Widyatama International Seminar on Business and Management Improving Business Competitiveness Through Integrated System Bandung, April 27 – 28, 2011 De La Salle Lipa A-70 Analysis of GCG Application Toward Banking Productivity in Indonesia Devy Mawarnie Puspitasari Faculty of Bisnis and Management, Widyatama University, Widyatama E-mail : devy.mawarnie@widyatama.ac.id ABSTRACT Good Corporate Governance has linier relation with productivity of corporation or organization. GCG principle consisted of fairness, transparency, accountability, independence and responsibility. Banking society realized the importance of applying Good Corporate Governance (GCG). This research tries to find what the impacts, advantages of implementing Good Corporate Governance on Banking operational in Indonesia before and after implementing Good Corporate Governance. This research will use data from common bank according to listed banks on Central Bank. This research used samples from the 5largest common banks in Indonesia based on bank listed in Central Bank. This research is done toward the largest 5 common banks in Indonesia before and after applied Good Corporate Governance. Data taken belongs to unclassified confidential bank from 1999 until 2007. Problems on this research mostly are from the internal corporation. Nevertheless, economic condition and monetary stabilities will be used as control variable. Variable used in this research includes dependent and independent variable. Independent variable include CAMEL (CAR, ROA, ROE, OCOI and LDR) and external factor as independent variable (S on CAMEL), that are rate and exchange rate. The image of bank analyzed will be as dependent variable. Tools of analysis that are used to process data are Multi Correlation Analysis Method and Regression Analysis Method. Keywords: Good Corporate Governance (GCG), CAMELS, Multi Correlation and Regression Analysis Method. 1. INTRODUCTION Economic matters and monetary policy are dealing with structural problem in macroeconomic. Uncertain condition worsens banking condition in Indonesia. Economic recovery measure relates to politic reformation that Indonesia has been doing and cannot be avoided. But every plan and program cannot be aimed only for quick recovery, but also for achieving economic recovery. Recovery efforts can be done with Good Corporate Governance. Good Corporate Governance and studies have been done in national and international industries. Banking is one of the economic wheels a country. It has an important part to mobilize fund of society. A lot of efforts and measures have been done by Central Bank to create financial system stability and to achieve monetary policy effectiveness. Lately, banking society realized the importance of applying Good Corporate Governance (GCG). Previously, GCG principle consisted of fairness, transparency, accountability, independence and responsibility. The principle was impressive and functioned as window dressing. But in fact, it is not easy to apply the principle because it needs serious commitment between shareholders and bank management. GCG Principle consists of five principles that positively influence management of business (BEI NEWS Edition 19 Year V, March-April 2004). The first is fairness principle. Bank should be concerned about all shareholders importance based on equal treatment. But, bank needs to give the shareholders the opportunity to access for information in accordance with transparency principle. The second is transparency principle. For example, bank must give information which is punctuality, suitable, clear, accurate and comparable. The information must be easy to access by stakeholders and suitable with their right. The third is accountability principle. It means bank must determine obvious responsibility for each organization component in accordance with vision, mission, goal and company strategy. Each organization component must understand its contribution in carrying out GCG. Besides, bank has to make check and balance certainty in carrying out bank activities. Bank must possess productivity measure from all parts based on corporate values, goal and bank strategy. Bank must also have reward and punishment system. The forth, is independence principle. Bank must have ability to avoid unfairness for the majority of stakeholders. Bank management must be able to avoid all kinds of conflicts of interest. The fifth is responsibility principle. It means that bank must keep careful and sensible banking practices in order to maintain the corporate. Bank also needs to perform as good corporate citizen.