OJK Addresses Danantara's Elimination of State-Owned Bank Executive Bonuses

Regulatory Oversight and Remuneration Practices

The Financial Services Authority (OJK) has addressed the recent decision by Danantara to eliminate bonuses and tantiem for executives of state-owned banks, reaffirming its continuous supervision of bank remuneration practices. OJK's regulatory framework, particularly POJK No.45/POJK.03/2015 and POJK No.17/2023, mandates that variable remuneration for bank executives must be directly linked to both performance and risk management ¹

Key Regulatory Provisions

1. Performance and Risk Alignment: Remuneration must be tied to both individual performance and the bank's risk profile
2. Variable Remuneration Controls: Banks can implement malus (deferral) or clawback (recovery) provisions for variable compensation
3. Written Remuneration Policies: Banks are required to maintain formal remuneration policies for directors, commissioners, and employees
4. OJK Oversight: The regulator can review and request adjustments to remuneration practices that may negatively impact financial stability or violate governance standards

Danantara's Policy Change

Danantara, since its establishment in February 2025, has implemented various efficiency measures including adjustments to the remuneration structure for state-owned bank executives. Through Circular No. S-063/DI-BP/VII/2025 dated July 30, 2025, Danantara mandated that:

1. Executive incentives must be entirely based on actual operational performance
2. Financial reports must accurately reflect the company's real condition
3. Commissioners' tantiem has been discontinued, aligning with global best practices that typically do not provide performance-based compensation to commissioners

Market Implications

The convergence of OJK's regulatory oversight and Danantara's policy changes signals a significant shift in corporate governance practices for state-owned banks in Indonesia. This dual approach aims to ensure that executive compensation structures promote long-term financial sustainability and proper risk management while maintaining alignment with global governance standards.