ome / Archives / Vol 1 No 2 (2018): Regular Issue / Articles CREATING MSMEs GOVERNANCE INDICATORS, AS EVALUATION TOOLS AND REFERENCE IN CREATING A GOOD CORPORATE GOVERNANCE

Abstract

Micro small and medium enterprises (MSMEs) in Indonesia have difficulties in developing their business, this is due to a lack of knowledge and references about good governance concepts for MSMEs. Base on that phenomenon, this study aims to find the right indicators, to be used as a reference for MSME in improving good governance. Using experimental research methods, we found several good governance indicators for MSMEs: (1) Transparency: Transparency of financial statements through separation of company and personal finance, transparency of rights and obligations of employees, (2) Accountability: Human resources function, marketing function, financial function and operation function (3) Responsibility: business legality, waste management and Product Certification, (4) Independency: Profitability and  autonomy in managing the business, (5) fairness: Equal opportunity in a company career and a fair compensation system. This indicator is implemented in the evaluation process of MSMEs, The result show that MSMEs with better governance score, able to survive and improve its performance while MSMEs with bad score go bankrupt.  These results prove that these indicators can be used as an evaluation tool and can be a reference for MSMEs in creating good governance.