In the contemporary environment, business organizations have to face up to the task
of meeting the expectations of a wide variety of their stakeholders. A stakeholder is normally defined as someone that can be considered to have an interest a stake!, indirect or direct, in the companys operations. In contrast, stakeholder is "any group or individual which is affected by the operations of the company#. $ach category of stakeholders has a distinct interest and expectations from an organization. %orporate organizations have to meet the expectations of each group of stakeholders without &eopardizing that of another stakeholder group. 'o meet these expectations with some reasonable degree of effectiveness, organizations are obliged to adopt a broader agenda which takes these diverse expectations into account. %orporate (ocial )esponsibility is thus increasingly adopted by organizations operating at national and international levels to address these varied stakeholders expectations. In Islam, business activities are not undertaken to satisfy only material needs and wants but more importantly it should be undertaken to fulfill religious obligations and to achieve other non*material ob&ectives such as to secure social needs. 'he aims of the Islamic system of business are therefore not primarily materialistic but are based on the concepts of human well being and achieving a good life overall. %orporate governance in banking has been analyzed very extensively in the context of conventional banking markets. +y contrast, little is written on corporate governance from Islamic perspective particularly the governance structures of Islamic finance sector. ,ndeniably, corporate governance is one of the vital elements of any corporation development and it is even bigger challenge to Islamic finance system due to its additional risk as compared to the conventional banking system. 'herefore, it is strongly indicated that any Islamic corporation needs to have a proper corporate governance framework to ensure its growth and success. 'he purpose of this paper is to draw an analytical review on corporate governance and corporate social responsibility %()! from the Islamic perspective. It was found that it is very important to take into consideration the corporate governance and %() in Islamic financial institutions because it might help to draw the right image about the organization. - Corporate Governance in Islam .enerally, the definition of corporate governance can be divided into two senses. /irstly, in narrower sense corporate governance can be defined as a formal system of accountability of senior management to the shareholders. (econdly, in expansive term, corporate governance includes the entire network of formal and informal relations involving the corporate sector and their conse0uences for society in general 1asan, 2--3!. %houdhury and 1o0ue 2--4! views that the ob&ective functions of corporate governance in Islam is to define and attain an ob&ective criterion by means of understanding the relations between critical variables supported by policies, programs and strategic coalition. A clear and precise of the ob&ective criterion leads to the determination of such policies, programs and strategies by means of institutional consensus and the exercise of proper instruments as re0uired by the corporation. 'hese ob&ective functions put maqasid (hariah as the ultimate goal of corporate governance. 'he corporate governance in Islam plays very essential roles in order to meet the specific goals and ob&ectives of the corporation. Islam adds further value by insisting the element of ma0asid (hariah which cannot be found in the 5estern concept. 'he former refers to the corporate governance model based on the principle of consultation where all stakeholders share the same goal of Tawhid or the oneness of Allah %houdury and 1o0ue, 2--4!. 6 'he figure shows that the Islamic corporate governance approach is premised on the Tawhid epistemological model whereby the functional roles of corporation are working via the Shariah rules. 'he principle of Tawhid derives important concept of vicegerency khalifah), trust amanah! and &ustice or e0uilibrium aladl wal Ihsan!. 'he stakeholders as vicegerent of Allah have fiduciary duty to uphold the principle of distributive &ustice via the Shuratic process. %hapra 63327284! mentions that the practice of Shura is not an option but it is rather an obligation. 'he constituent of Shura provide. 'here are two main institution involved in the above process of corporate governance namely the Shariah board and the constituent of Shuras groups of participants for example all the stakeholders. In determining the scope of Shariah, the institution of Shariah board comes into a picture and it plays crucial role to ensure that all corporation activities are in line with the Shariah principles. In addition, the shareholders also play a big role as active participants and conscious stakeholders in the process of decision making and policy framework by considering the interest of all direct and indirect stakeholders rather than maximize their profit alone. 'he other stakeholders including community should also play their roles to provide mutual cooperation to protect the interest as a whole and to stimulate the social wellbeing function for social welfare. All of these processes are centered on toward fulfilling the ultimate ob&ective of Islamic corporate governance of complementing the private and social goals via upholding the principle distributive &ustice %houdury and 1o0ue, 2--47 9:*99!. 'he Tawhid and Shura based approach provides the epistemological foundation of Islamic corporate governance. 'his approach however seems to be unclear and ambiguous as to how it could be adopted and implemented in the current corporate governance system. ;oreover, the practice shows that ma&or corporations including I/Is tend to follow the existing corporate governance model which is founded on the episteme of rationalism and rationality. It is a time to focus more on the empirical studies rather than theoretical to study and examine the operational aspects of this Tawhid and Shura based approach. 2 Corporate Social Responsibility 'here are a numerous of definitions of %(). 'he ma&ority of definitions integrate the three dimensions7 economic, environmental and social aspects into the definition, what is usually called the triple bottom line. In general, %() is essentially a concept whereby companies decide voluntarily to contribute to better society and a healthier environment. At present, a good number of companies are promoting their %() strategies as a response to a variety of social, environmental and economic pressures. 'hey want to send a signal to their stakeholders that companies are investing for their future and they expect that the voluntary commitment will help to increase their profitability. 'here is a competitive advantage that companies believe they can reap by being socially responsible. 'hey foresee that by communicating effectively about their social, environmental and economic contributions, they can strengthen their brand, enhance their corporate reputation with customers and suppliers and attract and retain a committed and skilled workforce. 'he commitment towards %() will in turn lead to better performance in terms of profitability, competitiveness and risk management. Islam is the complete code of life. It guides every aspect of human life including spirituality, business and social &ustice by encompassing an entire socio*economic system )ice, 6333!. <ne of the key characteristic of the Islamic ethical system is that it allows no separation between the individual in public and in private life. (ocial responsibility refers to the obligations that an organization has to protect and contribute to the society in which it function +eekun, 633=!. 'here are some rules of ethical discipline in Islamic commercial transactions. 'hey are all pursuant to the concept of lawful and unlawful and reflect features of social responsibility in every aspect of the transactions. 'he concept of %() in Islam encompasses a broader meaning embracing the Taqwa .od consciousness! dimension by which corporation as group of individual, assuming the roles and responsibility as servants and vicegerents in all situations >usuki, 2--9!. Islamic %orporate (ocial )esponsibility I%()! derives itself from core principles of the holy ?uran. 'he ma&or foundational principles for I%() are unity, vicegerency and trusteeship, rights and responsibilities and &ustice and e0uilibrium. 'he unity of Allah is the first principle of Islam and of everything Islamic. Allah is the <ne and absolutely <ne. According to Islam, the purpose of man is to live his life in submission and obedience to Allah. 1e supposed to fulfill this purpose within the ethical 8 framework devised by Allah. 'he ?uran states that Allah is the one and only creator of this universe who is worthy of worship. $verything in the heavens and on earth belongs to 1im. +ased on 'awhid, the main ob&ective of social responsibility should be to demonstrate responsibility not only to Allah, but also provide one single direction in guaranteeing a unified spirit in adhering to (hariah ;oten, 633-!. In other words, by accepting unity of Allah, all commercial activities must adhere to shariah and non*conformance will result in sin 1aniffa et al., 2--2!. 'he concept of 'awhid also signifies mans role as vicegerent on earth. As khalifah, mankind is not free but responsible and accountable to Allah. ;an is considered to be the vicegerent of Allah on earth and thus trustee of Allahs resources. 'he principle of vicegerency denotes that mankind is the representative of Allah on earth and as such Allah has entrusted mankind with stewardship of Allahs possession. Allah states this principle in the holy ?uran, "I will create a vicegerent on earth# ?uran, 278-!. 'he concept of khalifah refers to the role, status as well as the mankinds responsibility to themselves and to the ummah as a whole. 'his means every human being are responsible to all ;uslims for whatever deeds they have done with regards to the resources that Allah has entrusted to him. As a khalifah, leaders in business organizations are re0uired to practice %() essentially from the principle of 'awhid. /rom an Islamic perspective all possessions, wealth, expertise, abilities, positions and power belongs to Allah. ;ankind is only trustees. As trustees, it is imperative that human being manage these possessions to the best of their abilities to create a maximum added value in social responsibility with an intention of creating benefit to the community as a whole +ardai, 2--2!. According to the concept of vicegerency, the right attitude towards human beings is the mutual sacrifice and cooperation to fulfill the basic needs of all, to develop the entire human potential and to enrich human life as a whole. 1umans have been endowed with intellectual to choose either to be righteous or otherwise. As a trustee of Allahs resources on earth, mankind has been given the free will to steer his own life. ,nlike other creatures in Allahs universe, human can choose their behavior to be either ethical or unethical. $very individual is accountable and ultimately responsible for his own actions. 'he concept of vicegerency implies that human beings are e0ual and human interactions should be based on trust, e0uity, and &ustice @arvez, 2---!. ;uslims should be honest, sincere, and truthful in their business dealings and ensure exactness in terms of promised product specifications such as weights, measures and other attributes. Islam condemns cheating and lying and commands businessmen to be straightforward in all their 4 dealings and transactions. /inally, &ustice in Islam also includes the e0uitable distribution of wealth. $0uilibrium must be practiced by means of fair competition in an open marketA treating others fairly and maintaining fairness in wage distribution and avoid discrimination in all forms. In this respect Allah (5'! says, ".ive full measure when you measure and weigh with a balance that is straight# ?uran, 6=78:!. 'he concept of trust, in Islam, is inseparably linked with responsibility, implying that the wealth that is entrusted to a human being is indeed a responsibility that he will be called to account for in the 1ereafter. 'he combination of these principles denotes a divine accountability for each ;uslim to en&oin good and &ustice and forbid evil and in&ustice. 'hese core principles therefore constitute the basis of individual social responsibility. Conclusion /rom the above discussion, it is clear that the teachings of Islam not only appear to be in close conformity with the concept of traditional %() but in many respects go further than the minimum standards adopted by the framework. In particular Islam exceeds the re0uirements of the traditional %() in a number of important ways. /irst, it appears to be wider in scope, for example in the transparency re0uirements in business transactions. (econd, it has a clear codification defining what is permissible or Halal and what is forbidden or Haram. 'hird, Islam has an explicit enforcement mechanism in the Shariah as well as in community enforcement and the final sanction of the accountability of the individual for unethical behavior on the >ay of Budgment ?uran 6=768!. 'he design of corporate governance model in Islam has its own uni0ue features and presents distinctive characteristics in comparison with the western concept. 'he study summarizes the distinct features of Islamic corporate governance into four aspects namely the episteme, the corporate ob&ective, the nature of management, the management board and the capital*related ownership structure. In the aspect of epistemological method, Islam puts Tawhid as the episteme while the corporate ob&ective is premised on protecting of all the stakeholders interest and rights in line with the principle of maqasid Shariah. 'he nature of management of Islamic corporate governance model is centered on two fundamental principles of shura and interactive, integrated and evolutionary process and the apex level of management is the (hariah board that is responsible to supervise and oversee the overall corporate activities so as to comply with the Shariah principles. : References %houdry, ;., C 1o0ue, ;. 2--4!. %orporate .overnance in Islamic @erspective. 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