Corporate governance in Islamic perspective

Abstract

Purpose

The purpose of this conceptual paper is to develop a discussion expounding the Islamic perspective of corporate governance as a special case of a broader decision‐making theory that uses the premise of Islamic socio‐scientific epistemology. Islamic epistemology is premised on the divine oneness of God. The worldly explanation of divine unity is done by means of specific laws and instruments that make the Islamic epistemology functionally viable in developing, implementing and inferring from the application of the epistemological rules to different issues. In the present case the issue is of corporate governance.

Design/methodology/approach

The development and conclusions of this discursive paper as a conceptual one point out the possible application of a process‐oriented epistemology of unity of knowledge to corporate governance. The underlying methodology of institutional discourse and integration with dynamic parameters is formalized.

Findings

The end results of the conceptual framework of this paper on corporate governance are contrasted with the approach to corporate governance in mainstream literature. Also the same Islamic theoretical and philosophical background of corporate governance is examined from the dual (mixed) Islamic economic and institutional perspective.

Practical implications

The practical implications of the Islamic idea of corporate governance are immense in studying transaction cost minimization in decision‐making environments. In this regard it is argued that the theory of Islamic corporate governance presents a discursive process, transparency and institutional participation that reduce transaction costs.

Originality/value

The paper contributes fresh knowledge in corporate governance theory in the light of two central issues. First, an organic preference formation is studied by a process model. Second, transaction cost is minimized while pursuing a discursive and participatory model of decision making in an environment governed by the systemic meaning of unity of knowledge as its episteme. Relevant institutional policies can be developed in the light of such systemic discursion under the episteme of unity of knowledge understood and applied in the systemic organic sense.

Citation

Alam Choudhury, M. and Ziaul Hoque, M. (2006), "Corporate governance in Islamic perspective", Corporate Governance, Vol. 6 No. 2, pp. 116-128. https://doi.org/10.1108/14720700610655132