The Influence of Good Corporate Governance Implementation towards Employee Performance in PT. XYZ, Surabaya

Purpose: This research paper aims to measure the influence (including correlation) of Good Corporate Governance (GCG) implementation towards the employee performance in PT. XYZ, Surabaya. Design/methodology/approach: Method used in this study is simple linear regression applying the equation of Y=a+bX. Findings: Good Corporate Governance (GCG) is known as one of the best management frameworks, is now being adapted and implemented by many of the companies around the world. Research limitations/implications: Some of the activities done here include observation and analysis where the survey was conducted using a questionnaire, process of identification and data modeling, parametric testing, goodness of fit evaluation, and also hypothesis examination. Practical implications: In the era of business volatility and uncertainty, there are companies that dealing with loss caused by fraudulence and unethical actions. Originality/value: Based on the analysis result, it is found that Good Corporate Governance implementation has influence towards employee performance positively and significantly in PT. XYZ with coefficient determination value at the number of 0.41 which is categorized as fine correlation. , ,


I. INTRODUCTION
Good Corporate Governance has been becoming a biggest issue in many of companies these days. It is not only dealing with stuffs about how we operate, but also on how we compromise with everyone in workplace. Good Corporate Governance (later will be shorted as GCG) is a system used to regulate and also control business at the same time to generate value that is added for all stakeholders of a company (Monks, Robert A.G, dan Minow, 2004).
There are five keypoints in good corporate governance concept; fairness, transparency, accountability, responsibility, and also independency Kaen, Fred. R, (2003); Shaw, John. C,( 2003) Business practitioners believe that those key points will stand as barrier to those who are ignorant enough teased to be involved in fraud action. Corruption is one of the most anticipated fraud actions in business. The Corruption Eradication Commission of Indonesia (KPK) published data in their annual report stating that they have at least 564 corruption cases during 2004-2018 which has the biggest portion at the number of 64% instead of procurement cases (21%), budgeting fraud (5%), money laundering (3%), illegal levy (3%), licensing (3%), and investigation hindering (1%). What quite surprising is that the second biggest corruption happened was coming from private business sector with 238 suspects preceded by cases from House of Representatives with 247 suspects as the ISSN : 2597-4785 (ONLINE) ISSN : 2597-4750 (PRINTED) The Influence of Good Corporate Governance Implementation towards Employee Performance in PT. XYZ, Surabaya Yuli Kurniawati, Dhyah Wulansari Page │ 544 highest one (kpk.go.id). That is why Financial Service Authority (OJK) requires all of public companies to implement Good Corporate Governance into the company operations because it is assumed that GCG could bring any success in company culture development by fulfilling the five principles of GCG. Another fact retrieved from transparency.org that in 2019 Indonesia's corruption index was ranked 85th from 198 countries (scored 40 out of 100), left behind with other ASEAN countries like Singapore ranked 4th, Brunei ranked 35th, and Malaysia with 51st rank. This fact drove many Indonesian researchers and scholars who were happened to conduct studies in good corporate governance. Theoretically, many of experts said that the rise and fall of a company depends on the engagement between the management team and the good corporate governance principles. So it is about implementation, not only available as knowledge base with no action taken. Viewed from the historical aspect, attention towards corporate governance became so popular and raised global concern since the several scandals occurred in the past like Enron, Worldcom, Tyco, London & Commonwealth, Poly Peck, Maxwell, etc. Kaihatu, (2006). The collapse of those public companies was caused by the failure of strategy and fraudulent practices in the top management level that lasted without any of detection in such a long time period caused by internal weakness control that should be maintained by the company board.
GCG was then adopted by many companies in G20 (OECD) in 1999 and became so popular in Asia since 2000's. Some were skeptical but some also optimistic with GCG approach in corporate management and governance. Internal audit is one of the ways to check the implementation of GCG. Internal audit is a specific mechanism in which cannot be separated with Good Corporate Governance Cohen & Sayag, (2010). It is very relevant to make sure that the efficient utilization of resources, business process control and fraud detection and misapplication of the resources of a company Badara, (2013). Internal auditing applies principles to make sure that the efficiency in the growth and business development in company leading to sustainable financing. Alzeban & Gwilliam,( 2014) believe that failure in corporate business is the result of poor implementation of internal audit practices.
Due to the popularity and the big recognition of internal auditing in corporate governance, the measurement of internal audit implementation including its effectiveness has attracted many of academic studies afterward. Badara, (2013) state their opinion that internal audit effectiveness has become an important topic over decades. This might be caused by the important roles played by the internal auditors in organizational survival and achievement to comply with Good Corporate Governance standard in order to gain the best employee performance of a company.
Moreover, the writers believe that internal audit on Good Corporate Governance implementation will improve company's performance where every stakeholder including corporate board members, management team, and business partners may gain benefit from it in many forms. But when it goes to topic where current situation is stated, there is a doubt where companies really implement good corporate governance as we know it is one of requirement in business sustainability.
Based on the above point of view, a deep study must be conducted to measure the influence between the Good Corporate Governance implementation and the employee performance.

II. LITERATURE REVIEW & CONCEPTUAL FRAMEWORK
The Corporate Governance can characterize the arrangement of principles, practices, and procedures by which an organization is controlled. It consists of shareholders, administration officers, customers, finance officers, suppliers, government and the community. Since corporate governance also provides the framework to obtain the objectives related with company business performance, it encompasses practices in every sphere of management, (Shleifer & Vishny, 1997) All of government ministries and agencies must improve effectiveness of the internal control work, also internal audit role and the organizational commitment since they are able to develop good governance Suyono & Hariyanto, (2012) where in addition, an effective internal control will provide information to management about the business progress, or the lack of progress in achieving their objectives (Nilniyom, P. & Chanthinok, 2011) (Vijayakumar, A. N. & Nagaraja, 2012); (Verdina, 2011) Prior studies by OCED (1999) have provided a deeper definition of corporate governance. It clearly described the corporate governance as the system where business corporations are directed and also controlled. The structure of corporate governance specifies the distribution of rights and responsibilities among stakeholders in the corporate ecosystem such as: the board, managers, shareholders, customers, employees, among others, and also states the rules and policies for making decisions related with the corporate affairs. By doing this, it also provides the structure in which the company objectives are set and the tools of obtaining these objectives and monitoring performance (Wolfensohn, 1999); (Uche, 2004); (Akinsulire, 2006 Effective corporate governance will reduce the shareholder's control ability and creditors confer on company managers, by increasing the probability that managers invest in projects with positive net present value Shleifer & Vishny, (1997)Thus, it will fix the relationships between the board and management team where operations should be characterized by transparency to shareholders, and fairness to other stakeholders Al-Faki, (2006)As effect, this will mitigate the agency costs (Jensen, M. C, 1976).
Employee performance refers to how workers behave in the workplace and how well they perform the job duties obligated to them. Your company typically sets performance targets for individual employees and the company as a whole in hopes that your business offers good value to customers, minimizes waste and operates efficiently Donohoe, (2015). Good corporate governance is inarguably one of the principles that potentially increases the employee performance where this assumption becomes the foundational concept of this study.
Based on the background and literature review the conceptual framework of the study is as follows.

Figure 1. Conceptual Framework
Source: Writer's proposition, 2021 According to the above conceptual framework, there are at least two kinds of hypothesis we can pull as the target to prove in this study.
Ha: Good Corporate Governance (GCG) implementation influences employee performance in PT. XYZ. H0: Good Corporate Governance (GCG) does not influence employee performance in PT. XYZ.

III. RESEARCH METHOD
This type of study goes with quantitative character which purpose is to explain something that uses research with numerical data analysis proceed with statistical procedures. The population in this study are employees working at PT. XYZ, Surabaya, East Java, a plastic-based product company who have been establishing its business since 1981 and has several offices and manufacturing bases in Southeast Asia and America. Population in this study are employees who work in the period of 2021 spread around the globe. Based on the company's policy, Good Corporate Governance is one of the principles that company adopts and implements for the business sustainability and to minimize fraud. The number of employees including stakeholders, shareholders and business partners, is currently 15.000 people. It has been considered by the writers as the only resource of population to collect data from this scientific study.
Questionnaire as the main instrument consists of 10 questions about good corporate governance principles and other attributes that considered help to dig deeper in data collection process. The 10 questions will cover the topics of transparency, accountability, responsibility, independency, fairness, frequency of audit held in Good Corporate Governance area, supporting training, implementation, management evaluation, influence and impact measurement scored based on Likert scale where non-disclosure agreement (NDA) is prepared in the beginning of the study to keep the respondent data confidential. Of course, non-disclosure agreement is not an obligatory activity but considering ethics in doing research, that might create serious risk if not be mitigated in such a way.
The sampling technique used in this study is based on the Isaac and Michael table which is 340 employees. The data set obtained from respondents is then processed using Python programming approach in the Jupyter Notebook including library packages such as Scikit-learn to call regression library, Pandas for data description and data frame reading, Numpy for arrays with approach like linear algebra, Fourier test, & data transformation, and Matplotlib for plotting. In this study data analysis uses simple linear regression test because there is only one independent variable. Simple linear regression test is used to examine the effect of independent variable on the dependent variable where instrument tests are also conducted in order to examine the linearity, validity, normality, and heteroscedasticity. The formula used for the regression is Y=a+bX. As the last step, hypotheses test needs to be done too where t test is used with significance valued at 0,05. All of these tests will be discussed in the next chapter.

A. Descriptive Statistics
To describe the respondents, writers propose descriptive data to define the respondents in categorical ways. They are categorized by gender, age, educational background, working period, and marital status. According to the data collection, respondents are 51% male and 49% female. Seen from age, we have 18-24 years old as many as 37%, 25-34 years old 40%, and 35-44 which is 23%. Another finding is, that most of respondents are coming from graduate degree background which is 38%, followed by post-graduate alumnis as many of 28%, then diploma has portion of 16%, high-school graduates 14%, and middle-schoolers take 5% of portion which can we see in the below tree map graph.  It is also found that employees who have been working less than a year are 31%, 1-5 years is 29%, and those who have been working for more than 5 years are 40%, as we can see in the below graph. Another fact is, that those who are married have portion of 28%, single 50%, and widow 22%.

B. Instrument Test
Before going to do instrument test, we need to check the data profiling and summary. It will show the indicators, their average, total summation, and the standard deviation so we can ensure the quality of the data being processed for regression analysis. Average is taken from the data pulled from all indicator which consists of 10 questions. The question set will show the actual conditions to be put in the instrument where data analysis will be based on. Total summation is also done to ensure the fitness of the data frame, where standard deviation is carried out to check whether or not the deviation is higher than the expected criteria. The set of analysis will help in the observation step. From all of those activities the writers might get the points needed. From the profiling above, that the average is stable where total is also close enough one another means that the gap is narrow. Moreover, standard deviation which is a measurement of relative data set that is scattered over the average and is counted as square root from the data variance, shows normal result which is categorized as fine scatter. First test is validity test over the questionnaire. It shows the t stats at 0,86 is higher than t table which is 0,6 while normality test shows the value of 0,07 which is lower than Dn valued at 0,21 meaning that the data is distributed normally.
In the other side, heteroscedasticity test carried out shows the P value at 0,56 which is higher than alpha (0.05) which means that there is no heteroscedasticity symptom in the instrument.

Source: Python Output
In the regression graph in picture 4.7., the independent variable is on the X axis and the dependent variable is on the Y axis that means positive where it shows that all the variables are linear. In the other words, plot shows that there is no multicolinearity symptom in the instrument where it is also proven that there that linear regression is appropriate model in this study. It shows that both variables are linearly related where they have the same finite variance and normal distribution too.

C. Exploratory Data Analysis
In addition to the instrument tests above, an exploratory data analysis is also conducted. Simply defined, exploratory data analysis (EDA) is a set of analysis process that a researcher must do with large sets of data, looking for patterns and generate a summary of the dataset's characteristics instead of taking concern in data modeling and hypothesis testing.  From picture 4.8. we can see that question item about training has the most out score where respondents give highest appreciation on that. These finding drives assumption of which indicator contributes most to the independent variable. The next step is to bring more closely to the data set before going to regression.  Data reading process above uses head and tail functions to check which one is the highest and the lowest row including its values. It is a way to make sure that data fits the frame and is readable for further analysis. Data description phase shows that the data consists of 340 respondents filled the questionnaire once as stated in the frequency row above. To proceed it further we need to check the data frame summary.

Source: Python Output
According to the data frame description which is shown above we know that the type, series, and value are recognized by python interpreter, meaning that the analysis process is allowed to be done further. Correlation coefficient measures the extent of interrelation between the two of variables which are simultaneously changing with mutually extended effects. Simple linear regression test above shows that R Square (R2) value is 0.41 which means the variable (X) determines the Y valued at 41%, while the another 59% is determined by other variables exclude the model.