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Corporate Governance

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The Islamic International Rating Agency’s (IIRA) Corporate Governance Rating an independent opinion on an organization’s structure and practices for managing the business. It reflects an entity’s governance practices with respect to the relationships among shareholders, the board of directors, management and other stakeholders. It evaluates the extent to which they conform to regulations and global best practice. Sound corporate governance provides proper incentives for the board and management to pursue objectives that are in the interest of the institution and all shareholders and should facilitate effective monitoring, thereby encouraging firms to use resources more efficiently.
Effective corporate governance is measured on the basis of a variety of characteristics. The most important of these are:

Transparency and adequate disclosure;
History, Board performance, demonstrated trustworthiness;
Management: Who is the actual governor (CEO or executive team);
Effectiveness of the top management team and process;
Shareholders
For financial institutions, do they know their customers, AML focus.

The current preoccupation with corporate governance can be attributed to the aftermath of the East Asian Crisis of 1997 and the American corporate fraud incidents which saw the collapse of Enron and WorldCom. The ensuing scandals collapsed other companies like Arthur Andersen, Global Crossing and Tyco.

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