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.
