TOPIC 6 : corporate shariah governance

Question 1

What is corporate and shariah governance ? Its process and structure

Answer 1

• Process and structure which used to direct and manage the business affairs of the company (so that can enhancing business accountability)
• to enhance the relationship among the corporate governance participants
• The structure also encourage BOD rights in decision making

Question 2

Why the corporate governance important

Answer 2

• to ensure that the business environment is fair and transparent
• Weak corporate governance might lead to waste, and corruption
• strong governance will provide access to capital and helps economic growth

Question 3

Organization in CG

Answer 3

• BOARD, TOP MANAGEMENT, STAKEHOLDERS

Question 4

Three key principles of CG

Answer 4

• Board leadership and effectiveness
• Effective Audit and Risk Management
• Integrity of Corporate Reporting and Meaningful Relationship with stakeholders

Question 5

Board Leadership and effectiveness (Principles)

Answer 5

• Important role for the long-term success of a company
• The board is responsible to govern and set a strategic direction of the company by setting appropriate things
• Board composition influences the ability of the board to fulfill its oversight responsibilities

Question 6

Effective Audit and Risk Management (Principles)

Answer 6

• effective audit committee: being transparent, focus and have independent judgement
• risk management focus on identifying threats and opportunities
  -This can help company to make informed decisions about the level of risk, so that they will have appropriate strategy to be implement

Question 7

Integrity in corporate reporting and meaningful relationship with stakeholders (principles)

Answer 7

• ongoing engagement and communication to build trust with them
• provide better appreciation
• have a general meeting platform for directors and senior management so that they can engage with the shareholders

Question 8

Characteristics of the CG shariah

Answer 8

-Have a well articulate corporate strategy
- have a clear assignment of responsibilities
- a strong risk management and good internal control systems
- Financial and managerial incentives

Question 9

Shariah governance (definition)

Answer 9

• The single most important distinction between a conventional and Islamic financial institutions
• IFSB 10 : A set of institutional and organizational arrangements (ensure that there is a shariah compliance over the issuance, internal/annual shariah compliance

Question 10

AAOFI approaches for effective corporate governance

Answer 10

• have a shariah supervisory board (GSIFI NO. 30)
• have a audit and governance committee (GSFI NO.40)

Question 11

what is the guiding principle for the CG offering only to the islamic Financial institutions ?

Answer 11

• General governance approach of IFRS
• Transparency of financial reporting
• compliance with the islamic Shariah rules and principles

Question 12

What is the general governance approach of IIFS

Answer 12

• BOD will need to set up Governance committee
• The primary objective of the governance is to protect the interest of stakeholders other than shareholders
• IIFS also need to ensure that their financial and non financial information meets the requirement
• BOD shall set up audit committee at least 3 people

Question 13

What is the right of the investment account holders (IAH)

Answer 13

• Right to monitor the performance of their investments and risks
• Eligibility of the IIFS employees
• adequate protection of IAH investments
• disclosure of the relevant and material information

Question 14

What does it mean, Compliance with Islamic shariah rules and principles

Answer 14

• appropriate mechanism for obtaining rules from the shariah scholars, applying fatwa, and monitor the shariah compliance in every aspects
• internal shariah compliance review where the audit committee that ensure the external auditors are capable of conducting shariah compliance review
• Have internal shariah compliance review (shariah scholars of IIFS work together
• Shariah rules and principles as expressed in the rulings of IIFS shariah scholars and available to the public

Question 15

Rational and objectives of the guiding principles

Answer 15

• to facilitate IIFS and implementing effective corporate governance practices
• To complement the current corporate governance principles issues by OECD
• there is no yet single model for good governance

will also affects :
- the run day to day operations
- protect the interests of depositors/investment account holder

Question 16

Shariah governance policy (2019)

Answer 16

• ser out to enhance board oversight and responsibilities
• increase the requirement of the shariah committee because provide objective
• raise expectation that board and senior management promote
• improve the quality of internal control (restricts the tenure of shariah committee member to a maximum of nine years, the precedings of SGF 2010 : are too silent about the status of a politically exposed person acting as a member of the shariah committee, a qualified shariah officer should hold at least bachelor of Usul FIQH & Fiqh muamalat)