Implementation of GCG second 12th_001.pptx

7/29/2019 Implementation of GCG second 12th_001.pptx

1/37

Presented in The 12th Sharia Economic Days 2013

Forum of Islamic Studies, Faculty of EconomicsUniversity of Indonesia


2/37

What is GCG?


3/37

CG?

Refer to the structure and processes for the direction and control ofcompanies

It concerns the relationships among the management, board of directors,controlling shareholders and other stakeholders.

In other word, CG is system of checks and balances that corporate

management, including board committees, senior corporate executives,auditors and even corporate advisors, all carry out their fiduciaryresponsibilities owed to those they represent.

CG refers to the defense of shareholders interests.

CG structure specifies the distribution of rights and responsibilities amongdifferent participants in the corporation and spells out the rules andprocedures for making decisions on corporate affairs.

OECD principles of CG provide the framework for the work of financialinstitutions, identifying the key practical issues: the rights and equitabletreatment of shareholders and other financial stakeholders, disclosure andtransparency and the responsibilities of the board of directors


4/37

Purpose

maximizing shareholders value legally,

ethically and on a sustainable basis, while

ensuring fairness to every stakeholder (the

companys customers, employees, investors,

and vendor partners) - Wolfensohn, 2001

in fact GCG is a reflection of a companys

culture, policies, how it deals with itsstakeholders, and its commitments to values.


5/37

Impact of CG

Profitability

Growth of corporations

Access to capital Cost of capital

Influence decision -> wealth creation


6/37

Collapses linked to GCG


7/37

Bigest bankruptcies in US

Perusahaan Tanggal Bankruptcy Total Aset sebelum

bankruptcy

Lehman Brothers

Holdings Inc.

15 September 2008 $639,063,000,000

Washington Mutual 26 September 2009 $327,913,000,000Worldcom Inc. 21 Juli 2002 $103,914,000,000

Enron Corp 12 Februari 2001 $63,392,000,000

Conseco, Inc. 18 Desember 2002 $61,392,000,000

Chrysler 30 April 2009 $39,300,000,000

Texaco, Inc. 12 April 1987 $35,892,000,000

Financial Corp. of

America

9 September 1988 $33,864,000,000

Refco Inc. 17 Oktober 2005 $33,333,172,000

Global Crossing Ltd. 28 Januari 2002 $30,185,000,000


8/37

World Crisis in History

No

Crash/Financial Crisis Tahun

1 The Tulip Mania 1637

2 The South Sea bubble 17203 The Great Crash of October 1920

4 The Great Depression 1929

5 The Crash of October 19876 Argentinas Crisis 1990s

7 Mexican Peso Crisis 1994

8 Asia Financial Crisis 1997


9/37

Businessentity

InvestorA

Investor

B

Investor

C

investors

Business need funding

to expand and growth

Investors need to be

sure the business Financially sound

Well managed


10/37

Shariah encouragement for Business

Quranic

encouragement

Zakah

Prophettradition

Prophettradition

Ibadah

Ritual


11/37

Electronic

& Media

TransportMilitary

Equipment

Energy

Exploration &

Exploitation

Finance &

Capital Market

Industrial

Machineries

Medical

Equipment

Agriculture &

Basic

Commodities

The Importance of

Islamic Business


12/37

Asset Profit Income

AKTIVITAS EKONOMI

Produksi Perdagangan - Jasa

ZAKAT

Infaq, Waqf, Hibah, Shadaqah

Pemberdayaan

Pengentasan Kemiskinan

Bank &Tabungan

Masyarakat


13/37

The Nature and Characteristics of the Islamic

Theory of the Firm

Restrictions of the IslamicFirm

Objectives of the IslamicFirm

The Basic Characteristics ofthe Islamic Firm


14/37

Restrictions of the Islamic Firm

Achievement of Falah or welfare

The Islamic producer thus ethically bound to those productiveactivities which conforms the goals of the Islamic shariah.

In production:

Maximisation of social utility of public interest (maslaha) Prohibition of inflicting injury on or causing grief to others

(la darar wa la dirar) ; or the minimization of socialdisutility (mafsada) ;

Primacy of social benefit over private benefit ; facilitating

life for others and relieving them of difficulty and hardship (usr wa kharaj) especially under

conditions of dire necessity and imperative need (daruratwa idterar)


15/37

Objectives of the Islamic Firm

Profit maximisation

Welfare or falah maximisation.

An Islamic firm will consider the benefit of thewhole society as well as the other priorities of

the Islamic state.


16/37

Problems Encountered

Religiouscommitment with

secular reasons

Knowledge onsharia

Adequate fatwafrom concerned

board Ulama

Human Resources Agency Problem


17/37

Agency Problem

By the word Agency we mean that conductivemechanism by which production firm or businessenterprises are managed or conducted

The divergence of interests and asymmetry ofinformation between principal and agent may causeoutput to depend upon the contingent nature of thecompensation contract.

Different theories of agency show that correlationbetween remuneration and productivity determinesthe growth of the enterprises and behaviour of theagency.


18/37

Classification and Characteristics of Agency

Asymmetric information

Adverse selection

Moral hazard Arise where the principal can not costlessly

observe or monitor the agents characteristics

and/or actions


19/37

Implications of Agency Problem in Islamic

Contracts

Firstly, such a bank would face difficulties resulting

from ex-ante information limitations concerning

project quality

Secondly, in PLS contracts, borrowers have the everyincentive to under-report or artificially reduce

declared profit.

Thirdly, an Islamic banks susceptibility to moral

hazard and adverse selection would probably make it

uncompetitive with conventional rivals


20/37

Solutions to Overcome the Agency Problems in

Islamic Banking

To incorporate ignored behavioural consideration in thecontract, principal-agent problem can be solved in the PLSbanking system. Because, reward attached to co-operationmight induce the agent to behave honestly.

The formats of contracts should be designed as honesty-

compatible The redeeming PLS can be effectively used for the promotion

of entrepreneurs and projects.

Long-standing bank-borrower relationships would improvethe efficiency of PLS banking in other ways.

Actively supervised credit by the branch banking system is anopportunity to minimize the information asymmetries thatresult from distance


21/37

Effective CG

Promotes the efficient use of resources

Helps ensure that the company is in compliancewith the laws, regulations and expectations of

society; Provides managers with oversight of their use of

corporate assets

Supports efforts to reduce corruption in businessdealings; and

Assists companies in attracting investment capital


22/37

Iman

IslamIhsan

Aqidah

SyariahAkhlak


23/37


24/37

GCG

Transparence

Accountability

ResponsibilityIndependence

fairness


25/37

CG Basic Rules in Islam

Protection and safeguarding the contracts

Paying attention to responsibility and

accountability

Transparency and truthfulness

Paying attention to expertise

Considering ethics and value system Forbidding corruption and unproductive

activities


26/37

Fairness (adalah)

Adil adalah menjaga hak-hak orang lain

Zalim adalah merampas hak-hak orang lain

Adil adalah memberikan hak kepada yang berhak

menerimanya Menjaga hak seseorang merupakan keadilan,

merampas haknya merupakan kezaliman

Adil merupakan competitive advantage ygmempengaruhi suatu organisasi

Adil menjaga titik keseimbangan


27/37

Reliability

Ketenangan batin

kepercayaan

Amanah

Tidak ada iman bagi yang tidak memiliki amanah (Hadits)


28/37

Serahkan kepada ahlinya!

Sesungguhnya Allah menyuruh kamu

menyampaikan amanah-amanah kepada

ahlinya (pemiliknya) QS 4:58

Jika suatu urusan diserahkan kepada orang

yang bukan ahlinya, maka tunggulah saat

kehancuran. (HR Bukari)


29/37

Transparence

Business

policies

decisions

Finance


30/37

Transparency

Transparansi adalah keterbukaan dalam

komunikasi dan pertanggungjawaban

Transparansi adalah nur, zalim adalah

kegelapan

Tidak transparan menimbulkan information

asymmetry


31/37

Why not transparent?

Dishonest mentality

Coward

Hidden agenda Unreliable

Ignoring transparency

Tidak halal bagi seseorang menjual sesuatu dan diatidak menjelaskan sesuatu itu.

HR at-Tabrani


32/37

Independency

Allahu al-Shamad (Allah tempat bergantung

segala sesuatu)

Teladan Rasulullah SAW

Teladan para pahlawan dan tokoh-tokoh besar

-> independency

Bahkan independen terhadap diri sendiri

(nafsu) -> teladan Nabi Yusuf AS


33/37

Accountability and Responsibility

Akuntabilitas: kejelasan fungsi, struktur,

sistem, dan pertanggujawaban organ

perusahaan sehingga pengelolaan perusahaan

terlaksana secara efektif

Responsibilitas: kesesuaian (kepatuhan) di

dalam pengelolaan perusahaan terhadap

prinsip korporasi yang sehat serta peraturanperundangan yang berlaku


34/37

Some basic rules

Jangan melempar tanggung jawab

Akuilah kesalahan jika ada

Pendelegasian

Tanggung jawab ada di setiap orang


35/37

Why not Independent?

Utang budi

Hubunganpribadi

Suap

Intervensi


36/37

Concluding Remarks

Theres enough on earth for

everybodys need, but notenough for anybodys greed


37/37

37

For further Information, please contact

Nuruddin Mhd Ali

[email protected]

Implementation of GCG second 12th_001.pptx

Documents