The Governance of Islamic Banks: Ethical Challenges and the Implications for Corporate Governance.

Abstract

governance is one of the most important elements of the corporation as it is meant to ensure and promote principles of fairness, accountability, and transparency. In Islamic banking sphere, the governance of this kind of institutions presents specificities that reflect a wider field of a concern than that of Corporate Governance. Indeed, The Islamic banking vision, unlike the conventional banking approach, is concerned both with performance and shari’ah-compliance. The purpose of this paper is to highlight, on the one hand, the particularity of corporate governance from the Islamic perspective as a system that where an Islamic bank is governed by directors and also by Shari’ah board. That is what scholars called -double governance-. The study finds that the main issue that arise is related to protecting all stakeholders ‘interests as well as those of shareholders. In fact, Islamic banks have to remedy this situation. Thus, investment account Holders (IAH) are exposed to many of the same risks as shareholders, but lack governance rights shareholders fully enjoy. Therefore, this paper is intended on the other hand to view measures proposed by IFSB (Islamic Financial Services Board) to deal with this situation Finally, this paper concludes that the degree required to protect IAH's interests is not yet reached to the detriment of all recommendations and practices implemented.