Following months of violent turbulence, the winds of change cannot come soon enough to Garuda Indonesia Airlines. After showing Gusti Ngurah Ari Askhara the door over an alleged Harley-Davidson smuggling last December, the publicly listed national flag-carrier took off last week with Irfan Setiaputra, a seasoned corporate executive, as its new president director and Triawan Munaf, the former head of the Creative Economy Agency, as chairman of the board of commissioners.

State-Owned Enterprises (SOEs) Minister Erick Thohir made it clear that the first order of business for the new management would be to restore good corporate governance and the company’s image.

Garuda went through some jolting turbulence year last year. In June, the Financial Service Authority caught the company window-dressing its 2018 financial statements. The carrier was later fined and forced by regulators to “fix and restate” its financial report.

After correcting for accounting errors, the new results showed an astounding US$179 million net loss from a purported $800,000 profit in the previous report.

The carrier’s marketing and public relations team has not been doing much better either. In the month after the accounting scandal, they shot themselves in the foot trying to silence a complaint from a business class passenger by filing defamation charges against the restaurateur and YouTuber.

Social media empowered customers have often complained about the carrier’s crumbling quality, especially about in-flight catering, once a source of pride for the company.

Erick is correct to point to poor corporate governance as the culprit at Garuda. The window-dressing scandal could have been averted had the management heeded the minority shareholder’s dissent at the Garuda shareholders’ meeting last April.

Instead, Dony Oskaria, a member of the board of commissioners representing the minority shareholders was given the boot only shortly after voicing his sensible dissent.

Erick’s reinstatement of Oskaria as deputy chief of the board signals the minister’s appreciation for integrity and, more importantly, his commitment to respecting minority shareholders in publicly listed companies, notably SOEs.

Going forward, other commissioners, especially those representing the government as the controlling shareholder, should do their job keeping management in check. This can be achieved by investing more time in overseeing the audit, business-development and risk-management committees. Likewise, the management should do its part to heed the board’s advice and not use undue influence to silence them like their predecessor allegedly did with Oskaria.

Following Erick’s directives, good corporate governance (GCG) should be internalized in Garuda’s mission statement. The new management team should plot a new course using GCG as their North Star.

As a general rule, Garuda should embrace feedback from customers and hardworking employees rather than balking at them. Just like the best authors listen to their editors, customer service businesses such as airlines should listen to their customers. Garuda’s past treatment of passenger complaints was beyond unsettling.

They were lucky to get off with just a slap on the wrist from the consumer advocacy group. Instead of going on the offensive, Garuda should have developed a strategy to better engage customers and, following the advice from the Harvard Law School forum on Corporate Governance, treat them as part of the company’s constituencies.

Lastly, Garuda’s new management must do right by their employees, especially their female flight attendants. Steps must be taken to detoxify the workplace, and this may involve a broad range of stern actions. Social media leaks alleging union leaders acting with impunity signal deep-seated resentment over sexual harassment and other forms of misconduct.

The breadth and depth of disturbing information the whistleblower received from anonymous internal sources speaks volumes about Garuda’s dysfunctional internal audit procedures. The manner in which more and more grievances have come forward is reminiscent of the Fox News scandal in 2016.

First and foremost, Garuda must instate internal whistleblowing procedures as part of its corporate governance strategy. According to the United Kingdom’s Chartered Institute of Internal Auditors, whistleblowing is an important element in a healthy corporate culture.

When concerns are heard and dealt with before they become reputationally damaging problems, management can avoid legal fees and other costs associated with restoring the company’s image. As such, internal procedures should protect whistleblowers from retaliation.

Ensuring GCG is key to creating the requisite corporate culture for a productive and efficient workplace. Garuda needs to do all the above with no delay as 2020 is already taking off to a gloomy market.

According to Bloomberg’s forecast, Asian flag carriers are likely to face moderated growth this year due to rising costs and competition from no-frills airlines. The recent coronavirus outbreak does not help either.

We have been forewarned; tighter competition in the Indian subcontinent has forced the government to sell Air India, their legacy flag carrier, amid buyers’ disinterest.

Garuda desperately needs an independent and effective audit committee, one that takes all employees under its wing. In the capable hands of the new management team and with the principles of GCG as their compass, Garuda Indonesia should be able to plot a course out of the storm within and into the clear skies ahead.

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Both writers are Indonesian Transportation Society members.

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