Recently, public attention has focused on cases involving directors of Indonesian state-owned enterprises (SOEs) whose legal proceedings were terminated through the President’s constitutional authority.
Various terms have circulated in public discussion: release, pardon, and abolition.
Amid these debates, one important issue is often overlooked:
what is the legal position of SOE directors when making business decisions, and to what extent does the law provide protection?
To answer this, the issue must be examined calmly, through a proper legal framework rather than emotional reactions.
Background: Why SOE Director Cases Are Always Sensitive
SOE directors occupy a unique position.
On the one hand, they are corporate managers expected to make business decisions.
On the other hand, because SOEs are linked to state finances, their decisions are often exposed to criminal scrutiny.
As a result, business losses are frequently perceived as:
- state financial losses,
- abuse of authority, or
- even acts of corruption.
In business practice, however, a loss does not automatically mean a legal violation.
Presidential Authority and the Meaning of Abolition
Under Indonesia’s constitutional system, the President holds certain powers related to criminal proceedings, including the authority to grant abolition.
Abolition does not mean that an act never occurred.
It is also not a judicial determination that the person involved was right or wrong.
Rather, abolition is a political–legal decision to terminate prosecution for broader considerations, such as legal certainty, stability, or national interest.
That said, abolition does not resolve the underlying question of how directors should be held accountable for business decisions.
For that, we must return to corporate law doctrine.
Directors and Fiduciary Duty
Under company law, directors are bound by fiduciary duty. This includes the obligation to:
- act in good faith,
- exercise due care,
- remain loyal to the interests of the company, and
- avoid abuse of authority.
Fiduciary duty does not require directors to always be right.
It requires them to act honestly, reasonably, and responsibly.
Directors are not guaranteed success.
What matters is the decision-making process, not merely the final outcome.
Where the Business Judgment Rule Becomes Relevant
To protect reasonable business decisions, corporate law recognizes the Business Judgment Rule (BJR).
In simple terms, BJR provides that directors are not personally liable if a decision is made:
- within their authority,
- based on adequate information,
- in good faith, and
- without conflicts of interest,
even if the decision later results in losses.
This is not legal immunity.
It is protection for legitimate business risk.
Problems Commonly Seen in SOE Practice
In the SOE context, problems often arise when:
- business losses are immediately treated as state losses,
- without first examining whether the directors breached their fiduciary duty.
This narrows the space for decision-making.
Directors become defensive, risk-averse, and hesitant to act—ultimately harming corporate performance.
This is where the Business Judgment Rule should function as a balancing mechanism, not as a shield for misconduct.
Abolition Is Not a Substitute for the Business Judgment Rule
It is important to understand that abolition is not a structural solution.
It is an extraordinary measure applied in specific circumstances.
Healthy protection for directors should instead come from:
- consistent application of fiduciary duty,
- objective testing of the business judgment rule, and
- a clear distinction between business losses and criminal acts.
If BJR were properly applied from the outset, many cases would never reach the stage of political–legal intervention.
Implications for SOE Governance
These cases offer important lessons:
- Directors must properly document their decision-making processes,
- Boards of commissioners must actively exercise oversight,
- Law enforcement authorities must distinguish business failure from abuse of power.
Without this understanding, SOEs will continue to operate under the shadow of policy criminalization.
Conclusion
SOE directors are not immune from the law.
But they are not managers without protection either.
Fiduciary duty and the business judgment rule are two inseparable principles.
One demands accountability; the other protects reasonable risk-taking.
Presidential abolition may resolve a single case.
Long-term legal certainty, however, can only come from a proper understanding and application of corporate law doctrine.
Closing Note
Every business decision carries legal risk, especially in the context of state-owned enterprises.
Understanding the boundary between directors’ liability and available legal protection is a key element of sound and sustainable corporate governance.