Interest

Business, Corporation and Governance Models in the Islamic Economic System

Review of Religions: Oct/Nov 2001 49 Why an example of any present Muslim Country cannot be a model Many Muslim countries today, u n f o r t u n a t e l y, have forgotten the teachings of Islam. They have lost the spirit of Islam. All faculties and aspects of life have been affected due to ignorance in understanding the true meaning of Islam. As such matters relating to economics and commerce are no exception. Therefore it is no use to present an Islamic country as a model for economics nor for that matter can we present their governing practices of business as a model for corporate governance. On the other hand all Muslim nations of today are good examples for constructive criticism from the point of view of the philosophy of the teachings of Islam. The most prominent reason for the above fact, sadly to say, is that the majority of Muslim nations are unjust and it is known that injustice automatically breeds corruption and distortion to any kind of jurispru- dence. Instead of equality in economic terms as called for by Islam, there is inequality prevailing in all aspects of life. A privileged or ruling class, often placing itself above the law, devours the social, economic and political fabric of society. Allah says in the Holy Qur’an; Verily Allah commands you to make over the trusts to those entitled to them, and that, when you judge between men, judge with justice. And surely excellent is that with which A l l a h admonishes you! Allah is A l l Hearing and All Seeing. (Ch. 4: verse 59) Islam, it must be kept in mind, establishes its system of jurisprudence by winning hearts through love, convincing minds by arguments and preaching. The concept of Islam being spread through force or being established by force is a totally false Business, Corporation and Governance Models in the Islamic Economic System This is an edited version of an article that first appeared in the Khuddam Professionals’ Journal August 2001, Volume 1. By Hashim Ahmed – Hartlepool Islamic Economic System Review of Religions: Oct/Nov 200150 and foolish idea. Thus, when we see countries enforce religion author- itatively an ugly picture is presented, totally unrelated to the spirit of Islam. Allah decrees in the Holy Qur’an; There should be no compulsion in religion. Surely, right has become distinct from wrong; so whosoever refuses to be led by those who transgress, and believes in Allah, has surely grasped a stro n g handle, which knows no breaking. And Allah is All Hearing, A l l Knowing. (Ch. 2; verse 257) No religion may be implemented by force, yet, in a number of countries, Islam is associated with compulsion in one form or another. Islam is being used as a tool to fulfil the worldly desires and motives of the ruling class or those clerics who seek worldly power. The system practised in most Islamic countries is totally in contrast to what Islam teaches. The principles of economics, which the Islamic system stands for, have not been fully implemented and are mostly ignored by Muslim countries generally. Therefore naturally the economic environment is developing in an opposite way to a true Islamic system. Hence in the world of today there is not a model which may be presented as an example for an Islamic economic system or a model for corporate governance. Modelling of an Islamic Economic System The only choice we are left with is to go back to the roots of the teachings of Islam and on the basis of these true teachings a model may be projected which is in compliance with the true spirit of Islam. Islam prohibits interest (Riba) in any form, which is clearly expressed in the Holy Qur’an; Those who devour interest do not rise except as rises one whom Satan has smitten with insanity. That is because they say, ‘Trade also is like interest’whereas Allah has made trade lawful and interest unlawful. So he to whom an admonition comes from his Lord and he desists, then will that which he received in the past be his; and his affair rests with Allah. And those who revert to it, they are the inmates of the Fire; therein they shall abide. (Ch. 2; Verse 276) Allah further says in the Holy Qur’an with regards to interest; O ye who believe! Fear Allah and give up what remains of interest, if Review of Religions: Oct/Nov 2001 Islamic Economic System 51 you are truly believers. (Ch. 2; Verse 279) These injunctions automatically eliminate the possibility for financial institutions to exist in the form and kind that they do at the present time. Moreover on the capital saved with individuals over and above their consumable needs, is levied an annual capital tax (‘Zakat’). For Zakat, the obligatory alms, Allah has stated in the Holy Qur’an; Surely, those who believe and do good deeds, and observe Prayer and pay the Zakat, shall have their reward from their Lord, and no fear shall come on them nor shall they grieve. (Ch. 2; Verse 278) Under these circumstances individ- uals have only two alternatives, either to employ their money in personal businesses or to pool their resources to establish small or big business enterprises. Injunctions about ‘interest’ and ‘zakat’ in this matter help to create capital to turn the wheels of economy. This will promote joint ventures, partnerships, and formation of small companies or large public share holdings. Whatever may be the structure of the business, it will be run strictly on the basis of ‘profit and loss sharing’, without any debt financing. Lending to the business in every case would be through equity sharing and thus sharing profit and loss. Now this would not only require the lender to be very cautious while choosing who to finance, but it will also require a high standard of honesty and integrity on the part of the entrepreneur in need of financing. The market will work to eliminate the dishonest ingredients; staying afloat will be the honest ones and the ones who have earned the reputation of goodwill. This exactly was the case in the days of the Holy Prophet(sa), and it carried on for a few centuries after him among the Muslims. Hadhrat Imam Abu Hanifa(ra) was one of the most highly revered jurists in Islam; his system of jurisprudence is followed by the largest number of Muslims today. He was also an astute businessman. People used to throw money at him, some would leave pouches full of money at his doorsteps with the message, ‘For God’s sake employ it and let us share the profit’(1). This is but only one example and there are many more. So business enterprises which come into being under the influence of the Islamic economic system may have any structure, whether corporations, partnerships or whatever, for trade Islamic Economic System Review of Religions: Oct/Nov 200152 and commercial activities. According to Islam they will all be legitimate operations (Holy Qur’an, Ch. 2; verse 276). The basic difference between the western concept of such business entities and the Islamic concept is that in Islam they do not need to be identified as limited or unlimited, as the company does not borrow, all its funds being financed by equity participation. Advantages of Islamic Business Enterprise over the Western Style Corporations Equity sharing being the only form of raising finance also has a social as well as an overall economic advantage. For instance, the westernised business, raising finances on an interest basis, must keep paying interest during recession periods even if the business is making huge losses. Such adverse situations provide them with very short breathing period to survive under difficult circumstances. The only choice left is to declare themselves bankrupt, which hurts the whole society and economy. However in an Islamic business entity under the same circumstances when the production or business activity has to be lowered due to the crisis, then the lender (equity sharer) will also have to share the burden of it. The lender will not be paid anything or may have to bear the loss of his/her equity. But such companies in turn are provided with much greater breathing periods. Like those animals that in order to conserve energy when the source of the energy has decreased, hibernate during winter periods. Likewise the Islamic system provides the possibility of hibernation while the western capitalist system has no provision for this. An example of this regard was the lorry drivers’ strike in France, during November 1996. German lorries unwillingly also had to be stranded in France for days. After only eleven days of business crisis, German transport companies came under tremendous pressures. Boyes (from Bonn, Germany) in The Ti m e s article (29/11/96) reported, ‘Many small German transport companies say they face bankruptcy as a result of the strike’(2). Here it is interesting to note that only eleven days loss of revenue pushed into crisis situation the small transporters who had taken loans on an interest basis to finance their businesses. T h i s example strongly endorses the above argument. B o r rowing ‘Structure ’ F ro m History The forms of business entities as practised in the historical Islamic era were developments of pre-Islamic practices of the Arabs, generated out of their historic culture and traditions. Review of Religions: Oct/Nov 2001 Islamic Economic System 53 After the advent of Islam, the Holy Prophet(sa) did not abolish or prohibit these entities. Therefore the A r a b Muslims adopted them as part of Islamic business practices. But it must be kept in mind that Islam without being mechanistic provides the spirit in which to carry out businesses. Therefore it is important to understand the concept; then with the true spirit of Islam it may be practised under whatever name. Two major forms of business will be discussed. Besides these forms of enterprise, there are many other business activities undertaken in an Islamic system but they do not relate directly to the subject of this dissertation. Namely, some of them are ‘Murabaha’ (trade financing), ‘Ijara’(lease of hire), ‘Ijara wa iqtana’ (hire-purchase), etc. It is necessary not to fixate upon the names and descriptions of Islamic business entities, but to understand the concept of these practices. The driving force behind all is the Islamic ‘Sharia’ (law), which provides the guidelines for understanding these concepts. Two of the main ingredients of this concept are, proportional sharing of profit or loss and complete elimination of interest in any form or disguise. 1. Mudaraba The origin of Mudaraba is in trade. Trade historically has been the foundation stone of doing business. Other Arabic terms used to designate Mudaraba’are Qirad, and Muqarada. The terms are interchangeable with no essential difference or connotation. When Arab Muslims started trading with the west, the same business activity adopted by the west was named ‘Commenda’ o r ‘Commendam’. Mudaraba is derived from the expression making a journey (al-darbfil-ard ; ‘strike on ground’ meaning walking on the ground or to travel for the purpose of trade). It is an arrangement where investors entrust capital to agents who trade with it and the profit is divided usually equally or at a ‘pre-agreed’ basis between the agent (al-mudarib) and the investor. In the case of loss the agent is not liable and the whole loss is borne by the investor. The Holy Prophet Muhammad(sa), before his claim to prophethood, traded and also acted as agent in such arrangements. In his case the investment was provided by Hadhrat Khadija( r a ), who upon receiving reports of the Holy Prophet’s(sa) honesty and high moral dealings from her servant, made a marriage proposal to him and became his wife. Investors may select agents or agents Islamic Economic System Review of Religions: Oct/Nov 200154 may select investors, it could be either way, depending on the reputation of the agent or desire of the investor. Both parties may impose conditions which can be negotiated but have to be agreed upon before the signing of the contract. For instance Hadhrat Abbas bin Abdul Muttalib (Holy Prophet’s(sa) uncle) narrates that when he used to give property in commendam, he stipulated on the recipient not to travel with the property by sea, nor to cross a valley or purchase with it live animals and if he did he would be held liable(3). Hadhrat A b b a s(ra) also obtained the Holy Prophet’s( s a ) approval for imposing conditions upon his agents to whom he entrusted his money(4). 1. Application of Mudaraba in Present Day Business Applying this concept in the present day, ‘al-mudarib’ or agent will be the manager or management, while investors will be the owners of entrusted or invested capital. As such we can see that the separation of ownership or management was not initiated with the creation of ‘joint stock’ companies in the 19th century. Muslims and prior to them the Arabs of sixth and seventh century A.D., were already familiar with such business arrangements. Although the investor had the provision of applying conditions relating to the use of his funds, the agents usually enjoyed complete freedom under normal trading circumstances from any liability for the capital in the event of partial or total loss(4). This naturally elevated individuals, such as Hadhrat Abu Hanifa(ra), who were known for their high level of integrity and honesty and morals on the business scene to take the role of ‘mudarib’. 2. ‘Musharaka’/ ‘Mufawada’/ ‘Inan’. (Equity Participation or Partnership) ‘Musharaka’ is a partnership formed to carry out some specific project. So Musharaka would be for a limited duration. If it is a perpetual partnership till partners agree to part, then it is know as ‘Mufawada’ or ‘Inan’. Mufawada connotes a general mandate of partnership that is an arrangement in which each party confers upon his colleagues full authority to dispose their joint capital in any manner intended to benefit their association( 4 ). Profit is distributed (or loss is shared) among the partners in proportion to respective capital contribution. Providers of capital are entitled to participate in management but not necessarily to do so. Review of Religions: Oct/Nov 2001 Islamic Economic System 55 The Role of the Bank in the Islamic Economic System In the present age one of the challenges in practising of Mudaraba would be bringing together of investors (financiers) and agents. Islam does not approve of the of the stock market concept as practised in the present day, which, although acting as an efficient way to bring provider and user of capital together, also bears numerous negative practices which are against the basic teachings of Islam. Such anti-Islamic practices include short selling of stock, margin trading, futures trading and of course the borrowing of money on interest for the purpose of short term trading. The solution is a middle financial body, which can play a combined role of Al-mudarab (agent) as well as the investor. Therefore a ‘bank’, in an Islamic perspective. Banks may invest in Mudarabas or M u s h a r a k a s. M u s h a r a k a f i n a n c i n g from a banking point of view is somewhat akin to equity financing of the western financial system. The Holy Prophet(sa) even before his claim to being a prophet was known among the Arabs as Amin, due to his exceptional honesty and truthfulness. Because of his reputed integrity and h o n e s t y, people would leave their belongings (money and goods) in his custody when leaving for a journey and also otherwise, with the right to demand the same from him at any time in the future. They would always get their property (Amana) back in the same condition as and when they desired. So Amin is the highest praise of complementing an extremely honest person who would keep money or goods in his deposit and return it back, as and when demanded, in the same condition. Banks in an Islamic system exist on a non-interest basis. They perform the function of Amin as well as that of the investors. This may be explained with the help of the following simple structure; the Bank in a true Islamic economy would consist of depositors and investors, A – Depositors Depositors would typically be the people using the bank to collect their salaries/incomes etc., but needing such deposits for consumable needs within one year. B – Investors Individuals with surplus capital willing to invest in the hope of making profit above the rate of Zakat. The initial capital provider who starts the bank will also be categorised with the investors without any difference or distinction as far as investors’ Islamic Economic System Review of Religions: Oct/Nov 200156 privilege is concerned. T h e investment could be on the basis of p e r p e t u i t y, fixed long/medium/short term. Services Besides providing general services the bank will advance and invest its liabilities (equities) in the following two manners: (i) Q a rd – e – H a s a n (loan without interest to individuals for exigencies and emergencies, in the Persian form of the Arabic expression). This is a loan available for the needy for exigencies and emergencies. T h e borrower is obliged to repay the lender the principal sum borrowed on the loan. It is left to the discretion of the borrower to reward the lender for his loan by paying any sum over and above the amount of the principal. (ii) Investments in non-financial firms. These investments will purely be financed out of investment funds at the disposal of the bank from ‘B- Investors’. The investment basis could be Mudaraba, Musharaka or M u f a w a d a. Whatever the type of investment the bank will always be a stable shareholder if not 100% owner. Moreover these investments will need to be matched with the bank’s investors in respect of perpetuity, fixed long/medium/short term stock. Profit or Loss Sharing The accumulated effect of profits and/or losses out of the diffused and dispersed investment will provide a net periodical figure of a ‘profit’ or ‘loss’. After adjustment of administrative costs and operational expenses of the bank, this figure if of loss will be equally shared by the ‘B- investors’, thus reducing the value of their respective capital invested by a same ratio of loss. The profit likewise will be proportionally distributed among all the investors, thus increasing the value of their capital investment in the same ratio. This distribution will typically take place a f t e r a l – m u d a r a b ( t h e agents/management) of the bank get their share of the profit, on the basis of pre-agreed contract. Appropriation of Profit The dividend will be the actual share of net profit earned by the investors. It may either be paid in cash or investment shares, depending upon the desire of every individual i n v e s t o r, or as per contractual agreement. Under no circumstances the bank or any other business under the Islamic system would be allowed retain appropriate profits, except for the individual investors willing or agreeing to do so. Under which Review of Religions: Oct/Nov 2001 Islamic Economic System 57 circumstances they would be issued respective proportional investment shares in the enterprise. A m o n g investors there could be no classes. As Islam believes in equality of rights, the only difference can be in their respective proportion of investment. The Bank in other Institutional Roles The Islamic system is opposed to the concepts of institutional investors in some forms as exist in western financial markets today, such as insurance companies, pension funds and mutual funds. This is mainly due to interest bearing undertakings. However an Islamic alternative is Al- Takaful, the difference is that it is not a separate business entity but is part of an Islamic bank. Takaful which means mutual support is the basis of the concept of solidarity among Muslims. The Islamic banks act as management companies. The participants pay installments. The bank invests the accumulated funds in its usual investment operations. The profit and principal is used to provide coverage to its participants for contingencies and material losses. After settling all claims and making adjustments for administrative costs and m a n a g e m e n t ’s share, the policy- holders are entitled to a share in profit. However if not enough revenue is collected to meet the claims made during the year, the policy-holders are called upon to pay the differences. This scheme, besides its material benefits, is able to achieve solidarity and co-operation under the condition of contract. Banks and Corporate Governance The Islamic economic system ensures wider distribution of wealth. It puts barriers in the way of its amassing in the hands of a few and seeks the social and economic welfare of all the population of the world. Once this is achieved the position would be that the capital would be widely divided in fractions among a major portion of the world population. In order to have resort to it, a middle body will have to be formed, with means, knowledge and better information to invest this vastly distributed capital into the main e c o n o m y. It will first collect this capital, and then invest it into productive activities. This body, as already discussed, would be both Mudarib for the people from whom it will collect this capital and will also be an ‘investor’ for the Mudarib in the production sector. This would result in the creation of many banks but their existence and success will depend upon the same principle of ‘integrity and honesty’. They would Islamic Economic System Review of Religions: Oct/Nov 200158 provide a source of stable shareholders and their interests would be long term. A n y h o w, the banks in Islam, in whatever form or under whichever title they exist, will be playing a central role in the business activities and corporate governance. In this respect an Islamic system thus envisioned could be closer to German or Japanese systems. As far as non- financial firms are concerned, for them banks will remain the most convenient and major source from where to raise finances. T h e differences being that unlike German or Japanese banks the investment will not be divided into the category of debt and equity. It will all be equity, even one day investment will be equity participation when sharing the risk of loss or benefit of profit. The interest factor, in any form will be completely negated. Interest is the primary factor, which makes the institutions capitalist, or it can be said that it makes these tools of capitalism. The concept of Germany’s universalbank will apply to Islamic banks but, in a broader sense as compared to the German concept. The present situation from the corporate governance viewpoint in ‘ b a n k – c l i e n t s ’ relationships and practices in Islamic banks is quite explicitly portrayed by Wilson: ‘Many family businesses in Muslim countries are reluctant to seek public quotations as they f e a r, probably correctly, that family control might be lost. Often, finance for expansion is sacrificed and business remains small because of such worries. There is clearly a venture-capital gap which the Islamic banks could help meet through “Mudaraba” financing; under these arrangements where a separate company is set up by the bank and its clients, there is no risk of the client losing control of his original business. Indeed, “Mudaraba” finance seems the ideal financial vehicle in such circumstances. Even under “Musharaka” arrangements, however, an Islamic bank is merely interested in obtaining a return not in company control’(5). This is quite true and it happens, as all Islamic banks formed up until now have been from the regions which previously had been under British rule (following its system of banking) or are influenced by the A m e r i c a n system of banking. In both these cases, the banks traditionally play a very passive role as far as the governance issue is concerned. The Review of Religions: Oct/Nov 2001 Islamic Economic System 59 relationships with clients are typically at arms length. Banks of Pakistan, Dubai Islamic Bank (U.A.E.), Faisal Islamic Bank (S.A.), Al Rayan, Al Sharif, Al Misr (Egypt), National Bank of Abu Dhabi (U.A.E.), A l Baraka Islamic Investment Bank (S.A.), Kuwait Finance House (Kuwait) are only some of the present Islamic Institutions as an example. H o w e v e r, as it was noted earlier, investors entrusting their capital may bound ‘Mudarab’ ( a g e n t / m a n a g e r ) with conditions. This was A r a b practice, prior to the advent of Islam and continued amongst the Muslims with the approval of the Holy Prophet(sa). This definitely opens up the way for investors to interfere in the governance of the firm, where ownership and management have been separated. Therefore, it is not possible to agree entirely with Wi l s o n ’s argument [5, pg.13] that ‘Mudaraba’ only signifies a sleeping partnership from the bank’s (investors) point of view; it may or may not. The Role of the Stock Market in the Islamic Economic System It has been discussed how the banks will play the role of stable shareholders. This does not eliminate the possibility of stock market operation or development. Islam does not forbid any form or shape of business activity unless it falls outside the sphere of Islamic ‘Sharia’. From that viewpoint some activities of the present day stock market will certainly be prohibited. However, any means of bringing the user and provider of capital together (whether through stock markets, banks, mutual partnerships, etc.) are all legitimate as long as they follow the injunctions of Islamic economic system. It must be accepted that the general speed of loading or unloading stocks will not be as quick as in western stock markets. The speed of operation of today’s stock market is a direct result of speculative activity. There is a developed and thriving class of speculator, inventing exotic tools to play the ‘game of hazard’. Any type of gambling is prohibited in Islam. An Islamic business can never become subject to speculation. This leaves only the serious lenders and serious users of funds in the market, almost face to face with each other. The Islamic system promotes the idea of long term stable shareholders, which leads to diminished velocity of share transfers. This might not promise a ‘market liquidity’, but it can certainly prevent events such as the October 1997 stock market crash from happening. The research and study suggest that the very reason for the crash was speed and so called Islamic Economic System Review of Religions: Oct/Nov 200160 sophistication of the market (T h e Economist, 1987). Stock Market and Corporate Governance Another thing that cannot be allowed in an Islamic stock market is the discrimination of shares. A S t o c k market operating under Islamic rules will not be permitted to differentiate between investors through various classes of shares. All investors must have rights on the basis of “one share, one vote”, with every one having identical rights, no preference, no distinctions, no ‘A’ or ‘B’class shares. The reputation in terms of ‘honesty and integrity’ of a particular agent (Mudarab), i.e. managing executive, will be the underlying strength of any listed or unlisted company’s shares. Moreover the significance of the stock market will also depend upon the traditional practice of any particular business market; for instance in Germany, joint stock companies cater only for 20% of all business turnover and out of these only one-fifth are listed on the stock market. So if the USA, for example, follows Islamic Sharia then the ‘Glass-Stegal’ Act will certainly go out the window. In fact according to Business Week (2/12/96), ‘The 1933 Glass Stegal Act inhibits banks from buying brokers (equity in non- financial firms) and vice-versa. But by Christmas the federal reserve board is expected to enact a rule change that would make it much easier for commercial banks to acquire even the largest brokerage firms.’(6) Change is already underway in the USA in that respect. Having experienced problems in corporate governance and having tried to improve board effectiveness by putting institutions in the shoes of stable shareholders, the USA has felt the need to change regulations and allow banks to play the role of stable shareholders (as in the German or Japanese systems). This is done so as to improve the ‘long-termism’ phenomenon and thus give a boost to their declining competitiveness. Nonetheless under the present circumstances it is only a temporary solution as far as Islam is concerned. Creditors Any form of business credit which does not provide time for hibernation (discussed earlier) for the business enterprise is not in Islam. Therefore in the case of the creditors, it is obvious that major fixed interest loan creditors cannot exist. All long term financing must therefore be of equity sharing/partnership type. This would naturally create in the creditor a wider concern for the business than that of repayments alone. Credits will not be Review of Religions: Oct/Nov 2001 Islamic Economic System 61 advanced to one who is not expected to repay except as an act of charity(7) which Islam encourages. In the absence of the interest factor the worth of the credit period is extinguished only the loss of opportunity cost may be recovered, which may be included by the lender while quoting his price. A delay in repayment due to unforeseen crises would not mean that the borrower would have to pay back more than already agreed in the contract. A long-term credit will be considered as a form of equity sharing/partnership. In case of insolvency of the borrower, creditor will get his respective share from the insolvency proceeds. If at the time of agreement, the creditor and borrower agree that the credit will not be an equity participation then, of course, in the event of insolvency the creditors must first be paid in full and after that if any proceeds are left, they will be proportionally distributed among investors. Model of Corporate Governance in Islam It must be remembered that Islam seeks the welfare of the community and to ensure the achievement of this welfare, it puts the responsibility both on the investors (lenders) and management (borrower) equally. An economic unit in Islam cannot be a separate legal entity. However, this does not threaten the uninvested property of the owner (borrower and lender jointly), as there is no threat of recourse for outstanding debts with accumulation of interest in case of liquidation. This is so because Islam requires the lender to participate in the risk of the business and equally to take a share in the profit or loss of the venture. Individuals may borrow upon the strength of their personal credibility, to invest in a venture, but then it will be that individuals’ own responsibility to repay his lenders irrespective of performance of the underlying business venture. Earlier, an effort was made to propose the structure and prominent outlines of an Islamic model of business, corporations and governance. Considering the above in line with the guidance of the Holy Qur’an, the issues about, ‘executive-salaries’, ‘the role of directors’, ‘hostile take-over activities’, etc. become trivial matters, which will be automatically taken care of by the system, which prohibits some of the prevalent practices of the current western system. Practices which hurt the welfare of mankind in general are against the Islamic. Islam is the flag bearer of solidarity among mankind; it seeks to unite the whole human race without difference Islamic Economic System Review of Religions: Oct/Nov 200162 and discrimination on the grounds of race, nation, clan, class, family etc. It wants to see the whole of mankind linked together like rings in a chain, with everything retaining its o r i g i n a l i t y, individual identity of culture, traditions, habits, dress and colours, but together representing one soul, one spirit. The same would be the case in the matter of corporate governance. The Japanese system of ‘keiretsu’ and ‘Zaibatsu’ will exist, but it will not be fortified exclusively for themselves, for it will be open, and all nations will be welcomed to participate in it for the cause of mutual benefit. Germans will have their supervisory board but it will not function solely to protect the management from going astray, and it will certainly care for the interest of minority shareholders. The Chinese may have their family enterprises, but outside family employees will be made to feel as part of the family. The French will have their ‘dirigisite’ system but it will not exist only to strengthen the ‘ruling class’, nationalism or the role of PDG (chief executive). It will ensure the welfare of every individual who is part of the corporation or society. Anglo-saxons may have their ‘market based system’ but the presence of stable shareholders will ensure elimination of destabilising practices. Italian capitalists will prefer to share their power and wealth, not only providing rights and voice to the minority shareholders, but ensuring the prosperity and development of the lower classes. The likes of Potanin in Russia will not be working to amass wealth and power for their class, but all irrespective of their classes will be invite to have their long due and rightful share in it. It is beyond the scope and capacity of this article to go into the mechanistic details of drawing a universal model of corporate governance. The guiding injunction of the Islamic economic system will deliver a model with lasting solutions to the problems concerning corporate governance encountered in any models of the world. The new discovered models driven by the spirit of Islam may differ in appearances, according to respective diversities in culture and traditions of different regions, but nonetheless they will be like different pearls joined by a single string. Bibliography 1. Hadhrat Mirza Tahir A h m a d , Investment, Interest & Islam , Transcribed by Amtul Hadi Ahmad, in Review of Religions, London, February 1994. 2. R. Boyes, ‘Bitter German Review of Religions: Oct/Nov 2001 Islamic Economic System 63 Drivers Forced to wait in the cold’, The Ti m e s, London, 22/11/96, p.13. 3. S. H. Homoud, Islamic Banking, Published by A r a b i a n Information, London, 1985. 4. A. L. Udovith, Partnership and P rofit in Medieval Islam . Published by Princeton University Press, USA, 1990. 5. R. Wilson et al, (Edited by Rodney Wilson), I s l a m i c Financial Markets, Published by Routledge , U.K., 1990. 6. A. Rea, L.N. Spiro and P. Galnska, ‘Bankers get set to go for Brokers’, Article in Business Week, 2/12/96. 7. T. Gambling and R.A. A b d e l Karim, Business and Accounting Ethics in Islam, Published by Mansell, London, 1991. Please put me on the mailing list for the Review of Religions for 1 year. I enclose subscription payment of £15.00 or $30.00 US. Name: ___________________________________________ Address: __________________________________________ __________________________________________________ __________________________________________________ We hope you have enjoyed reading this edition of the magazine. The Review of Religions will continue to provide discussion on a wide range of subjects and welcomes any comments or suggestions from its readers. 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