Human Governance Index of Manufacturing Sector of Shariah Compliant Companies in Malaysia: A Preliminary Analysis

Hasnah  Haron; Nurul Nazlia  Jamil; Nathasa Mazna  Ramli; Sumaiyah Abd  Aziz; Syahnaz  Sulaiman; Idris  Gautama; Anderes  Gui; Synthia Atas  Sari; Nurul ‘Athirah Rosli; Nurul Kamarina Kamarudin

doi:10.15282/jgi.5.2.2022.7361

Authors

Hasnah Haron Faculty of Economics and Mualamat, Universiti Sains Islam Malaysia
Nurul Nazlia Jamil Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia
Nathasa Mazna Ramli Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia
Sumaiyah Abd Aziz Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia
Syahnaz Sulaiman Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia
Idris Gautama Binus Business School, Bina Nusantara University, Indonesia
Anderes Gui School of Information Systems, Bina Nusantara University, Indonesia
Synthia Atas Sari Management Department, Bina Nusantara University
Nurul ‘Athirah Rosli Graduate School of Muamalat, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia
Nurul Kamarina Kamarudin Graduate School of Muamalat, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia

DOI:

https://doi.org/10.15282/jgi.5.2.2022.7361

Keywords:

Human Governance Index, Shariah-Compliant Companies, Manufacturing Sector

Abstract

Human Governance refers to the governors’ commitment to improve employees’ values and ethical behaviour in the organization. Humans are capital asset and key driver to a successful organisation. The objectives of the study are to explain the development of human governance index and discuss the findings of human governance index when applied to 68 Shariah-compliant companies in the manufacturing sector. Previous study used primary and secondary data. Thus, this study will combine the indices of Human Governance from previous study and will develop a more comprehensive checklist using secondary data. Human Governance Index of this study comprises 37 items which are made up of four (4) main components which are (1) BOD Leadership - which is measured by i) BOD Job Experience Index, (ii) BOD Educational Background Index, (iii) BOD Educational Level Index, (iv) BOD Age Index, (v) BOD Gender Diversity Index; (2) Level of Integrity Index; (3) BOD Quantity of Training Index; and (4) Quality of Internal Control System Index. The index has been validated by panel experts and inter-rater consistency was also conducted. The index was then used to measure the Human Governance Index of 68 Shariah-compliant companies’ annual reports for the year 2019. 68 Shariah-compliant companies are from manufacturing companies which comprise 25 consumer products, 3 healthcare, and 40 industrial products. The results of this study revealed that consumer product sector has the highest items compared to industrial product and healthcare sectors. BOD job experience index has the highest mean of 92.9% indicates that BOD has more than 10 years’ experience and BOD gender diversity index has the lowest mean of 17.6% which comprises female. Human governance Index can be used to assist companies to improve their human capital who are important assets to the company and have been proven to increase performance of companies if they are better managed.

Author Biographies

Hasnah Haron, Faculty of Economics and Mualamat, Universiti Sains Islam Malaysia

Dato’ Dr. Hasnah Haron is a Senior Academic Fellow at the Faculty of Economics and Mualamat, Universiti Sains Islam Malaysia. She was conferred a PhD from the University of Hull in 1996 with a specialisation in Auditing. She was formerly attached to Universiti Teknologi Mara, Universiti Sains Malaysia and Universiti Malaysia Pahang.

Nurul Nazlia Jamil, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia

Dr. Nurul Nazlia Jamil is a senior lecturer at the Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia (USIM). Her area of expertise and interest cover areas such as Accounting, Financial Reporting, Corporate Governance and Auditing. She has published in refereed journals including International Journal of Law and Management, International Journal Finance and Banking, International Journal of Business and Applied Social Science and Gadjah Mada International Journal of Business.

Nathasa Mazna Ramli, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia

Associate Professor Dr. Nathasa Mazna Ramli is attached at the Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia. She is a chartered accountant (Malaysia) and teaches undergraduate and postgraduate courses in accounting and finance. Her research interests are in areas relating to financial accounting and disclosure, ownership structure, governance and financial management.

Sumaiyah Abd Aziz, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia

Dr. Sumaiyah Abd Aziz is a senior lecturer in the Faculty of Economics and Muamalat, USIM, currently serve as Quality Coordinator for the faculty. She obtained her PhD from Universiti Utara Malaysia (UUM). She is a certified halal trainer (Halal Executive Program) registered under Halal Professional Board, JAKIM.

Syahnaz Sulaiman, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia

Dr. Syahnaz Sulaiman is a senior lecturer at Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia. She holds a Ph.D. in Islamic Economy from University of Malaya. Her research areas are Islamic banking and finance and Islamic social finance. She is currently a Shariah Committee in a few Islamic financial institutions in Malaysia.

Idris Gautama, Binus Business School, Bina Nusantara University, Indonesia

Prof. Idris Gautama So obtained his doctoral degree from Universiti Sains Malaysia. He is a lecturer and Professor in Management Science at Binus Business School, Bina Nusantara University, Indonesia and he is a Life Time member of Asian Academy of Management. His research areas are Marketing, Strategic Management, Entrepreneurship, and IS/IT-Business Management related fields.

Anderes Gui, School of Information Systems, Bina Nusantara University, Indonesia

Dr. Anderes Gui obtained his doctoral degree from Universiti Sains Malaysia. He is a lecturer at School of Information Systems, Bina Nusantara University, Indonesia and is a professional member of ISACA Indonesia Chapter. His research areas are Management Information System, Information System Governance, Information Technology Project Management, Information System Security and Cloud-based solution.

Synthia Atas Sari, Management Department, Bina Nusantara University

Synthia Atas Sari is a Ph.D. student in the School of Management at the Universiti Sains Malaysia and senior lecturer in Management Department, Bina Nusantara University. She holds a master’s degree in finance management from the University of Indonesia. Her main research interest is entrepreneurship, change management, and corporate governance.

Nurul ‘Athirah Rosli, Graduate School of Muamalat, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia

Nurul 'Athirah Rosli is a postgraduate student in Islamic Finance from Graduate School of Muamalat, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia. She holds bachelor's degree in Muamalat Administration from Universiti Sains Islam Malaysia.

Nurul Kamarina Kamarudin, Graduate School of Muamalat, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia, Malaysia

Nurul Kamarina Kamarudin is a postgraduate student in Islamic Finance from Graduate School of Muamalat, Faculty of Economics and Muamalat, Universiti Sains Islam Malaysia. She holds bachelor's degree in Muamalat Administration from Universiti Sains Islam Malaysia.

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