Toward Understanding Islamic Corporate Governance Issues in Islamic Finance

Asian Politics & Policy, 2010

Posted: 20 Mar 2015

See all articles by Maria Bhatti

Maria Bhatti

Monash University, Faculty of Law, Students

Ishaq Bhatti

La Trobe University - School of Economics and Finance; Financial Research Network (FIRN)

Date Written: January 8, 2010

Abstract

This article presents recent developments on legal issues associated with corporate governance in the Islamic finance industry based on a contractual pyramid. It presents the Islamic corporate governance (ICG) model and discusses its viability in a 21st-century corporate structure. The model is based on the institution of Hisba, which demands proper and honest bookkeeping, disclosure, and transparency based on the Shariah principles of Islamic ethics. This article proposes a model of ICG that reconciles the objectives of Shariah law with the stakeholder model of corporate governance. It argues that this may be viable due to the emphasis that Shariah laws place on property and Islamic financial contractual rights. The article also discusses a model of ICG that is consistent with principles outlined by the Organisation for Economic Co-operation and Development as well as Shariah law. Such a model of corporate governance would encourage capital formation, foster strong markets, and encourage judgment and transparency, which are all principles central to Shariah laws.

Suggested Citation

Bhatti, Maria and Bhatti, Ishaq, Toward Understanding Islamic Corporate Governance Issues in Islamic Finance (January 8, 2010). Asian Politics & Policy, 2010, Available at SSRN: https://ssrn.com/abstract=2580023

Maria Bhatti (Contact Author)

Monash University, Faculty of Law, Students ( email )

Melbourne
Australia

Ishaq Bhatti

La Trobe University - School of Economics and Finance ( email )

Bundoora
Melbourne, 3086
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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