Exploring the relationship between the board of directors and the Shari’ah Supervisory Board in Islamic financial institutions in Saudi Arabia

Shari’ah-based governance has grown in the last three decades to become a unique and exclusive system in Islamic financial institutions (IFIs). Although there has been growing research interest in the topic concerning the need to have an efficient and sound Shari’ah corporate governance (CG) system in IFIs, there are no insights into the role and function of governance bodies within this new framework. Specifically, there is a lack of academic studies that have focused on investigating the relationship between the board of directors (BODs) and Shari’ah supervisory boards (SSBs) in the IFIs in Saudi Arabia. The main objective of this research was to examine how the BODs and the SSBs exercise their roles in the Saudi Islamic banks. In order to address this objective, the thesis sought to provide answers to three questions. First, the research attempted to examine the nature of the relationship between the company directors and the SSBs in Saudi Arabia, focusing especially on the roles and tasks of these governance bodies. Second, the research was designed to identify the factors in the CG structure of IFIs in Saudi Arabia that either support or undermine the deployment of the SSBs. Third, it intended to explore potential areas of convergence or divergence which exist between the BODs and the SSBs. A qualitative research approach was used to collect relevant information from the study participants using interviews for the data collection process. Findings drawn from the interviews revealed that the nature of the current relationship between SSBs and the BODs is initiated and sustained by several factors. Some of the important factors which inform the relationship of these two boards include the growing focus and foundation in Saudi Arabia towards the important role that the boards play, including promoting the achievement of IFIs objectives and stakeholder interests. Results from the study also indicated that several factors have been reported to support or undermine the uptake of SSBs. Some of the important facilitators include increasing public and consumer support for the need to have SSBs, the growing consensus among stakeholders to ensure banks offer legitimate products in line with Shari’ah principles, changing perceptions in the Islamic financial sector towards CG, and the desire to achieve effective governance via compliance with Shari’ah and Islamic laws. Finally, data revealed that the roles which the boards play supplement each other towards achieving the same objective of financial growth and stakeholder interests. Fundamentally, the two boards engage in frequent communication and information exchange regarding banking practices, where the outcome includes improved policy and process formulation and practice for their companies. In conclusion, findings from this study show that the SSBs and the BODs need to be perceived as complementary units that supplement each other as opposed to being perceived as being separate and conflicting boards in the IFIs.

Publisher

University of Wolverhampton

URI

http://hdl.handle.net/2436/623688

Type

Thesis or dissertation

Language

en

Description

A thesis submitted in partial fulfilment of the requirements of the University of Wolverhampton for the degree of Doctor of Philosophy.

Rights

Attribution-NonCommercial-NoDerivatives 4.0 International

cbn

Collections

Theses and Dissertations