How diverse are Shariah supervisory boards of Islamic banks? A global empirical survey

Purpose - This study aims to examine diversity in the composition of Shariah supervisory boards (SSBs) of Islamic banks (IBs). It investigates diversity from two perspectives: existing composition of SSBs and the regulatory frameworks and standards of selected Organisation of Islamic Cooperation countries. Diversity characteristics include education, nationality, gender and age. Design/methodology/approach - A list of all full-fledged Islamic commercial banks (FFICBs) globally has been carefully prepared and confirmed. Conventional banks with Islamic windows, non-commercial banks, takaful companies and other Islamic financial institutions are excluded. The available profiles of 428 SSB members have been scrutinised and analysed. These board members occupy 522 SSB positions in 238 FFICBs operating in 52 countries around the globe. From the regulatory perspective, 12 national and international Shariah governance frameworks and standards have been examined. Findings - Findings of this paper indicate various levels of diversity in SSBs of the reviewed IBs. The level of diversity in educational background and in the nationality of SSBs can be described as generally acceptable. However, a lack of diversity in gender and age among SSB members is evidently observed in IBs. While the lack of age diversity in SSBs may be relatively justified as a common trend in the composition of corporate boards, SSBs of IBs are seriously lagging behind in gender diversity. On the regulatory level, this study concluded that provisions on diversity as a requirement in SSBs are almost non-existent in the existing regulatory frameworks and standards. Research limitations/implications - The major limitation of this study is the lack of available information on the SSB members. Practical implications - This paper provides insights for IBs and policymakers concerned with the corporate governance of IBs and all Islamic financial institutions. First, it offers an excellent bird’s-eye view of the status of diversity in SSBs of IBs. Second, it motivates policymakers and standard-setting bodies to ensure, through the relevant regulatory frameworks, adequate levels of diversity in the composition of SSBs. Diversity in SSBs of IBs and Islamic financial institutions should be given special emphasis, not only in boards and top management positions but also in the workplace. This is of profound significance to the reputation of Islamic finance industry which has been recently under mounting pressure to translate the rhetoric about the Islamic finance industry being ethical, fair, just, equitable and inclusive into genuine implementations. Originality/value - To the best of the authors’ knowledge, this study is the first of its kind to examine the diversity of SSB members from the regulatory as well as from the implementation perspective.