globalization and the role of corporations in the society. The debate has 3

continued until this present day as the world economy has been engulfed in the serious financial crisis.

CSR THEORIES Due to CSR comprehensiveness nature, one would find difficulties in finding theoretical base for researching CSR. Many scholars argue the CSR theory is almost non-existent (Hatcher, 2002). However, stakeholder theories are commonly used as foundation for CSR related research. Other different theories have also been proposed, including legitimacy, contingency, social permission, and transcendental theory. Nevertheless, in this paper I would only describe stakeholder theory briefly.

Stakeholder Theory The Stakeholder theories are recognized as primary theoretical foundation of CSR. Basically, the theory explains about the broad relationship between the company and its constituent groups called stakeholders. According to Jones and Wicks (1999), stakeholder theory is based on four principles: The Corporation has different relationships with many groups that affect and are affected by its decision (Freeman, 1984); the nature of this relationship is primarily concern in terms of processes and outcomes (Clarkson, 1995); focus on management decision making (Donaldson and Preston, 1995). Concern about the values of organization’s stakeholders and their influence on management decisions predict the performance of organization (T. Donaldson, 1999). Picture 1.1 is describing the stakeholder theories diagram in which a company is closely related with its stakeholders. The stakeholders can be government, investors, political groups, employees, customers, suppliers, and etc.

Picture 1.1 Stakeholder Theory Diagram

OVERVIEW OF CSR IN INDONESIA As one of the biggest country in the worldvii, Indonesia is having many large companies both public and private which widely affect the nation economic growth and societies at large. For instance, these large companies would be able to generate significant profit and contributing considerably for paying enormous high taxes viii . Many employment opportunities and particular 4

goods and services are also provided by these companies, generating the sustainable and conducive economic condition within the nation. I believe the larger the company is and the more successful it is, the larger their responsibility to its stakeholders. Therefore, to fulfill that responsibility to the stakeholders these companies are practicing CSR as integral part of their core business. I suppose that the CSR practice of the company should be affected by their business culture infiltrated within company. So I think, it is indispensable to describe the Indonesian business culture briefly at the following section.

Indonesian Business Culture Indonesian Business cultures are greatly affected by two dominant cultures, Islamic and Chinese culture. However, most of the Indonesia’s large conglomerates businesses are dominated and owned by Chinese-descent (Kemp, 2001), consequently infiltrating the Chinese culture in their company. Confucianism ix is considered as the integral part of Chinese culture (Whelan, 2007). Derive from Confucian heritage, Chinese-descent corporation culture would significantly value the family and friendship, and the respect and courtesy they show for “age, wisdom, leadership, neighbors and customs”. Therefore, the relationship between the family and the business is very closely related. Furthermore, the business group, conceived of family group members is also formed to safeguard the importance of the groups rather than being selfish due to the individualization (Whelan, 2007). This kind of culture is obvious in many Chinese-descent owned companies, for example we could see from the large number of corporation groups that are owned by family and generally the position of BODs or BOCs are also filled by the family if it is possiblex. On the other hand, Indonesia is also prevalently known for having the largest Muslim population in the world. The Islamic culture with its Islamic principle known as Shariaxi law has been infiltrated mainly in the government, Muslim owned Businesses, and shaped most of the Indonesian societies culturally, socially, as well as ethically. For example, one of the law states that property should not be acquired by acts of bribery, looting, or deception, which are considered haram (prohibited). Moreover, Sharia law also accentuates that the result of productivity should benefit the community and Muslims as individual could not own the public facilities that is crucial for the public societies, such as roads, oil, mining, etc (Kemp, 2001). As a consequence of the laws, Muslim businesses have been trying to apply such laws and maintain for not disobeying it. One of the vivid examples that is obvious in Muslim based company workplace is the women are generally wearing special dress which is specifically design for Muslimah (Muslim women).

Indonesian Laws Regarding CSR As a governed by the laws countryxii, Indonesia has implemented numerous laws concerning the corporation. Therefore, in CSR case, the Indonesian government has written laws concerning CSR as one of the fundamental company’s obligation, binding all of the Indonesian limited liability companies. These laws are legally binding both private and public companies. Indonesian CSR law is adhered in Article 74 Law No.49 2007, the contents as follows: Article 74 of Law No. 40 2007 on Limited Liability Companies 1. Companies running their business in the natural resources sector must accept social and environmental responsibilities. 2. Social and environmental responsibilities are mandatory for companies and included in the company’s cost. Their execution will adhere to standards accordingly. 3. Companies failing to meet these responsibilities will be punished under the relevant laws 4. Details on regulations on social and environmental responsibilities will be stipulated in a governmental decree.

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PRACTICE OF CSR IN INDONESIA I would describe three large companiesxiii as the example to represent the CSR practice in Indonesia. PT. HM Sampoerna, Tbk and PT. Matahari Putra Prima, Tbk are the example of the companies owned by Chinese-descent, whereas Bakrie Brothers for representing Islam business culture.

PT HM Sampoerna, Tbk. PT. Hanjaya Mandala Sampoerna Tbk. (”PT HM Sampoerna”) was founded in 1913 by a Chinese immigrant named Liem Seeng Tee at Surabayaxiv, Indonesia. In running the business, Liem had the vision to provide best smoking experience to adult smokers in Indonesia. Initially, he sold kretek xv cigarettes at his own home at small scale and eventually he fostered the business then changed its own family name to Sampoerna (Indonesian for ”perfect”) in 1930, which later became the official company’s name. The quality, innovation, and excellent of their cigarette products have been well preserved since its establishment until present days. Nowadays, PT HM Sampoerna has become one of the largest leading tobacco companies in Indonesia (Picture 1.1 is showing the company’s logo). The well known products such as Sampoerna Hijau, Sampoerna A Mild, and the renowned ”King of Kretek” Dji Sam Soe xvi could be found anywhere in Indonesia market. However, in 2005 the company was acquired by Philip Morris Internationalxvii by taking over most of the majority company shares. Hence, as subsidiary of Philip Morris International the company would be a part of the world’s largest tobacco companies. In 2007, with more than 30.000 employees, the company could penetrate as many as 28% of Indonesian cigarette market.

Picture 1.2 Sampoerna Logo

PT HM Sampoerna has contributed to the society as part of their CSR practices. I believe it is obligatory for cigarette company to contribute and be more responsible to the stakeholders as they have gained exceptionally high profit by selling ”obliteration” products to the market. In my opinion, the appropriateness of selling such endanger product has still been in hot debates for several years since the company could highly contribute to the nation economic growth as well as creating extensive work fields. In their official websites, I found several interesting points that shows the company responsibility which they referred as ”Community Initiatives” towards its stakeholders. Firstly, they have a motto: ”For us, as a tobacco company, responsibility begins with our products. Meaning that: we remind people about the dangers of smoking, we do what we can to keep cigarettes away from children, we work through our parent company Philip Morris international, to develop potentially less harmful products”.

Based on this motto, though cigarette in its nature does harmful to human body, I strongly believe that the company is not running away from its responsibility and still caring about their customer’s concerns. More than that, the company has realized to see the bigger picture to depend on and influence their environment. They try to invest in the society in the long term welfare of the communities where they are part of it. It is stated that, “Besides, when you employ some 30.000 people throughout the country, community involvement is not a matter of choice – it is a fact of life. As you become part of your employees’ neighborhood, town or region you take on responsibility”.

Secondly, the company also had the initiative to help those in needs in some natural disasters such as Aceh Tsunami in 2004, and recent earthquakes in Bengkulu and Jogjakarta. Even more, there were established several programs which did not attract the headlines such as clean water program, 6

entrepreneurial training program, and humanitarian relieve for disaster victims. To ease the aid process, the company has established Sampoerna Search and Rescue (SAR) team in 2002. The team comprises of employees and community medical volunteer. The team has also fully equipped with SAR equipment such as boats, ambulances, hospital, and etc to provide aid to the victims of natural disasters throughout Indonesia. Thirdly, the company has opened Sampoerna Entrepreneurship Training Center (SETC) to develop and facilitate the emergence of Small Medium Enterprises (SMEs) in the local region. SETC would provide training and skills needed for establishing new businesses that could offer new work places and subsequently improving the local economies. Fourthly, Sampoerna has addressed significant concerns in education by founding Sampoerna Foundation (SF). In their own SF websites (http://www.sampoernafoundation.org/); SF is defining itself as “professional philanthropy organization and a service provider for Corporate Social Responsibility (CSR) with a focus in education”. As the common practice in Chinese family cultures, the boards are chaired by Son and Daughter of Sampoerna family, namely Putera Sampoerna and Jacqueline Michele Sampoerna. Since its establishment, SF has awarded more than 32.000 scholarships to students who are in financial needs from elementary to graduate school level. Moreover, SF has also developed school development program to assist local schools in providing proper teaching standard in 2005 and 2006, SF launched SF teacher Institute (SFTI). Then, an international standard boarding school program called Sampoerna Academy will be initiated in 2009.

PT. Matahari Putra Prima, Tbk Matahari was founded in 1958 by Mr. Hari Darmawan, a Chinese descent who has been well known both in domestic and international market as a living Indonesia retail legend. He built his business empire called Matahari Department Store with hard work from very small, until now it has become the largest Indonesian retail company. In 1996, Lippo Group xviii owned by Mr. Mochtar Riady, who is also Chinese descent, took the ownership of Matahari and diffused the company into one of the subsidiaries of Lippo Group. The following is the picture logo of Matahari.

Picture 1.3 Matahari Logo Picture 1.3 PT. Matahari Putra Prima, Tbk Logo

Currently, PT. Matahari Putra Prima Tbk or Matahari has the core retail business in fashion and groceries stores targeted for middle- upper middle customers. Its two core businesses are divided by two major divisions, Matahari Department Store (MDS) and Matahari Supermaket (MS). Matahari is consistent in providing the best product and service of fashion as well as food needs for its customer by opening many stores in all over Indonesia. Presently, Matahari has opened hundreds of stores including 80 department stores, 39 Hypermarkets, 29 Supermarkets, 46 health and beauty center, and more than 90 family entertainment centers throughout the country. As the company growing stronger, there were many awards received such as prestigious Gold Award in the Retail Asia Pacific Top 500 Awards consecutively in 2007, 2006, 2005 & 2004, and Best of Best 2007 Retail Asia Pacific Top 500 Awards. As I search through Matahari websites (http://www.matahari.co.id/), I found special link refers to CSR. The opening statements of the company CSR mission are as follow:

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“The Matahari Group believes that our businesses exist not only to do business, but to give back to society as well. There are many good companies, but to be a great company, one requires the highest standards of corporate behavior towards all aspects in human interaction, either as employees, consumers and the surrounding communities, also fellow human beings in the world we lived in. Thus, we demonstrate our means to give back to those in needs through our Corporate Social Responsibility Integrity Programs....”.

Based on that statement, the company has claimed that to be a great company, one should contribute back to the society. It has been personified by the company’s CSR programs which covered the following areas: Support and Improvement of education, small medium company CSR, community and environment, and best workplace practices Support and improvement education could be considered as the prime concern in Matahari CSR. The supports have been distributed through donation to various schools, social organization and orphanage home. For example, in August 2006, Matahari donated 100 million rupiah to Yayasan Putra Bahagia to help the unfortunate children. Then, in collaboration with Ministry of Foreign affair for commemorating Independence Day on August 2008, Matahari appreciated teachers who served in the remote area by giving them highest appreciation for their efforts in advancing education. Furthermore, by working together with one of leading private university in Indonesia, Universitas Pelita Harapan (UPH)xix, Matahari has assisted in building private schools called Lentera Harapanxx. These schools have been built to provide excellent education quality in various remote areas and targeted mainly for the unfortunate students. In small medium company (SME) CSR, Matahari has invited various SMEs to work together in providing best quality products. SMEs could gain such profit and advantage by working together with retailer giant like Matahari. For example, in commemorating 80th National Milad of Tarbiyah Islamiyah, Matahari collaborated with Department of Trade, National Association of Tarbiyah Islamiyah, and various SMEs organized bazaar event, providing the societies with low cost food and clothing. One formidable reason of why Matahari held such bazaar is to address its concern for current economic crisis such as declining buying power and rapid increase in basic food prices. Matahari has done pretty much in the social contribution towards society and environment, mainly for helping the victims who are suffered in various natural disasters across the country. For example, in June 2006, Matahari helped earth quake victims by donating foods, blanket, and medicines for more than 10.000 households. In February and June 2007, in collaboration with Yayasan Obor berkat Indonesia, Matahari helped the victims of Jakarta great flood as well as Tsunami in other region. Then, as the response for flood disaster victims in 2007, Matahari had also helped the flood victims of Bengawan Solo River escalation. The escalation had caused many surrounding areas flooded, causing many villages near Solo area, especially Tuban area was drowned by flood as deep as 4 meters depth. Matahari had helped Tuban victims to relieve their pain in distressing lives after the disaster. Indeed, such helps are desperately needed by the flood victims for surviving and recovering to their normal lives. In providing best workplace practice, Matahari was trying to create the most conducive working atmosphere to motivate and nurture their professional potential. The programs introduced for assisting employee welfare such as scholarship for employee, vocational study, and spiritual responsibility by providing praying places, condolences contribution, employee cooperation, and employee union. Matahari has also worked together with various foremost institutions like Unicef, Louise Braille institution, and Ministry of Foreign affairs to contribute more in their CSR. This collaboration would make Matahari get more channels, ease to do CSR practices as well as generating more impacts to the societies. In addition, In 2008 Matahari had plans to do CSR in more various ways, such as by introducing cause marketing and trade-in program. In cause marketing, each bra sold, the 8

part of its profit will be donated to breast cancer council. Whereas, In trade-in, Matahari encourages its customers to donate used uniforms, bags, clothes to the orphanage in return to the new merchandizes.

PT Bakrie & Brothers, Tbk Founded in 1942 by Achmad Bakrie, who was a Muslim, Bakrie Brothers began its glorious history as a general commodities trading firm in Indonesia. In the beginning, Achmad was starting its business by selling rubber, peppers, and coffee in 1940s. At that time, the company was named CV Bakrie Brothers and afterwards in Japanese aggression, the name altered to Jasumi Shokai. In its development, the company has been involved in diverse business fields. The following picture is Bakrie Brothers logo.

Picture 1.4 Bakrie Brothers Company’s Logo

Currently, the company is considered as one of the biggest corporations dedicated in various fields, for example infrastructure, telecommunication, and plantation fields. The products produced such as steel pipes, structural engineering services, corrugated steel, building materials, wireless telecommunication services and system integrators, CPO and also natural rubbers. With more than 60 years experience, the company has incessantly improved its overall quality for achieving international standards as well as staying effectively competitive in the global market. From Bakrie corporate website (www.bakrie-brothers.com), I found that the company is stating its genuine commitment and dedication to the societies through diverse CSR program. The following is part of its statement: “The company believes that the purpose of the Corporate Social Responsibility (CSR) program is not merely to comply with government regulations or policies but to demonstrate the Company’s genuine commitment and dedication to building and sustaining partnerships between the company and the surrounding community that will enable them to achieve prosperity together....”.

The founder father of Bakrie, Achmad Bakrie had pledged that “for each Rp. 1 profit in his business, must have benefits for the society”. This sterling pledge has been kept well by his son, Aburizal Bakrie as the president and others Bakrie top leaders as the essential foundation of Bakrie CSR practices. Therefore, as it was stated by Anindya Novyan Bakrie, head of Bakrie CSR program, that each year the company allocates more than US$50 million only for its CSR program. Bakrie’s CSR programs are implemented in two key approaches, community based development and charity or philanthropic programs. Moreover, the programs are concentrated in the five main areas such as social religion and natural disaster, health, infrastructure, education, and economics nurturing. As I research from the several articles in local newspapers, Bakrie’s CSR practices apparently have been claimed having significant benefits for helping poor people in seven provinces. For example, in February 2008 Bakrie had helped flood victims when Bengawan Solo River massively escalated by distributing seven trucks filled with basic foods and clothes supplies packet. Bakrie spent Rp 180 million for funding this philanthropic action. Bakrie had frequently distributed and allocated the funds to help victims of natural disaster across in seven provinces by covering other areas, such as nurturing economics, reparation of infrastructure, social and religion. For example, in 2007 Bakrie allocated Rp 125 million for CSR which was equal to 1.5% of the company’s profit. This fund was used for helping the rehabilitation process of damaged school building as well as general public facilities or houses of natural disaster victims. 9

Then, in March 2008, Bakrie Sumatera Plantations (BSP) subsidiary of i had organized free medical care to the poor people in the Sikabau Village, west Sumatra. This event was very useful for local people since they had not got proper medical attention. The local people for sure could take benefit in this event and check their health freely. Likewise, Bakrie construction, also subsidiary of Bakrie was introducing health care program for children under 5 years old and providing free medical treatment for elderly people around their fabrication yard. In education area, through Bakrie School of Management (BSM), Bakrie had given the scholarship for 400 bright students. These students were generally having excellent academic capability, yet they came from poor family so they could not continue and have excellent education. Besides that, child sponsor program was also introduced by Bakrie construction to help unfortunate child. In 2006, i had also facilitate distance learning infrastructure which made long distance lectures series from U.S to be delivered to the local students at top Indonesian Universities of Science and Technology over third generation network possible. The infrastructure was provided by Bakrie Telecom (BTEL), a subsidiary of Bakrie. In nurturing and assisting SMEs, Bakrie through Bakrie telecom had affiliated with Grameen Foundationxxi for helping SMEs, especially in the telecommunication business by giving SMEs soft loan to help capitalizing their initial business. Besides, Bakrie had also giving Entrepreneurship seminar, held in Bakrie school management which was attended by many SMEs. During this events, there were exhibition, introducing many products originally made by SMEs which participated in the seminars.

DISCUSSION AND CONCLUSION CSR practices in the three large Indonesian companies have proved that as a developing country, Indonesia has modern companies which are socially responsible for its stakeholders. These companies are three examples from many large companies in Indonesia which have practiced CSR. I believe different companies might formulate different purpose of practicing CSR. These differences might be caused by different perspective of viewing CSR. I think several feasible purposes why they have done CSR are as follows: gaining brand awareness and producing more profit, pure, fulfilling religion or culture requirements, complying the laws stated by government, or response in ethics and social responsibility for realizing as a part of large society. The profitable purpose seems so popular among the large companies. Likewise, to comply with the government laws so that they are free from punishment is also considered as the utmost CSR motivation. As it is already mentioned, Indonesian Laws concerning CSR must be complied by all companies, otherwise the punishment will be thrown. However, I believe that the best motivation for one company to practice CSR should be its purest on social responsibility to the stakeholder regardless profits concern or solely liability for complying the law. In other words, the companies should thoroughly comprehend from inside that they have the social obligation to be fully responsible to all of its stakeholders. In regards to culture, I think the Islamic and Chinese culture infiltrated in Indonesian companies would affect the managements in general and CSR practices in particular. Based on the essential value that both culture possessed, I found both cultures are reflecting respect and relationship in family, moral or ethical standards, rich culture traditions, and also social responsibility in their surroundings. For instance, Chinese culture which incorporated Confucianism teaching is highly prioritizing the family. We can see from tops Sampoerna’s directors are still filled by Sampoerna families. Likewise the Islam culture is also honored the family. We can see that Bakrie’s family is also in control of the companies. However the problem that usually occurs in the family problems is the ones who fill the position is not always qualified to do their jobs accordingly, primarily in CSR which requires commitment, long term thinking, and vision from the business 10

managers. Faulkner report that trained managers are too few since the position is often filled according to politics or family connections (Faulkner, 1995). I think, the company should be very careful to assign their family member in filling the strategic position such as CSR director since this position is essential for company’s CSR motivation practices as well as would cause a great impact on overall company’s brand image and performance. Islam culture is highly emphasized on the honesty, integrity in the business, and the care for their surrounding environments. Indeed, trust is very important in Islam business culture as Mohammed invented cheques as recognition of trust in the paying methods. It is also indispensable in Islam culture to do good deeds by giving everyone, whether family or foreign people who are in needs as the essential requirement to enter heaven. Meanwhile, Chinese management style is considered highly personal, embracing only family member or those known as family, and minimizing outside interference (Kemp, 2001). I think that style is rather not aligned with CSR practices in which the companies must incorporate the needs of multi stakeholders’ interest. Nevertheless, I suppose that as the Chinese owned companies are more modern, more accountable in management practice, and more adapting westernized management style, the companies has begun to concern “outside the box” regarding their CSR practices. As we can see from the CSR practices from three companies, I can say that most of the companies have been involved in a lot of CSR projects which concentrate in three areas such as helping victims of natural disasters, education, and assisting SMEs businesses. These two areas are the most common issues in Indonesia and indeed need a lot of helps from many institutions. Generally speaking, the level of education in Indonesia is still very low. While in the city areas the education level are better, yet there are still a lot of children especially in the rural areas who are uneducated mainly due to economic reasons and poor education structures. For example, many school buildings are broken which many of them are not suitable to be proper school buildings and teachers’ compensation is very little. Natural disasters are also very common in almost the entire Indonesia region. Each year, there should be at least one or two major disasters strike different region in the countries regularly. The natural disasters are various, beginning from flood, earthquake, until bigger scale 2004 Aceh colossal Tsunamixxii. The victims itself could be numbered generally more than hundreds people due to its massive scale. Like in Aceh, there were more than 150.000 people died and a lot of hundred thousands more, injured and lost their houses. In response to these urgent needs, many of the companies feels obligated to assist the victims through their CSR programs. For instance, by giving some donations in form of money, basic goods, charity events, or even by involving in direct assistance in forming help and rescue team like Sampoerna’s SAR. Micro economic in Indonesia can be considered as one of the nation greatest economic power horse. With population more than 240 million people, Indonesia has a lot of SMEs businesses spreading across the region. These SMEs play important parts in nurturing wealth a lot of many people, mainly the people with low to medium wealth economics who are the biggest percentage in the whole Indonesia’s population. By helping SMEs, both large companies and SMEs can work together to create conducive economic and business climate as well as enhancing the quality of wealth in the societies in general. Therefore, it is necessary for the big companies to assist, facilitate, and SMEs to develop their business accordingly. I think education, donating to the natural disaster victims, and assisting SMES are the most applicable as well as feasible CSR practices to be done by many companies in Indonesia. To sum up, I believe CSR is going to be more recognized and practiced by many companies in all sizes in Indonesia in the future. The CSR practice should not only be done in fulfilling the 11

government laws or raising more profit, yet it should be in its pure motivation which is to help others. Human itself is a social being and need to be socially responsible to their surroundings. Therefore, a company in its nature is also a group of social being who exist within the societies, must be socially responsible to their stakeholders.

END NOTE i

In 1992, Levi Strauss, a manufacturing plant in Indonesia had been reported to violate the human rights, which abused their workers if the production target was not met. Barito Pacific, an infamous logging company known for its destructive logging, unsafe and polluting environment, non compliance with minimum wage requirements. The public addressed these two companies sharply for not being socially responsible. ii Indonesia Chamber of Commerce (Kamar Dagang dan Industri) is one of the Indonesian governtment institution specialised in commerce or business. iii The purpose will be concluded in the Discussion and Evaluation part iv The greek philosophors such as Socrates, Plato, Aristotle, Archimedes, and others. v Christianity is the the religious teaching spreading by Jesus Christ 2000 years ago. The religion has been spread throughout the world and nowadays Christian is the largest religion in the world. vi Neo liberal economy was the political view which endorsed free market position such as free market and well fare reform. vii Indonesia is considered as the seventeenth most largest country in the world in terms of area and the fourth largest population in the world (240 million people). viii The large companies formed a business groups known as conglomerate. ix Confucius was an infamous chinese philoshoper whose teaching has been greatly influenced the chinese culture from the ancient times untill now. Confucius had lived in 551 – 479 BC. x The top positions in the company are filled by most of the family members. This practice is very common in Indonesia company, whether muslim or Chinese owned companies. It is identical to what it is called Nepotism, in which the family is too much involve in the business. xi Sharia laws are the body of Islam religions. It deals with every aspect of everyday life, including politics, economics, families, social issues, etc. xii Indonesia is a law country. It means everything is regulated based on the available law. The Indonesian law system is generally inherited from Deutche and other European laws. xiii There are a lot of large companies in Indonesia, for example Djarum Group, Sinar Mas Group, Wings Group, Salim Group, Astra International Group, etc. These three companies (Sampoerna, Matahari, Bakrie & Brothers) are a few of the largest and infamous business company in Indonesia. xiv Surabaya is Indonesia second largest city xv Local name for best quality cigarrete. xvi Dji Sam Soe, literally means ”one two three”. It is the best brand fand the proud of Sampoerna product lines. xvii Phillips Morris International is the largest tobacco company in the world. It holds the brand name such as Marlboro, A Mild, Phillip Morris, etc. Their products sold in more than 160 countries, with the international market share 15.6 percent share outside the USA. xviii Lippo group is one of the largest private business group in Indonesia owned by Mr. Mochtar Riady. The group business core is including property, retail, insurance, medical, and education. Currently, the leadership is hold by Mochtar’s son, James T. Riady. xix Universitas Pelita Harapan (UPH) is one of the infamous private university in Indonesia. It was founded in 1994, located in Lippo Karawaci, near west Jakarta. Currently, the university has planned to become the world leading university by investing in advance and sophisticated infrastructures to support teaching and learning environment. xx Lentera Harapan is a charity project of estabishing 1000 schools for children in around Indonesia. The project is initiated by Pelita Harapan Foundation incorporation with Matahari and Lippo Groups. The schools are specially addressed for the rural areas in which its people mainly live in poverty. xxi Charity organization inspired by Graamen bank in Bangladesh. The organization is headquarter in Washington DC, USA and aims to reduce poverty by securing micro finances. xxii In December 2004, an enormous earthquake occurred in north of Sumatra island, causing colossal tsunami waved. This natural disaster has been claimed as the worst disaster in the world history, with more than 150.000 people died.

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