Shari’ah
corporate governance, in its broadest terms, is the single most important
current issue for the Islamic finance and insurance industries. There are many
current drivers towards further developments. The global financial system
continues in a state of flux and is not without further threats and stresses.
Infrastructural changes to the way such a system works, and should work, have
been, and remain, a source of major debate. An alternative, or parallel,
financial system based on Islamic economic principles is one option.
Corporate
governance is generally in a constant state of change as graphically
demonstrated by the trends in country and pan-country governance codes and
guidelines issued over the last 20 years.
Shari’ah
corporate governance has special features in addition to the commonly accepted
components of corporate governance as applied to conventional banking and
insurance businesses, namely the ultimate stakeholder, Allah, the
Investment Account Holders and observance of the Maquasid Al-Shari’ah
(which is that the goals and objectives of Shari’ah law are to support
five essential benefits to human and community life on earth). It also
contains inherent overarching features derived directly from the core
principles of Islamic economics. Finally, Shari’ah corporate
governance has a further defining overarching feature, which is that Islamic Financial Institutions (IFIs) continue to operate within the institutional framework of a
conventional financial system. Mirakhor and Krichene (2009) argue this is
completely inappropriate as a regulatory and supervisory framework and
challenge the industry to aspire towards a single global regulatory-supervisory
framework for Islamic finance and insurance.
Not
only does good corporate governance require the existence of available models
of good practice, but more importantly, corporate governance requires
organisations to have a good stock of human resource capital throughout the
organisation in order to be able to implement the corporate governance framework
and execute in operational practice.
To
read more on my report examining the different components of Shari’ah governance
systems of IFIs in different countries and how they operate in
practice please take a look at the following:
Tim
Travers
Cass EMBA Dubai Alumnus
Cass EMBA Dubai Alumnus
*Please
note the context of this article is based on Tim’s report completed 1st November
2010.
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