A look back to move ahead with corporate governance

Looking back through the history of the Islamic world, examples of prudent corporate governance have been in practice since as early as 600AD. Caliph Omar ibn Al Khattaab was the first Muslim ruler responsible for putting in place laws to govern businesses. He developed guidelines for the establishment of trusts, the founding of a public treasury, the charting of the Islamic calendar (Hijri), and the placement of regional governors to uphold these laws. With the strong sense of justice he afforded to Muslims and non-Muslims alike, he became known as Al Farooq, which translates to “the one who distinguishes between good and bad”.

As an ethical man and a powerful leader, he put into action a system that can still be looked at today as a model for corporate governance. Omar’s criteria for appointing governors was to select people who had strong leadership qualities but who had also demonstrated an investment in ensuring the best for their people. And he didn’t let their past behaviour serve as his only guide. He closely monitored their performance and based his decisions on the satisfaction of the people they were charged to serve. He refused to entertain requests from senior officials who asked for promotion or favour.

Over the following centuries, these practices have become diluted and even tinged with the concept of wasta. While some corporations have an outline for their corporate governance in practice many fall far short of guidelines for their operations set out by the Organisation for Economic Co-operation and Development, an international body that provides oversight and direction for many market-based economies.