The Relationship between Islamic Corporate Governance, Human Governance and Sustainability Reporting of Shariah Compliant Companies in Malaysia

Abstract

This study aims to evaluate the relationship between Islamic corporate governance, human governance and sustainability reporting by investigating Shariah compliant companies in Malaysia. This is very significance as to ensure that the corporate governance mechanism will lead the organization to do more sustainability practises when there is disclosure on Islamic corporate governance and human governance. Human governance is measured by job experience of Board of Directors (BOD), education background of BOD, education level of BOD, age of BOD, gender diversity of BOD, level of integrity, the quantity of training attended by BOD and internal control quality. This study investigates the relationships between sustainability reporting, which comprises economic, environmental, social, Islamic corporate governance and human governance. The study has been using quantitative analyses based on a total of 68 Shariah compliant companies' annual reports for the year ended 2019.Descriptive and multiple regression analyses were used to analyse the data. The study found that, education background of BOD, education level of BOD, age of BOD, level of integrity and internal control quality were significantly related to sustainability reporting. However, job experience of BOD, quantity of training attended by BOD and gender diversity of BOD were found not to be significantly related to sustainability reporting. Islamic corporate governance was also found not to be significantly related to sustainability reporting. Shariah companies should focus on having BOD diversity in terms of age, education level and education background. There should also be an internal quality control system and an ethical culture in place to improve its sustainability reporting. Further, this study contributes to the discussion of Islamic corporate governance, human governance and sustainability reporting. The findings can be used to identify the necessary mechanisms that should be enhanced to strengthen the practice of sustainability reporting. Hence, future research could include more items in Islamic corporate governance on the sustainability practises.