Business Entities Draft Bill to Regulate Allocation of Company Shares to Employees

Widodo, Director General of General Legal Administration (Administrasi Hukum Umum – “AHU”) at the Ministry of Law, stated that the Draft Bill on Business Entities (“Draft Bill”) will regulate the obligation of companies to provide employee benefits in the form of share ownership. According to Widodo, this concept was previously contemplated under Decree of MPR No. XVI/MPR/1998 on Political Economy in the Framework of Economic Democracy but has yet to be fully implemented. 

“Employees who have worked for five or ten years are generally rewarded by corporations, whether through remuneration or career advancement. It would therefore be beneficial if companies were to take the initiative to provide them with shares,” Widodo told Hukumonline.

In addition to serving as a form of employee recognition, Widodo stated that granting shares to employees could foster a sense of ownership in the company, which could in turn increase their motivation to innovate. “Even if the shares only represent a fraction of a percent, they could still foster a sense of ownership and provide motivation for further development,” he said.