gcg perspektif islam

8/4/2019 GCG Perspektif Islam

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Rizki Aulia Harahap

27 –

8D |DIV Akuntansi

Corporate Governance

from the Islamic Perspective

A Comparative Analysis with OECD Principles



i n t r o d u c t i o n

fair, just and honest



Framework of Sharia

The Emerge of


Organization for Economic Co-

operation and Development (OECD)

f a i r , j u s t a n d h o n e s t



Corporate Governance - Definition

Countries that have implemented goodcorporate governance : robust growth of

corporate sectors and higher ability to attractcapital (SECP, 2005); enjoy higher valuation

(Coles, 2011 and Durnev and Han 2002)

Adjusting the signals with an organization suchthat staff automatically do the right things,

without the need for oversight – Meyer 2004

Set of relationships between a company’smanagement, its board, its stakeholders and

other stakeholders - OECD, 1999

The only one possible element that might driveperformance - Van Den Berghe, 2001

needs to be “fair,transparent and

accountable - Wolfensohn,2001



OECD Principles of





Why should care about the quality of corporate governance ?

It leads to increased economic efficiency and growth, it improvesthe use of capital, and encourages foreign direct investment.

It lowers the risk of crisis and in the case of an external shock itimproves the robustness of the economy.

It is crucial for the legitimacy of a market economy.

Henceforth, to ensure consideration of these standards, theOECD has oriented discussions including some main categories of the principles.




The main areas of the OECDPrinciples and its annotation

Ensuring the basis for an effective corporate governanceframework.

The right of shareholders and key ownership functions.

The equitable treatment of shareholders.

The role of stakeholders in corporate governance.

Disclosure and transparency.

The responsibilities of the board.




Four Basics Principles of OECD Main Areas

The mechanism of business ethics,

The mechanism of decision making,

Adequate disclosure and transparency,

The mechanism of book keeping and final accounts.




Corporate Principles

from Islamic Perspective




Islamic Business Principles

Sharia covers not only religious ritual, but also many aspects of

day-to-day life, politics, economics, banking, business or contractlaw, and social issues (Wikipedia, 2005).

Wealth is considered a trust and a test, where failure to use itwisely, especially to alleviate the hardship of the poorb is

detrimental to the person who holds that wealth (Saeed, 1996).

One of the most important prohibitions against misuse, of wealthis prohibition against riba, which is generally translated to mean“usury” or interest (Haqqi , 1999).



Business Etchics

Be fair and honest to all the people involved in the business.

High moral conduct, so not to betray, deceive or exploit hisfellowships.

No profit making only.

Work, produce, not to be lazy and unproductive.

“To all are degrees (or ranks) according to their deeds”. Holy

Quran (6.132)



Decision Making

Extends the responsibility to fulfill with obligations beyond

shareholders, clients, financiers, suppliers, customers,employees, embracing within spiritual religious bounty.

Live true in mutual consultation and forbearance, and rely onAllah. Islam encourages the participants to work together freely

and frankly when arriving at decisions (Shaikh, 1988)

Islam also demands the whole group to participate in decision-making.



Disclosure and Transparency

Accountability is first of all to Allah.

True disclosure of financial facts, and accurate information

should freely available to the users.

Provide the users adequate information which needed for soundfinancial decisions.



Book Keeping and Final Account

“O you who believe! when you deal with each other in

transactions involving future obligations in a fixed period of time,reduce them to writing and let a scribe write down faithfully asbetween the parties” (Al-Quran, 2.282).

Islamic Law has very clear view on the basic principles as to howfinancial reporting and accounting practice should be undertakenin terms of objectives based on the spirit of Islam and itsteaching (Lewis, 2001a, 2001b).



Comparison of Islamic Corporate

Governance Principles with OECD




Insuring the basis for an effective corporate governance framework

• Promotion of transparent

and efficient markets withrule of law and division of responsibilities

OECD principles andannotation

• Promotion of business within

ethical framework of Shariah

• Believes in profit andloss

• Primacy of Justiceand social welfarewith social andspiritual obligations

• Prohibition of interest

Islamic Principles



The rights of shareholders and key ownership functions

• Basic shareholder rights

• Participation in Decision-

making at the generalmeetings

• Structures andarrangements market forcorporate control

• Ownership rights by allshareholders includinginstitutional shareholders

• Consultative processbetween shareholders andinstitutional shareholders


• Property as trustfrom God

• Sole Authority isGod

• Society asstakeholders

• Accountability notonly to stakeholdersbut also to God, theultimate owner

Islamic Principles



The equitable treatment of shareholders

• Protection to minority andforeign shareholders

OECD principles and

annotation

• Just and fairness of value

• Equitable distribution

of wealth to allstakeholders anddisadvantagesmembers in the form of Zakat and Sadqa

• Social and individualwelfare with bothspiritual and moralobligation

• Sensation of Equality

Islamic Principles



The role of stakeholders in corporate governance

• In creating wealth, jobs andsustainability of financiallysound enterprises


• Islamic accountabilityto Falah and social

welfare orientation• Haram/Halal

dichotomy intransaction

• Social & individualwelfare from bothspiritual and material

• Consideration towhole community.

Islamic Principles



Disclosure and transparency

• Matters regarding

corporation

• Financial situation

• Performance, ownershipand governance


• Accountability withShariah compliance

• Socio-economic

objectives related tofirms’ control and

accountability to all itsstakeholders

• Justice, equality,

truthfulnesstransparency

• Wider accountabilitywith written as well asoral disclosure

Islamic Principles



The responsibilities of the board

• Strategic guidance• Monitoring of management

• Accountability to companyand stakeholders


• Accountability not onlyto company or board orstakeholders but also to

Allah the ultimateauthority who leads towelfare and success

• Holistic and integrativeguidance

• Negotiation and co-operation

• Consultation andconsensus seeking foreach decision withrelated stakeholders

Islamic Principles

f t d h t




And above all Islam was made

accountable not only to stakeholders,

but also to God, the ultimate owner

and authority. These powerful moral

ethics help in promoting fair, just and

honest business dealing.



PERTANYAAN

THANK YOU

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