The Practice of Multiple Shari'ah Board Directorship and Fiduciary Duties

Abstract

This chapter examines the legal paradigm of the application of multiple Shari'ah board directorship practice from the common law context of directorial fiduciary duties. It employs the critical legal studies approach to analyse the principles, legislations, case laws, policies, and guidelines in the United States, European Union, the United Kingdom, Ireland and Germany. This study scrutinises the polarity of views concerning the pragmatic Masyaqqah (necessity) surrounding the practice in discussion: the Masyaqqah that encourages and one that discourages the application of the practice and places these against the two predominant directorial fiduciary duties under the common law system namely, the duty to act bona fide and in the best interest of the company, and the duty to avoid conflict of interest. Whilst the practice has proven to benefit Islamic financial institutions (‘IFIs'), the findings also notice the substantial risks it could inflict on the IFIs' business operations; some which could seriously damage their Shari'ah compliance assurance.