Corporate Governance from an Islamic Perspective: Exploring the Telecommunications Sector in GCC Countries

This research highlights the relationship between Islam, corporate governance, and the telecommunications sector in five GCC countries. To specify this relationship, laws of these countries formally depend on Islamic law, and this has to be appreciated in respect of corporate governance in the telecommunications sector. The sources of Islamic law are the holy Quran, and the Sunnah. Most previous studies on Islamic corporate governance (ICG) have focused on ICG in the financial sector. This research uses a qualitative method through content analysis and semi�structured interviews. The research tries to fill the gap in the literature and link the current period with the period of the Prophet and his companions through three main Islamic concepts. These three concepts are important for ICG. They are Shura, Hisba and the Shariah Supervisory Board. Telecom companies gain legitimacy in practice in two ways. The first is by obtaining licenses and fulfilling all legal requirements to practice their business activities. This is achieved in a telecom company through specifying the company’s direction as Islamic in its memorandum of establishment. The second is gaining legitimacy from the Islamic bodies that classify companies as Islamic and this is achieved when Islamic bodies add a telecom company to their lists. The research yields five interesting findings: first, to be classified as legitimate, telecom companies must establish an internal Shariah Supervisory Board to monitor their activities as Islamic banks do in these countries. Concurrently, regulations and laws in these countries lack explicit support of an Islamic perspective for the non-financial sector, including telecoms. Second, the Islamic bodies classify the companies listed on the stock market in each country; these bodies influence the value of companies in the market and divide listed companies in each stock market into three types: Islamic, mixed and forbidden. Third, Islamic bodies’ decisions influence Muslim investors, but Islamic bodies in telecom companies’ evaluations only focus on the financial such as paying zakah and forbidding interest rates. Fourth, Islamic bodies lack in relation to categorizing or dividing activities for telecom companies, whether core activities such as making connections between people (an activity compatible with legitimacy) or non-core activities, such as the detailed provisions of satellite channels or competition (some of these activities conflict with legitimacy in the context). Fifth, the Islamic bodies’ criteria are: firstly, the main activities are legitimate; secondly, forbidden investments do not amount to more than 33.33% of total investments; thirdly, traditional loans do not amount to more than 33.33%; and, finally, forbidden income does not exceed 5% of company income.