Journal of Islamic Business and Management
A Critique of Islamic Banks’ Good Corporate Governance Report in Indonesia
Published Online: December 2012
The concept of Good Corporate Governance (GCG) in Indonesia is copied from Western practices. Its roots lie in a case in which a Western company manager abused his power. The adoption of GCG by Islamic banks followed its adoption by conventional banks for the first time in Indonesia in 2007. While specific GCG regulations for Islamic banks were issued in 2010, the main difference with the 2007 regulations centered on the issue of compliance with Islamic teachings in Islamic banking practices. Failures in implementing good governance aspects and fiduciary responsibilities have become the most serious issue of modern day businesses. The nature and characteristics of Islamic banks differs from conventional banks with regard to contracts processes, transparency and complete disclosure to each party to a contract, level of risk incurred, and objectives. It seems to be ignored in relation to GCG regulation. The following research analyzes the GCG report of Islamic banks in Indonesia, comparing it to theoretical perspectives on the GCG, as well as Islamic perspectives, as reported by Islamic banks. Failure to implement a Sharī‘ah operational review, along with inefficient management, may compromise trust and increase resistance from customers.
GCG; Indonesia; Islamic Bank; GCG Report.