Directors- Islamic Code of Ethics

Authors: Ahmad Saiful Azlin Puteh Salin, Norlela Kamaludin, Siti Khadijah Ab Manan, Mohd Shatari Abdul Ghafar

Abstract:

This paper discusses a new model of Islamic code of ethics for directors. Several corporate scandals and local (example Transmile and Megan Media) and overseas corporate (example Parmalat and Enron) collapses show that the current corporate governance and regulatory reform are unable to prevent these events from recurring. Arguably, the code of ethics for directors is under research and the current code of ethics only concentrates on binding the work of the employee of the organization as a whole, without specifically putting direct attention to the directors, the group of people responsible for the performance of the company. This study used a semi-structured interview survey of well-known Islamic scholars such as the Mufti to develop the model. It is expected that the outcome of the research is a comprehensive model of code of ethics based on the Islamic principles that can be applied and used by the company to construct a code of ethics for their directors.

Keywords: Code of ethics, director, Islam, ethics

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1082471

References:

[1] A. Klien, "Audit committee, board of directors characteristics and earnings management," Journal of Accounting and Economics, vol. 35, pp. 375-400, 2003.
[2] J.C. Gaa, "Corporate governance and the responsibility of the board of directors for strategic financial reporting," Journal of Business Ethics, vol. 90, no. 2, pp. 179-197, 2010.
[3] R.J. Duchin, Matsusaka, and O. Ozbas, "When are outside directors effective?," Journal of Financial Economics, vol. 96, pp. 195-124, 2010.
[4] Y. Wang, C. Chuang, and S. Lee, "Impact of compositions and characteristics of board of directors and earnings management on fraud," African Journal of Business Management, vol. 4, no. 4, pp. 496- 511, 2010.
[5] M.S. Schwartz, T.W. Dunfee, and M.J. Kline, "Tone at the tops: An ethics code for directors?" Journal of Business Ethics, vol. 58, pp. 79- 100, 2005.
[6] N. Marquardt and R. Hoeger, "The effect of implicit moral attitudes on managerial decision makings: An implicit social cognition approach" Journal of Business Ethics, vol. 85, pp.157-171, 2009.
[7] M. Kaptein, "Business code of multinational firm: What do they say?" Journal of Business Ethics, vol. 59, pp. 13-31, 2004.
[8] H. Donker, D. Poff and S. Zahir, "Corporate values, code of ethics and firm performance: A look at the Canadian context," Journal of Business Ethics, vol. 82, no. 3, pp. 527-537, 2008.
[9] E. Dedoulis, "The code of ethics and the development of the auditing profession in Greece: The period 1992-2002," Accounting Forum, vol. 30, pp. 155-178, 2006.
[10] K.P. Parboteeah, Y. Paik, and J.B. Cullen, "Religious groups and work values: A focus on Buddhism, Christianity, Hinduism, and Islam," International Journal of Cross Cultural Management, vol. 9, no. 1, pp. 51-67, 2009.
[11] Z. Ma, "The status of contemporary business ethics research: Present and future," Journal of Business Ethics, vol. 90, pp.255-265, 2009.
[12] B.R. Gaumnitz and J.C. Lere, "Contents code of ethics of professional business organizations in the United States," Journal of Business Ethics, vol. 35, pp.35-49, 2002.
[13] M.S. Schwartz, "The nature and the relationship between corporate code of ethics and behavior," Journal of Business Ethics, vol. 32, pp. 247- 262, 2001.
[14] J.B. Singh, "A comparison of the contents of the codes of ethics of Canada-s largest corporations in 1992 and 2003," Journal of Business Ethics, vol. 64, pp. 17-2, 2006.
[15] C. Stohl, M. Stohl and L. Popova, "A new generation of corporate code of ethics," Journal of Business Ethics, vol. 90, no. 4, pp. 607-622, 2009.
[16] S. Helin, and J. Sandstrom, "An inquiry into the study of corporate codes of ethics," Journal of Business Ethics, vol. 75, pp. 253-271, 2007.
[17] J.M. Rose, "Corporate directors and social responsibility: Ethics versus shareholders value," Journal of Business Ethics, vol. 73, no. 3, pp. 319- 331, 2007.
[18] L. R. Dominguez, I.G. Alvarez, and I.M. Sanchez, "Corporate governance and codes of ethics," Journal of Business Ethics, vol. 90, pp. 187-202, 2009.
[19] N. Alam and M.S. Rajjaque, "Shariah-compliant equities: Empirical evaluation of performance in the European market during credit crunch," Journal of Financial Services Marketing, vol. 15, no. 3, pp. 228-240, 2010.
[20] H.G. Rammal, "Islamic finance: Challenges and opportunities," Journal of Financial Services Marketing, vol. 15, pp. 189 - 190, 2010.
[21] N.K. Malhotra, Marketing Research: An Applied Orientation. Edinburgh, Pearson Education Limited, 2007.
[22] E.A.Z.E. Alwi, "Peranan akidah dalam pembangunan tamaddun ummah" in Pembangunan Modal Insan dan Tamaddun Dari Perspektif Islam, M.R.M. Nor and A.Z.B. Ibrahim, Ed. Shah Alam: Akademi Pengajian Islam Universiti Malaya, pp. 169-180, 2010.
[23] S.S.S. Haneef, Ethics and Fiqh for Daily Life - An Islamic Outline. Kuala Lumpur: IIUM Press, 2008.
[24] M. Al-Qattan, al-Tashri-wa al-Fiqh fi al-Islam. Beirut: Maktabah Wahbah, 1984.
[25] A.R. Feisal, Islam - A Sacred Law. Library of Congress: Qiblah Books, 2000.
[26] Al-Ghazali. Bimbingan Mu-min. Singapura: Pustaka Nasional, , pp 433- 438, 1995.