6 th ASEAN UNIVERSITIES
INTERNATIONAL CONFERENCE ON ISLAMIC FINANCE
(6 th AICIF)
14th - 15th November 2018
New World Makati City, Manila, Philippine
CONFERENCE
PROCEEDING
CORPORATE GOVERNANCE
ISLAMIC BANKING AND CAPITAL MARKET
MONEY PAYMENT SYSTEM &
FINANCIAL INNOVATION
TAKAFUL & RISK MANAGEMENT ISLAMIC SOCIAL FINANCE
ARABIC PAPERS 1. 2.
3.
4. 5.
6.
SUB THEMES
CORPORATE
GOVERNANCE
Sub Theme Corporate Governance
No Paper ID Paper Title Author(s) Affiliation
1 6th AICIF:
083-075
Tax Amnesty and JIHAD on CV. SR
(Phenomenology Study) Ahmad Rudi Yulianto
Universitas Islam Sultan Agung (UNISSULA), Indonesia
2 6th AICIF:
039-032
Good Corporate Governance, Earnings Quality, and Firm Value:
Empirical Study on Jakarta Islamic Index Companies 2008-2015 using Structural Equation Model-Partial Least Square Method
Sugiyarti Fatma Laela, Dian Yuni Anggraeni, Rahma Wijayanti
Sekolah Tinggi Ekonomi Islam (STEI) Tazkia, Indonesia
3 6th AICIF:
076-063
Taawun: An Islamic Practice to Reduce Voluntary Turnover Intention
Ken Sudarti, Alifah Ratnawati, Mulyana,
M. Husni Mubarok
Universitas Islam Sultan Agung (UNISSULA), Indonesia
4 6th AICIF:
079-066
Successful Determinant of Islamic
Knowledge Organization Marno Nugroho
Universitas Islam Sultan Agung (UNISSULA), Indonesia
5 6th AICIF:
082-069
The Effectiveness of Internal Control, Organizational Ethical Culture, and Fraud Prevention: The Role of Moderating Individual Morality
Provita Wijayanti, Rustam Hanafi, Nurhidayati
Universitas Islam Sultan Agung (UNISSULA), Indonesia
6 6th AICIF:
084-071
Critics on the Comprehensive and Progressive Agreement for Trans Pacific Partnership (CPTPP) from Shariah Banking and Investment
Hakimah Yaacob,
Khairul Hidayatullah Basir
Universiti Islam Sultan Sharif Ali (UNISSA), Brunei Darussalam
7 6th AICIF:
084-072
Enabling Legal Environment of Islamic Finance in Brunei: A Demand for Improvement
Hakimah Yaacob,
Khairul Hidayatullah Basir
Universiti Islam Sultan Sharif Ali (UNISSA), Brunei Darussalam
8 6th AICIF:
088-076
The Impact of Collaborative Networks and Islamic Works Ethic on Business Performance of Small and Medium Enterprises
Mulyana
Universitas Islam Sultan Agung (UNISSULA), Indonesia 9
6th AICIF:
090-078
Corporate governance from Islamic
perspective Abdulrahman Alnofli
International Islamic University Malaysia
10 6th AICIF:
093-082
Corporate Social Responsibility in
Islamic Perspective Chrisna Suhendi
Universitas Islam Sultan Agung (UNISSULA), Indonesia
11 6th AICIF:
094-084
Internal Control, Acceptance of Compensation and Unethical Behavior as a Predictor of Trends in the Establishment of Fraud
Khoirul Fuad
Universitas Islam Sultan Agung (UNISSULA), Indonesia
12 6th AICIF:
101-125
Earnings Management of Family Generation Company in Indonesia:
Socio Emotional Wealth (SEW) Theory Perspective
Edy Suprianto, Y Anni Aryani, Doddy Setiawan, Rahmawati
Universitas Islam
Sultan Agung
(UNISSULA),
Indonesia
13 6th AICIF:
081-103
The Role of Partnership in Improving SMEs Reputation: An Islamic Outlook
Tri Wikaningrum, Imam Ghozali, Ahyar Yuniawan
Universitas Islam Sultan Agung (UNISSULA), Indonesia
14 6th AICIF:
134-127
The Analysis of Online Shopping
Satisfaction in Islamic Perspective (Case Study to Student Of
University Of Darussalam Gontor Campus Magelang On Period 2017)
Mustaan Al Faruqi, Mufti Afif
University of Darussalam (UNIDA) Gontor, Indonesia
15 6th AICIF:
155-146
Short-run and Long-run
Relationship between Economic Growth, Foreign Direct Investment, Trade Liberalization and Education on Income Inequality: Evidence from Indonesia
Siti Nur Azizah, Neneng Ela Fauziyah
UIN Sunan Kalijaga,
Indonesia
6thASEAN Universities International Conference on Islamic Finance (AICIF), Manila, Philippines 14th & 15th November 2018
Corporate Social Responsibility in Islamic Perspective
Chrisna Suhendi
Economics Universitas Diponegoro Economics Faculty Universitas Islam Sultan Agung
Abstract
Awareness in the importance of practicing CSR has become a global trend along with the growing concern of the global community for environmentally friendly products and produced by taking into account social principles and human rights principles. CSR from Islamic view is an inert consequence of the teachings of Islam, meaning that the company will try to create maslahah, not just seeking profit. CSR implementation tends to be caricative, responsive, short-term oriented and lacks community involvement. So, the assumption of the community assessing CSR is only used in an emergency. So that is why CSR should be directed towards equity, structural participation and emancipation; and co-ownership (ownership of shares more evenly and broadly includes the common bond of stakeholders), so that the stakeholders of Islamic banks not only feel they own the company but really do own the company.
Keywords: CSR from Islamic view, CSR implementation, wealth, co-ownership, inherent consequences
1. Introduction
CSR is familiar word to us. CSR or Corporate Social Responsibility has a very important role both for the community and for the company. Because of the CSR existence, in addition to this it is beneficial for the community by the existence of activities that encourage community empowerment, with the existence of this CSR will also help the company in an effort to expedite the company's operations so that it is free from interference. (Keraf, 2002) mentions the company's social involvement, because: (1) the needs and expectations of the community are increasingly changing, the more critical and sensitive people are about the products they will buy; (2) limited natural resources; (3) a better social environment; (4) balancing responsibilities and powers; (5) long-term benefits.
In the idea of CSR, companies are no longer faced with responsibilities that are based on the single bottom line, namely the corporate value reflected in its financial condition. Corporate responsibility must be based on the triple bottom lines, namely also paying attention to social and environmental issues. Because of financial conditions it self are not enough to guarantee the value of the company to grow sustainably. This sustainability occurs if the company pays attention to the social and environmental dimensions, one of them is reflected in the interests of the company's stakeholders. So that the company is required to pay attention to the interests of the company's stakeholders, provide added value from products and services for the company's stakeholders, and maintain the sustainability of the added value it creates. In addition, companies need to pay attention to the interests of employees, because the neglect of employee interests will have an impact on low productivity, efficiency, poor quality of products produced. In other words, stakeholders as a group or individual have an interest and can also influence the running of the company.
Awareness of the importance of practicing CSR has become a global trend along with the growing concern of the global community for environmentally friendly products and produced by considering social principles and human rights principles. Likewise in the banking world, CSR has also become an interesting new trend. In Indonesia, the Government specifically encourages the participation of corporate companies to carry out CSR activities. Regulations concerning this matter are stated in (Article 74 of Law No 40 of 2007) about the limited liability companies. Another rule that also includes CSR is (Law No. 25 of 2007 Article 15(b) and Article 16 (d)) about Investment. The same thing applies to sharia banking entities in carrying out their CSR activities.
2. Literature Reviews
2.1. CSR in Islamic Perspective
CSR in Islamic perspective is an inert consequence of the teachings of Islam itself. The aim of Islamic law (Maqashid al syariah) is maslahah (goodness) so that business is an effort to create goodness, not only seeking profit.
Business in Islam has a very noble and strategic position because it is not only permitted in Islam, but rather commanded by God in (Q.S. Al-Jumu’ah: 10) which mean:
But when the Prayer is ended, disperse in the land and seek Allah's Bounty, and remember Allah much so that you may prosper.
It is also mentioned in (Q.S. Al Baqarah: 148), which means:
Everyone has a direction towards which he turns; so excel one another in good works. Allah will bring you all together wherever you might be, for nothing is beyond His power.
Actually, based on the Islamic perspective, the obligation to implement CSR is not only related to the fulfillment of obligations legally and morally, but also the strategy so that the company and society can survive in the long run. If CSR is not implemented, there will be more costs to be borne by the company. Conversely, if the company carries out CSR well and actively works hard to balance the rights of all stakeholders based on fairness, dignity, and justice, and ensuring fair distribution of wealth, it will really benefit the company in the long period.
Islamic moral philosophy reflected in CSR is mentioned in the Qur'an such as:
1. Maintain the environment and preserve it (Q.S. Al-Maidah: 32), which means:
Therefore We ordained for the Children of Israel that he who slays a soul unless it be (in punishment) for murder or for spreading mischief on earth shall be as if he had slain all mankind; and he who saves a life shall be as if he had given life to all mankind. And indeed again and again did Our Messengers come to them with clear directives; yet many of them continued to commit excesses on earth.
2. The efforts to eradicate poverty(Q.S Al-Hasyr : 7), which mean:
Whatever (from the possessions of the townspeople) Allah has bestowed on His Messenger belongs to Allah, and to the Messenger, and to his kinsfolk, and to the orphans, and to the needy, and to the wayfarer so that it may not merely circulate between the rich among you. So accept whatever the Messenger gives you, and refrain from whatever he forbids you. And fear Allah: verily Allah is Most Stern in retribution
3. Prioritize something that is morally clean than something that is morally dirty, even though it brings greater profits (Al-Maidah:103) which mean:
Allah has neither appointed (cattle devoted to idols such as) Bahirah, Sa'ibah, Wasilah nor Ham; but those who disbelieve forge lies against Allah and of them most have no understanding (and therefore succumb to such superstitions)
4. Honest and trustworthy (Q.S. Al-Anfal: 27), which mean:
Believers! Do not be unfaithful to Allah and the Messenger, nor be knowingly unfaithful to your trusts.
Those four moral philosophies above are an effort to harmonize all aspects of a Muslim's life with their religious teachings so that the Islamic financial and banking system is expected to contribute to the achievement of Islamic socio-economic goals.
3. Discussion
3.1. CSR in Islamic Bank
Corporate social activities referred to CSR that is reflected in the principle of responsibility. CSR activities in Islamic banking basically have been inherent as a consequence of Islamic banks' reliance on Islamic teachings.
Unlike conventional banks, it cannot be separated dichotomically between business orientation and social orientation. Business orientation should also bring social orientation, or at least not contradictions with social orientation. This has consequences on the strong social character of Islamic banking in carrying out its social activities, relative to conventional banks. The social activities of Islamic banks are added value which can have implications for increasing long-term profitability and goodwill derived from a positive image of the business being carried out and increasing stakeholder trust in the performance of Islamic banks.
Islamic banks as intermediary institutions between the surplus and deficit parties, hence the increasing performance of Islamic banks can be observed from the increase in the number of third-party funds deposited by customers or increased financing proposals. Therefore, the main challenge of Islamic banks at this time is to generate stakeholder trust that is expected to be able to mobilize deposits, attract investment, channel financing, invest, while expanding employment opportunities, help the government finance the budget deficit for development, and accelerate economic development well. This happens because all financial institutions must respond to the reality that providers of funds (shareholders and depositors) and other stakeholders have expectations, and they will not invest funds or contribute well if the expectations they project are not met.
Stakeholder expectations of Islamic banks are certainly different from conventional banks. This is based on the awareness that Islamic banks are developed as financial institutions that carry out business activities in line with the basic principles of Islamic economics. Islamic economic goals, in this case, are not only focused on commercial objectives that are reflected in achieving maximum profit only but also consider its role in providing broad welfare for the community, so that the implementation of CSR activities is not only to channel social funds, but CSR can be directed to wealth distribution, in the direction of structural participation and emancipation, it means towards co- ownership (ownership of shares more evenly and broadly includes the common bond of stakeholders). Stakeholders not only feel they own the company but really do own the company.
3.2. The Effect of CSR toward Financial Performance
There are many studies discuss the relationship between CSR and the company's financial performance, including (Awa, 2010) shows that there is a positive and significant relationship between CSR and company performance.
(Awa, 2010) also stated that corporate social responsibility must be aligned with policies, company goals, and core competencies. Organizations must also embrace a variety of strategic corporate social responsibility programs.
(Arsoy, et al., 2012) stated that the existence of CSR was able to support the performance of 28 companies listed on the Istanbul stock exchange to be better. The same thing was also conveyed by (Richard & Okoye, 2013) which revealed that social responsibility carried out by banks in Nigeria had a big impact on society, namely the addition of infrastructure and community development. The relationship between CSR and company performance was also expressed by (Mwangi and Jerotich, 2013) with a correlation coefficient of 0.870. This relationship is positive but not significant.
(Adewale & Rahmon, 2014) showed that a positive relationship between CSR costs and after-tax profits in the banking sector in Nigeria. Therefore, this study recommends that top management in an organization must ensure caution in spending and commit to any social activity and invite members of the surrounding community to join the activity.
(Alkababji, 2014) reported: (1) a significant difference in the level of social and environmental disclosure, as measured by the average social and environmental disclosure index at 48 companies listed on the Palestine Exchange (PEX) in 2012; (2) the level of CSR disclosure is quite low in Palestinian companies; (3) there is a correlation between the level of CSR disclosure and the size of the company; (4) there are differences in the level of CSR disclosure between companies in the economic sector.
4. Conclusion
CSR in the perspective of Islam is an inert consequence of the teachings of Islam itself. It means that Islamic banks will try to create goodness, not only seeking profit. Likewise, CSR activities in Islamic banking are also inherent as a consequence of Islamic banks' reliance on Islamic teachings. Unlike conventional banks, it cannot be separated dichotomically between business orientation and social orientation. In this framework, the government
seeks to encourage the implementation of CSR in Islamic banks in terms of regulations as outlined in Law No. 40 of 2007 about Limited Liability Companies. Especially for Islamic banking other than Law No. 40/2007, CSR is also mandated by article 34 of Law No. 21 of 2008 about Islamic banking. With the regulatory support above, it is expected that Islamic banks must appear as the leading pioneers in implementing the CSR. However, there are still many Islamic banks that prioritize maximizing profit as conventional banks. CSR implementation tends to be caricative, responsive, short-term oriented and lacks community involvement. So, the assumption of the community assessing CSR is only used in an emergency. For this reason, CSR should be directed to equity, towards participation and structural emancipation; and co-ownership (ownership of shares more evenly and broadly includes the common bond of stakeholders), so that the stakeholders of Islamic banks not only feel they own the company but really do own the company.
References
Adewale, M. T., & Rahmon, T. A. (2014). Does Corporate Social Responsibility Improve an Organization ’ s Financial Performance ? – Evidence from Nigerian Banking Sector, XIII(4), 2014.
Q.S. Al-Maidah:103
Alkababji, M. W. (2014). Voluntary Disclosure on Corporate Social Responsibility : A Study on The Annual Reports of Palestinian Corporations ., 2(4), 59–82.
Arsoy, A. P. (2012). Relationship : The Case Of Turkey, 159–176.
Article 74 of Law No 40 of 2007. (n.d.). Limited Liability Companies.
Awa, F. N. (2010). An Analysis of Corporate Social Responsibility and Financial Performance in Organisations, 17(1), 1–14.
Jerotich, M. and. (2013). The Relationship between Corporate Social Responsibility Practices and Financial Performance of Firms in the Manufacturing , Construction and Allied Sector of the Nairobi Securities Exchange Cyrus Iraya Mwangi Lecturer Department of Finance and Accounting. Journal, International Technology, 3(2), 81–90.
Keraf, S. (2002). Etika Bisnis Tuntutan dan Relevansinya. Jakarta: Kanisius.
Law No. 25 of 2007 Article 15(b) and Article 16 (d). Investment.
Q.S. Al-Anfal: 27.
Q.S. Al-Jumu’ah: 10.
Q.S. Al-Maidah: 32.
Q.S. Al Baqarah: 148. . Q.S Al-Hasyr : 7.
Richard, E. O., & Okoye, V. (2013). Impact of corporate social responsibility on the deposit money banks in Nigeria, 2(3), 71–84.
