Governance, Risk, and Compliance Handbook: Technology, Finance, Environmental, and International Guidance and Best Practices

CHAPTER 46

CORPORATE GOVERNANCE IN MAJOR ISLAMIC NATIONS

Anthony Tarantino, PhD

46.1 INTRODUCTION

46.2 ISLAMIC FINANCIAL INSTITUTIONS DRIVE IMPROVED CORPORATE GOVERNANCE

46.3 HARMONIZING WESTERN AND ISLAMIC GOVERNANCE

46.4 CORPORATE GOVERNANCE IN LARGER MUSLIM NATIONS

46.5 THE RELATIONSHIP BETWEEN GOVERNANCE AND FREEDOM, LITERACY, AND WEALTH

46.6 THE RELATIONSHIP BETWEEN GOVERNANCE AND PER CAPITA GDP GROWTH

46.7 THE RELATIONSHIP BETWEEN GOVERNANCE AND TRADE

46.8 CONCLUSION

NOTES

46.1 INTRODUCTION

Western notions of corporate governance are rooted in improving shareholder value and are, in many cases, overly concerned with short-term gains at the expense of longer-range goals. Social responsibility and good corporate citizenship are often mentioned in corporate literature, but are rarely a driving force. The concepts of good governance and best practice standards developed after a series of painful scandals typically look to improve ethical behavior, transparency, and accountabilty. Even with these improvements, there remain three areas in which Western notions of corporate governance will fall short of Islamic requirements for moralistic behavior:1

First, Western business concepts of ethics and morality are typically socially and secularly based humanistic values rather than faith based. In practice, the fear of being caught and disgraced are often larger drivers in the West than humanisticvalues, which in Islam's shariah are the major force guiding governance.

EXHIBIT 46.1 A