Corporate Governance Structure of State Islamic Religious Councils in Malaysia

Little is known about corporate governance in Islamic perspective, particularly in the context of emerging economy and in the perspective of religious institutions. The distinguishing feature of Tawhid (oneness of God) in the Islamic corporate governance structure makes it worthwhile to investigate the corporate governance structure of the State Islamic Religious Councils (SIRCs) in Malaysia. The study incorporates Iqbal and Mirakhor (2004). Islamic corporate governance stakeholder-oriented model to reflect the structure of corporate governance in the SIRCs. A qualitative approach is utilised where data is drawn primarily from interviews and reviews of documents. Findings show that the corporate governance structure of the SIRCs is similar to the model proposed by Iqbal and Mirakhor (2004). Firstly, the Shariah rules play as a principal foundation which guides the operation, management and governance of the SIRCs. Then, Council Members act as the Shariah Board who advise and supervise the SIRCs. The research also suggests the shareholders component be replaced with main stakeholders component consisting of zakat payers, trustors and customers who suit the context of SIRCs. The SIRC is then directed by a Chief Executive Officer who represents the Board of Directors while the management is represented by the directors or managers of each division in the SIRCs who are responsible to manage their own divisions according to the Shariah principles. Finally, the other stakeholders are represented by many such as the employees, rightful recipients and the public who have direct and indirect participation in the SIRCs.