COMPARISON OF GOOD CORPORATE GOVERNANCE(GCG) IMPLEMENTATION PRACTICES IN ISLAMIC COMMERCIAL BANKS IN INDONESIA

Sharia Banking in Indonesia has a Sharia Supervisory Board that can monitor the operation of Sharia banks so that they are different from other banks. It is hoped that with this monitoring system the operation of corporate governance will be better. This study aims to explain the differences in the application of Good Corporate Governance (GCG) between Islamic banking in Indonesia. Sharia Bank is a bank whose application is different from conventional banks. Where one of the differences is the existence of a Sharia Supervisory Board which ensures bank activities are based on sharia. Then conducted a study of Islamic banks during 2014 to 2018. This research method uses descriptive analysis based on data that has been reported by each Islamic banking. The results of the survey showed that BCA Syariah and BSM received the highest rating among other sharia banks. This explanation shows that the implementation of corporate governance has been "very good" and has been in accordance with the stipulated provisions. BNIS, BRIS, Bukopin Syariah Bank, Mega Syariah Bank, Panin Syariah Bank, Victoria Syariah Bank, and Maybank Syariah, each ranked 2 (two). This means that the implementation of corporate governance goes "well". Interestingly, the Muamalat bank which has been the oldest BUS in Indonesia is ranked 3 (three). This means that the application of corporate governance is "good enough". Some notes on Muamalat's bank that must be corrected. Keyword : Islamic Banks, Good Corporate Governance p-ISSN 2654-3923 e-ISSN 2621-6051 SYARIKAT : Jurnal Rumpun Ekonomi Syariah Volume 4, Nomor 2, Desember 2021 26 INTRODUCTION Company control is an issue that cannot be separated by companies from various parties. This is done so that the creation of independence for managers in producing maximum company performance. Management of the company by professionals is carried out separately between the parties concerned. So there is a control function between the company's organs (GMS, Directors, and Board of Commissioners). In addition to independence, the principle of openness is also important in creating a healthy business environment. Transparency is carried out to maintain a balance of information gaps between shareholders and management. With transparency, shareholders will be able to assess how the company's performance is invested by looking at how the financial statements are performing (Ben & Padilla Angulo, L. 2018: 231). The relationship between the decision maker and management is based on the assumption that management acts based on its interests at the expense of the interests of shareholders (agency theory) (Patel, et.al, 2018: 286). Agency conflicts that arise are caused by various things, such as Moral-Hazard, Earning Retention, Risk Conversion, and TimeHorizon. This assumption was built to prevent the gap between shareholders and management, where the owner has an interest in getting the maximum return, while the manager has an interest in incentives for fund management (Athari, et.al, 2016: 101-103). LITERATURE REVIEW The corporate governance system was built to regulate the authority of directors so as not to abuse authority and ensure to work only for the benefit of the company (Alandejani, et.al, 2017: 136). Corporate governance is carried out to monitor company management in various industries, such as banking, capital markets, and other companies. The rules of corporate governance not only pay attention to how the company's business is running, but also about overall supervision and control of the company including the directors' policies. So that in corporate governance must include four principles in order to run properly, namely Direction, Executive action, Supervision, and Accountability. These four principles are important points for companies with the expectation of company compliance with regulations and minimizing gaps (Ducassy & Montandrau, 2015: 389). Companies that practice good governance show that the monitoring function of board members is increasing. Resulting in effective managerial decisions and improved performance. This effectiveness signifies the manager's opportunistic behavior which is reduced in manipulating reported earnings, due to the manager's tendency towards managing opportunistic financial statements. Even some well-managed companies exhibit lower levels of default risk (Alexakis, et.al, 2019: 13). Overall corporate governance practices themselves affect company performance. The implication is that it creates cohesiveness between managers and shareholders in conducting their business effectively in accordance with the rules of management guidelines (Hassan, et.al, 2019: 20). The implementation of Good Corporate Governance (GCG) in Indonesia also began with the signing of a memorandum of agreement between Indonesia and the IMF in line with the formation of the National Committee on Corporate Governance Policy (KNKCG) p-ISSN 2654-3923 e-ISSN 2621-6051 SYARIKAT : Jurnal Rumpun Ekonomi Syariah Volume 4, Nomor 2, Desember 2021 27 which formulated guidelines for Good Corporate Governance (GCG) issues in Indonesia to be implemented by companies operating in Indonesia. On November 29, 2000 the guidelines were formalized based on the decision of the Coordinating Minister for the Economy no. 31 / M.Ekuin / 06/2000, which recommends improvements to the rules for implementing the guidelines (Iqbal, et.al, 2015:46-48). Basically the Good Corporate Governance (GCG) principle is a choice in carrying out economic activities. However, these principles create good governance and increase value in the company. Seeing the importance of implementing Good Corporate Governance (GCG), the role of public institutions as regulators is needed as a benchmark for Good Corporate Governance (GCG) such as courts, the Capital Market Supervisory Agency, Bank Indonesia, and other institutions. This principle should be carried out by limited liability companies, state-owned companies, banking institutions, and other institutions where Good Corporate Governance (GCG) is needed. The banking institution it self has implemented the Good Corporate Governance (GCG) principles dated 30 January 2006 as stipulated in Bank Indonesia regulation no.8 / 4 / PBI / 2006. Where this regulation aims to strengthen banking conditions in the face of risk, protect the interests of stakeholders, and improve compliance with applicable laws in the banking industry. METHOD This type of research uses descriptive qualitative with library studies with the development of ideas from the quoted theory. RESULTS AND DISCUSSION Related to the risks faced by banks, that banks face credit risks (both in financing and in the form of debt) that depend on the management system (J. Li, C., Li, Dkk,2017: 47). Where in Indonesia there are two different banking systems so that the risks faced are also different. Islamic banks in managing risk are better than conventional banks, especially when the global financial crisis makes Islamic banks more efficient than conventional banks, as well as efficiency better fees than conventional banks. Indeed, after the crisis period, the development of Islamic banks has increased with some evidence that Islamic banks are resistant to financial crises, even Islamic bank financing has increased compared to conventional bank loans. Even Islamic banks are more profitable than conventional banks based on bank financial statements. In another analysis also shows that Islamic banks are more resilient than conventional banks, seen from the high volatility of conventional banks. Problems that exist at the time of the crisis that befell the national banking world, namely Negative spread, Liquidity, NOP (net open position), NPL (NonPerforming Loans) and Capital (Capital) (Neifar & Jarboui, 2018: 44). However, other facts show that the cost and profit performance of Islamic banks is worse than conventional banks. Indeed during the crisis, Islamic banks are resistant to shocks, but during the end of the crisis period, financial instability of Islamic banks is higher than conventional banks coupled with poorer performance with a decrease in capital, profitability, and efficiency. On the other hand, there are differences in efficiency between the two banks which show conventional banks are more efficient than Islamic banks. This means that conventional p-ISSN 2654-3923 e-ISSN 2621-6051 SYARIKAT : Jurnal Rumpun Ekonomi Syariah Volume 4, Nomor 2, Desember 2021 28 banks are more efficient in managing costs than Islamic banks. The failure rate of Islamic banks is also higher than conventional banks, which indicates that the resilience of Islamic banks has not been stable so that the sustainability of Islamic banks is shorter. Agency problems are also seen that conventional banks are relatively less and the tendency for Islamic banks to have agency problems . Seeing the above phenomenon, that on one hand, Islamic banks are better than conventional banks, but on the other hand vice versa. It needs to be seen how the practice of implementing Good Corporate Governance (GCG) in Islamic banks, where corporate governance practices can improve company performance which ultimately affects the value of the company. This study differs from previous studies that looked at the effect of Good Corporate Governance (GCG) implementation on Islamic banks. This study wants to see how the implementation of Good Corporate Governance (GCG) itself in Islamic Commercial Banks in Indonesia. Indeed, at the time of the financial crisis, Islamic banks have more resilience than conventional banks, but from several studies show that Islamic banks after the financial crisis showed lower performance than conventional banks. Several causes can affect the decline in the quality of Islamic banks, one of which is how the implementation of corporate governance in Islamic banks themselves. Corporate Governance is a system that is carried out to achieve the balance of the company