Corporate governance and islamic perspectives

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  • 1. by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 1 NRVIBM,email:1966patel@gmail.com
  • 2. 1. WHY GOD CREATES HUMAN BEING?2. WHAT ARE THE ROLES OF HUMAN BEING?3. PURPOSES OF KHALIFAH4. WITH ALL THAT, EACH OF US HAS ROLE TO PLAY IN CORPORATEGOVERNANCEDEFINITION OF CORPORATE GOVERNANCE(WESTERN)DEFINITION OF CORPORATE GOVERNANCE(ISLAMIC)5. PRINCIPLE OF CORPORATE GOVERNANCEACCOUNTABILITYTRANSPARENCYFAIRNESSRESPONSIBILITY6. INGREDIENTS OF GOOD CORPORATE GOVERNANCE by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 2 NRVIBM,email:1966patel@gmail.com
  • 3. WHY GOD CREATES HUMAN BEING? by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 3 NRVIBM,email:1966patel@gmail.com
  • 4. Why has He created us and sent us to this world?God knows how we act and live in this world. He sends us tobe tested by Him, so that we can improve our abilities andskills through the responsibilities“I have only created Jinns and men, that they may serve Me”( Az-Zariyat :56) We Muslims believe that all our suffering, failures andadversities are nothing but a test from God, who has saidthat“Allah will throw back their mockery on them, and give them rope intheirtrespasses; so they will wander like blind ones “(Al-Baqarah:15) 3/6/2012 5:08:16 PM by Dr.Rajesh Patel,Director, 4 NRVIBM,email:1966patel@gmail.com
  • 5. WHAT ARE THE ROLES OF HUMAN BEING? by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 5 NRVIBM,email:1966patel@gmail.com
  • 6. Allah has given us many things. Hisblessings are countless. We shouldbe thankful to Him all the time.We should also show our gratitudeby doing good to others, by helpingthe poor and by spending in Hiscause. by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 6 NRVIBM,email:1966patel@gmail.com
  • 7. PURPOSES OF KHALIFAH by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 7 NRVIBM,email:1966patel@gmail.com
  • 8.  It is the status of man kind’s responsibilitiesto themselves and the Ummah as a whole. Khilafah are the relationship between manand Allah,man and fellow man, man and otherelements of creatures of the universe man andhis innermost self -Abdalati (1994)Has responsibility to all Muslims for whatever deeds they have done with regards to theresources that Allah has given. by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 8 NRVIBM,email:1966patel@gmail.com
  • 9. •Behold, thy Lord said to the angels: "I will create avicegerent on earth." They said: "Wilt Thou place thereinone who will make mischief therein and shed blood?- whilstwe do celebrate Thy praises and glorify Thy holy (name)?"He said: "I know what ye know not."(Al- Baqarah:30) by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 9 NRVIBM,email:1966patel@gmail.com
  • 10. • In governing the corporation, man isthe central element for the system tobe effectively working in the rightroute. by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 10 NRVIBM,email:1966patel@gmail.com
  • 11. • Man is the shareholder,creditor, auditor, regulator,manager as well as thedirectors. by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 11 NRVIBM,email:1966patel@gmail.com
  • 12. • It manifest that man plays the paramount roles in managing and lead to the attainment of company’s vision and mission. by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 12 NRVIBM,email:1966patel@gmail.com
  • 13. WHAT IS CORPORATE GOVERNANCE? by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 13 NRVIBM,email:1966patel@gmail.com
  • 14. “ Corporate governance is the process andstructure used to direct and manage thebusiness and affairs of the companytowards enhancing business prosperity andcorporate accountability with the ultimateobjective of realising long-term shareholdervalue, whilst taking into account theinterest of other stakeholders”. by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 14 NRVIBM,email:1966patel@gmail.com
  • 15. “In the view of corporate governance isconcerned, the company directors managementas well as the auditors should perform theirprofessional duties with the objectives ofsatisfying the needs of the shareholders andAllah as well. Corporate governance is aimed ofenhancing accountability, transparency andtrustworthy. The values are paramount inISLAM.”- Quran by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 15 NRVIBM,email:1966patel@gmail.com
  • 16. PRINCIPLES OFCORPORATE GOVERNANCE by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 16 NRVIBM,email:1966patel@gmail.com
  • 17. •Accountability •Transparency •Fairness •Responsibility by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 17 NRVIBM,email:1966patel@gmail.com
  • 18. ACCOUNTABILITYIn terms of accountability, Muslims believe that they will beaccounted for what ever they do in this world and in the hereafter(life after death) We need to fulfill the will of Allah to seek Allah’s pleasure (redha) Every action must be in line with Islamic teaching There shouldbe no such fraud and material misstatement exist if the conceptcould be internalized and could be reflected in their conducts.The Holy Prophet (peace be upon him) says :“ Each one of you is a guardian and each guardian is accountableto everything under his care” by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 18 NRVIBM,email:1966patel@gmail.com
  • 19. TRANSPERANCY The concept of transparency has been divulged by Allah in the follwing ayatO ye who believe! When ye deal with each other, in transactions involvingfuture obligations in a fixed period of time, reduce them to writing. Let a scribewrite down faithfully as between the parties(Al-Baqarah:282) Corporation is responsible to a wide spectrum of stakeholders Aims should not strictly on monetary values but social responsibilityto the Ummah Corporation should disclose information regarding its policy.Activities undertaken such as the CSR. Islam system urges integrity and honesty in the management“if he does not strive diligently to promote their welfare, he will not enterParadise with them.” (Bukhari)“Applying the concept of transparency, corporation should alsodisclose information regarding its policy, activities undertaken,contribution to the community and the use of resources andprotection of environment”(Hanifa, 2002) 3/6/2012 5:08:16 PM by Dr.Rajesh Patel,Director, 19 NRVIBM,email:1966patel@gmail.com
  • 20. RESPONSIBIILITYThe concept of trustworthiness stated in surah Al-Anfal (verse 27):“O ye who believe! betray not the trust of Allah and theMessenger, nor misappropriate knowingly things entrusted toyou. “It is highly regarded virtues in Islam, every individual withinorganization is required to subscribe the ethical conductwhile carrying their commercial activities. Stewardship sense will lead all to utilize the possessionsentrusted upon them to the best of their abilities as a form ofsubmission to Him. Leader should be judge by how wellwealth is managed by using the Islamic principle not by howbig the wealth grown. by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 20 NRVIBM,email:1966patel@gmail.com
  • 21. Trustworthiness parallel with the concept of accountability’The Holy Prophet (peace be upon him):“ Righteous businessmen will be raised on theDay of Judgment ”“A truthful merchant will be raised on the Dayof Judgment together with the truthful andthe martyrs” by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 21 NRVIBM,email:1966patel@gmail.com
  • 22. FAIRNESS Islam implants collective decision – making, tolerance, civil andpolitical liberty, and resolve it. It is part of the Mercy of Allah that thoudost deal gently with them Wert thou severe or harsh-hearted, theywould have broken away from about thee: so pass over (their faults),and ask for (Allahs) forgiveness for them; and consult them in affairs(of moment). Then, when thou hast taken a decision put thy trust inAllah. For Allah loves those who put their trust (in Him).( Al-Imran :159) Islam is uncompromising about independent justice Allah dothcommand you to render back your Trusts to those to whom they aredue; And when ye judge between man and man, that ye judge withjustice:Verily how excellent is the teaching which He giveth you! For Allah isHe Whoheareth and seeth all things(An-Nisa5:08:16 PM 3/6/2012 :58) by Dr.Rajesh Patel,Director, 22 NRVIBM,email:1966patel@gmail.com
  • 23. Trustworthiness parallel with the concept of accountability’The Holy Prophet (peace be upon him):“ Righteous businessmen will be raised on theDay of Judgment ”“A truthful merchant will be raised on the Dayof Judgment together withthe truthful and the martyrs” by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 23 NRVIBM,email:1966patel@gmail.com
  • 24. MUNAFIQS (HYPOCRITES) by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 24 NRVIBM,email:1966patel@gmail.com
  • 25. The Character of the Munafiqs(Hypocrites) The greatest sign of the Munafiq is his mentioningAllah while he hides disbelief, rebellion and sin inhis heart Munafiq does not seem to be a non-religious person“from the outside”. Rather, he is a person who saysthat he believes in Allah and performs most of theacts of worship“They swear by Allah that they said nothing (evil),but indeed they uttered blasphemy, and they did itafter accepting Islam; and they meditated a plotwhich they were unable to carry out...”(Quran,5:08:16 PM 3/6/2012 9:74) by Dr.Rajesh Patel,Director, NRVIBM,email:1966patel@gmail.com 25
  • 26. Prophet Muhammad (peace beupon him) said that :“ a hypocrite, when he speaks, tells lies,when he promises, breaks his promise.They abandon the believers in a slightestmoment of difficulty and side with theadversaries of the believers. Their realcharacter is revealed in times of distress” by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 26 NRVIBM,email:1966patel@gmail.com
  • 27. Loyalty/TruthfulCHARACTERS OF THE HOLY PROPHET (peace be upon him)• Prophet Muhammad (peace be upon him) was the most honorable,bravest and generous man. Prophet Muhammad (peace be upon him)was the most tolerant man that once the Holy Prophet’s (peace beupon him) tooth was martyred by the enemies, but in return he prayedfor their forgiveness.• Prophet Muhammad (peace be upon him) was neither showing adesire to harm someone nor expressed his anger. But whenever henoticed some one crossing the limits prescribed by ALLAH s.w.t, he didexpress his anger and in that case no one stand it.• Prophet Muhammad (peace be upon him) never looked down upona poor person and he never filled with feelings of admiration by therealm of even a mightiest King. source: Abu Hurairah ra by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 27 NRVIBM,email:1966patel@gmail.com
  • 28. SincerityCHARACTERS OF THE HOLY PROPHET (peace beupon him)• Prophet Muhammad (peace be upon him) never talked ofany false thing. He was the warmest among the people onwelcoming his visitors and kindest in conduct while talking toor dealing with others. source: Abu Hurairah ra• Prophet Muhammad’s (peace be upon him) conduct was infact the Qur’an.source: Aishah raAnd the holy Qur’an confirms it in the following words. “andmost rare you passes king Dr.Rajesh Patel,Director, by moral excellence. 3/6/2012 5:08:16 PM 28 NRVIBM,email:1966patel@gmail.com
  • 29. FAIRNESSCHARACTERS OF SAIDINA ABU BAKAR AL-SIDDIQ r.aSaidina Abu Bakar Al-Siddiq r.a risks his life for the safety of the Holy Prophet (peacebe upon him). One day the Holy Prophet (peace be upon him) was saying his prayersin the Kaaba. Abu Jahl and some other chief of Mecca were sitting in the courtyard ofthe Kaaba. Abu Jahl took a long piece of cloth and was going to strangle themessenger of ALLAH to death. Abu Bakar happened to see this and he pushed AbuJahl aside and took off the cloth from around the Holy Prophet’s (peace be upon him)neck. Thereupon, Abu Bakar was beaten by the enemies of ISLAM and he fell downsenseless.Saidina Abu Bakar Al-Siddiq r.a was as sincere as he was firm in faith. He lived up toevery word of what he said at the beginning of his Caliphate. He was never anythingbut the faithful agent of ALLAH and His Messenger, and the humblest servant of hispeople.FAIRNESS by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 29 NRVIBM,email:1966patel@gmail.com
  • 30. CHARACTERS OF SAIDINA OMAR BIN KHATTAB r.aSaidina Omar Bin Khattab r.a’s acceptance of ISLAM hadmade a big difference for ISLAM and Muslims. He stood bythe side of the Holy Prophet (peace be upon him) in allbattles and expeditions. Great was his love for ALLAH and HisMessenger. He never allowed any blood ties or friendship tostand in the way of this love.Saidina Omar Bin Khattab r.a become a great pillar ofstrength for ISLAM.He showed unusual courage and he was thorough ineverything he undertook. by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 30 NRVIBM,email:1966patel@gmail.com
  • 31. FAITH CHARACTERS OF SAIDINA OTHMAN BIN AFFAN r.aSaidina Othman Bin Affan r.a was an extremelykindhearted man. He looked upon wealth as a meansof helping others. If money could remove suffering, hewas already to help.Saidina Othman Bin Affan r.a was among those whowere very close to the Holy Prophet (peace be uponhim). He fought by the side of the Holy Prophet(peace be upon him) in all battles except Badr. He hasgiven up the comfort of hishome for the cause of ALLAH. by Dr.Rajesh Patel,Director, 3/6/2012 5:08:16 PM 31 NRVIBM,email:1966patel@gmail.com
  • 32. FAITHCHARACTERS OF SAIDINA ALI BIN ABI TALIB r.aSaidina Ali Bin Abi Talib r.a grew up under the lovingcare of the Holy Prophet (peace be upon him). Thisgave him a keen vision of life and faith and apassionate love for truth. The Holy Prophet (peace beupon him) once said of him, “I am the city ofknowledge and Ali is its gate.”Saidina Ali Bin Abi Talib r.a was a fearless fighter inthe way of ALLAH. Thesequalities were later to prove a valuable asset forISLAM. 3/6/2012 5:08:16 PM by Dr.Rajesh Patel,Director, 32 NRVIBM,email:1966patel@gmail.com
  • 33. by Dr.Rajesh Patel,Director,3/6/2012 5:08:16 PM 33 NRVIBM,email:1966patel@gmail.com