Human Governance Development Index of Shariah Compliant Companies in Malaysia and Indonesia

Abstract

This research aims to form a Human governance index (HGI) using Board of Directors (BOD) attributes such as BOD job experience, BOD education background, BOD education level, BOD age, BOD gender diversity, degree of integrity, BOD training and development, and the quality of the internal control system. This research is based on a review of 70 Shariah-compliant companies' annual reports for the fiscal year ending in 2019. There are a total of 70 Shariah-compliant businesses. A representative from academia checked the measurement of this study. This study revealed that HGI is higher for Malaysia than Indonesia with 0.60 and 0.48 respectively. BOD job experience index has the highest mean for both countries, indicating that the majority of BOD has more than ten years of experience and the BOD gender diversity index has the lowest mean for both countries, indicating that the majority BOD are males. BOD education background index is almost similar between Shariah companies in Malaysia and Indonesia. BOD education level index and BOD age for Malaysia is lower than Indonesia. However, it can be seen that the integrity index is much higher for Malaysia than Indonesia, as in Malaysia it is mandatory to include the statement of internal control in the annual report, but it is not the case in Indonesia. Human governance has been proven to increase organizational performance through values, norms, and ethics implemented within the organization.