Introduction
Literature Review
Muslim Charities and Organizational Governance
Ethical Governance and Religious Ethics
Islamic Ethics5 and a Comparison with the Neo-Classical Approach to Governance
For Choudhury (1990), one has to strive to attain favour from Allah so as to be rewarded with a just and easy life in the hereafter (al-falah) (Kamali 1989). This belief entails that man makes his own wishes subservient to the wishes of Allah. Accordingly, in Islam humans are considered as vicegerents of Allah on the Earth (khalifah), whereby they are entrusted with family, resources, knowledge and property by Allah (amanah) (Murtaza 2002). Along with the management of this wealth, humans must also act and make decisions that are to the benefit of the wider society (Al-Qaradawi 2000; Kamla et al. 2006; Rice 1999; Rizk 2014). Hence, Islam places great emphasis on social justice, ethics (akhlaq) and the “right thing to do”, which should permeate all spheres of human life.And We have revealed to thee (Muhammad) the message that thou may make clear to men what has been sent for them and that they may reflect (16:44).
Free will refers to the choice that humans have been given in their actions. It also encompasses the need for humans to act for their own betterment and the betterment of their community, taking into consideration the notion of the individual and the collective and emphasizing a balance between the two. Responsibility is linked to free will as it makes individuals responsible for their actions in relation to the choices they make. This aspect is multi-layered and includes both personal responsibility and organizational responsibility. Benevolence refers to acts of kindness which are done without any obligation. Such deeds are highly encouraged in Islam. In addition to rights and responsibilities over individual actions and wealth, Muslims are also accountable for the contractual dealings they undertake (uqud). In fact, one surah (chapter) of the Quran, known as Al-Maidah or ‘the contracts’, details with various kinds of contracts and how these contracts should be fulfilled:Thus, have We made of you an Ummat justly balanced, that ye might be witnesses over the nations, and the Messenger a witness over yourselves (2: 143).
The essence of the Islamic ethical system therefore places an obligation on Muslims to continually enjoin what the Quran recognizes to be right and forbid what it considers to be wrong, as well as striving for the good of humanity (Haniffa and Hudaib 2002). In his final sermon the Prophet Muhammad ﷺ (may peace and blessings be upon him) explicitly stated: “Hurt no one so that no one may hurt you. Remember that you will indeed meet your Lord, and that He will indeed reckon your deeds”. (quoted in Al-Barai and Abdeen 1987, p. 70). It is also important to note that while the Quran instructs believers to do good, the Prophet Muhammad ﷺ (may peace and blessings be upon him) made it clear that judging whether any action or conduct is right or wrong must stem primarily from its benefit to the people and society (Aydin and Alquayid 2017). For example, he emphasized “Al-Din Al-Maamala”, that is, religion is found in the way of dealing with other people. He also stated: “He who does not thank the people, does not thank God” (quoted in Al-Barai and Abdeen 1987, p. 70). Thus, in Islamic ethics, the interests of the society should be situated at the heart of organizational life. Not only should morality transcend any principal-agent concern, but social dimensions are an integral part of organizational life and activities.10And fulfil your contracts, verily the fulfilment of contracts will be questioned on the day of reckoning (17:34).
Islamic perspective | Neo-classical perspective | |
---|---|---|
Worldview | ||
Underlying framework | Based on divine law and prescribed moral, spiritual and religious obligations | Based on man-made law and societal moral judgement |
Scope of religious duties | All aspects of life, including business, social and contractual dealings covered by Islam | Separation of temporal and spiritual |
Purpose of accountability and governance | Primarily to Allah as part of an act of worship Secondary to discharge responsibility to wider stakeholders | Primarily to discharge responsibility to resource providers and secondary to wider stakeholders |
Organizational focus | ||
Underlying maxim | Social justice and the public good | Protecting shareholder/funder interests |
Resource expenditure | Resources are a trust from Allah and executed to benefit owners and society | Resources from owners funders must be executed to maximize utility |
Scope of accountability | Accountable for all actions to Allah | Accountable only for those items relevant to stakeholders |
Consequences of (non) accountability | The wrath of Allah on the day of judgement and sanctions from regulator and wider public | Sanctions from regulator, funders and wider public |
Ethical Organizational Governance: A Framework for Charity Governance from the Islamic Perspective
Enriching the UK Charity Governance Requirements
Research Method
Interviews
Position | Senior management role | Income level of their organization | Interview Duration (min) | Gender | Code |
---|---|---|---|---|---|
Trustee | £500k–£1m | 100 | Female | T1 | |
Trustee | £250–£500k | 110 | Male | T2 | |
Trustee | £1m–£5m | 85 | Male | T3 | |
Trustee | £500k–£1m | 120 | Male | T4 | |
Trustee | £5m+ | 90 | Male | T5 | |
Senior Management | Communication | £5m+ | 73 | Male | SM1 |
Senior Management | Communication | £250–£500k | 65 | Male | SM2 |
Senior Management | Finance | £5m+ | 65 | Female | SM3 |
Senior Management | CEO | £5m+ | 60 | Male | SM4 |
Senior Management | CEO | £5m+ | 60 | Male | SM5 |
Senior Management | Assistant CEO | £5m+ | 75 | Male | SM6 |
Senior Management | Finance | £5m+ | 40 | Male | SM7 |
Senior Management | Head of operations | £500k–£1m | 60 | Male | SM8 |
Senior Management | Finance | £1m–£5m | 90 | Male | SM9 |
Survey Design
Job title | Gender | Age range | Highest qualification | Length of tenure | |||||
---|---|---|---|---|---|---|---|---|---|
N | N | N | N | Years | |||||
Senior Management | 30 | Male | 68 | 16–24 | 2 | School level | 14 | Min | 0.9 |
Trustee | 23 | Female | 3 | 25–34 | 9 | Undergraduate | 20 | Max | 41 |
Admin officer | 5 | 35–49 | 21 | Postgraduate | 33 | Mean | 14 | ||
Treasurer | 8 | 50–64 | 20 | None | 1 | ||||
65+ | 18 | ||||||||
Not provided | 9 | Not provided | 4 | Not provided | 5 | Not provided | 7 | Not provided | 7 |
Questionnaires sent | First wave | Second wave | Third wave | Total received | Response rate |
---|---|---|---|---|---|
332 | 24 | 37 | 12 | 75 | 23% |
The Actual Experience of Governance in Muslim Organizations
Religious Belief Underpinning Individual Actions
There was also a belief that charity work being undertaken would intercede on the day of judgement, with individuals commenting on the need to do ‘dua’ or engage in prayer for their deeds to be accepted and for the activities of the organization to have some societal impact. This belief was inextricably linked to the concept of being rewarded or punished in the hereafter:So for me when there’s a big decision or even a small one, I have to really toy with the idea in my head. If I’m honest with you, I have had sleepless nights thinking… if I pull out of that contract, am I doing the right thing for the organization or is it because I want to do it? [SM1]
All interviewees highlighted the importance of creating trust and having empathy as important aspects of internal and external relations. In particular, given the social and humanitarian nature of the organizations, interviewees expressed a strong belief in preserving human dignity, and in particular treating beneficiaries as they would expect to be treated themselves, if they were faced with such unfortunate circumstances. For example, interviewees highlighted the need to understand suffering and feel the pain (ihsan) of those they were trying to help:You know charity is one of those things that will provide you shade on the day of judgement. [T2]
Hence, the ability to deliver on promises made to beneficiaries and professionalism was found to be an important value espoused by interviewees. These findings are consistent with those found in the public sector, with public sector employees more likely than private sector employees to possess attitudes of social trust, altruism, equality, tolerance and humanitarianism (Brewer 2003; Rainey 1997). However, in our case this desire to help humanity stemmed from interviewees’ Islamic belief that there was blessing in the work they were doing and it would be accepted by Allah as a good deed in the hereafter.…all charity work is helping the underprivileged. Until you understand their condition, until you fully understand you can’t really do this work. You can’t force people to do this work, they have to be committed and you can only be committed if you believe in the work you are doing… [T3]If you ask someone to do some work and that person has never seen hunger and pain then he won’t understand. If someone tries to explain the pain and suffering of the people he is trying to help he won’t understand it. You have to have seen firsthand the pain and suffering, until you understand the real situation of the people you are trying to help, you can never be a committed worker in a charity. [T4]
This also meant that some of the trustees interviewed put a lot of their personal money into ensuring the organization survived and activities/projects were completed:…it was a big black hole that the money went into and it was the first time I realized… where is this £100,000 going? The answer was ‘Oh we can’t tell you – it’s going to the UN! That was a lot of money raised and we didn’t have any say over where it went. I could understand they may not know exactly, but you still want to know which project it’s gone into but they couldn’t tell me. So that sat a bit uncomfortable with me. [T1]
One trustee acknowledged that 20% of his personal business was owned by the charity, resulting in profits being directly put into running the charity organization. In another instance, one of the charity trustees, despite being recently diagnosed with a serious illness, still continued to devote time to the charity while undergoing treatment. This was all driven by strong Islamic ethical beliefs.…because sometimes it comes out of my personal costs or project costs and you constantly pray - please deliver, just please deliver. Just do something because I have made promises in my heart. I’ve seen these people, I’ve seen their suffering. [T1]You see my car, it’s a £1000 Peugeot. I could have a BMW for £15,000 and chill but I didn’t. I thought the rest of the money will be better spent on poor orphaned children. So due to this sacrifice that I have given, I owe it to myself to make sure the money goes to the right place and people. [T4]
Inadequacies in Organizational Governance
Despite this, we found that all interviewees had a strong awareness that trustees should have the right skills, time and dedication to undertake their role. A clear and reputable background was also deemed important as this had a direct effect on the reputation of the organization. It was felt to be very important for trustees to have specific areas of expertise which could then be used to plan the strategic direction of the organization:Yes, we’ve got a clear governance framework. It’s documented, it’s written, it’s on every job advert that goes out. [T4]We’re going through a global governance implementation right now but the structure itself is quite clear, we know who reports to who and how everything works. [SM3]
Yet, although trustees were highly regarded in the organization and all members spoke of the specific skills needed by trustees, they seemed to have a predominantly ceremonial role, especially in the larger organizations. In these organizations, trustees played a more “hands-off” role [SM6], by delegating the overall broad targets of the organization to the executive and leaving it up to the directors to decide how these are implemented. Some of this stems from the difficulty in separating the trustee board from its legal and strategic obligations. For example, senior management viewed trustees as guardians providing oversight and a second layer of vigilance over the organization but at the same time felt trustees should not interfere in the day to day running of the organization:Somebody on international development, somebody on finance, somebody in business, somebody on strategy, somebody on processes and somebody on communication. [SM5]
One interviewee suggested that trustees should “look at the organization from an outsider’s perspective” [SM2]. Another suggested they chose their trustees from prominent members of the community to give the organization greater exposure and publicity, rather than to help the organization improve its governance per se. Buse (1993, pp. 43–44) suggests that “trustees are guardians of the values of the charity, and the values driven by the charity’s planning”. However, a trustee is unable to drive the values of the organization without having detailed understanding of decisions being made internally within the organization. In addition, from the perspective of the IEF, the trustee board should also be responsible for ensuring the required hisba functions operate effectively and shuratic decision-making is being undertaken.But I think my experience compared to other organizations is that our trustees are not bad. I mean some charity trustees are very, very hands-on on a daily basis. I don’t think that’s the right way, so our trustees are not like that, they are not hands-on on a daily basis which is what I prefer. [SM9]
These organizations relied heavily on individual donations for their survival and sustainability and as such, their core stakeholder base was limited. On the other hand, those organizations with adequate resources highlighted that consultation with key stakeholders was important when it came to making strategic change decisions. These organizations had a larger stakeholder base due to their reliance on government and institutional funding, and this often came with specific contractual obligations. Within this consensus approach, they took the advice of different department heads and experts in the field. In some cases, even junior staff were encouraged to put ideas forward that would help improve organizational performance:We avoid going down that route because we know we are a small organization and in the voluntary set-up so we don’t have the capacity to deal with this. [T4]
In contrast, all interviewees reported that they undertook active stakeholder engagement when it came to external service delivery. All interviewees stated how they began projects with a needs assessment, by using project staff to assess the situation on the ground and asking beneficiaries what they required. This was a crucial process through which organizations were able to categorize the needs of different people and then tailor their activities accordingly; without it, organizations found there was a risk of duplication and possible mismanagement of resources.…. with the help of the whole team because we took one year developing the strategic programe and we took input from our country directors and from all our staff members, input from our trustees and input from our donors and volunteers. [SM2]This involved what others thought about us… from the government, to DFID [Department for International Development], peers, Christian Aid, Oxfam. So it was a massive big consultation project and it took about 18 months on the whole strategy process exercise. [SM7]
A Focus on Improving Governance
This framework was largely going to be a guiding framework and there was no mention of oversight and decision-making within this document. A reason for this lack of attention to structures such as shura and hisba could be due to a lack of awareness of what exactly an IEF-inspired governance framework entails. It could also be that given the loose regulatory requirements upon these organizations, they have not felt the need to introduce an alternative governance framework. In this regard, having trustees with the drive and expertise to recognize the importance of an IEF-led governance framework is important.We are trying to introduce this element of Islamic principles which makes us say that being a Muslim charity we regard, that in addition to the Charity Commission, and in addition to the trustee mechanisms, our beneficiaries and our donors, we also have a responsibility to our Creator. [SM5]We want to introduce some Islamic characteristic in our accountability. From the Islamic perspective… sovereignty is with Allah, people just have delegated power and we need to show this in our accountability frameworks. [SM6]
Consequently, another obstacle facing Muslim charities was recruiting new trustees and senior management with the right expertise:In the Quran it says the administrators of the zakah can take one-eighth, however we are not taking it because of the donors. [SM4]
Prior research has shown paid employment within the charity sector is “more work for less pay” (Cunningham and Harris 2001) and finding trustees to work in a voluntary capacity was an even more difficult undertaking. There was a desire in some cases to appoint those people already known to present trustees, and not look at their expertise, as they preferred to work with people they already knew:It’s just taking a little time to actually find the right person because the people are just not there. [SM5]
However, Tandon (1995) notes that such family-orientated non-profit boards are sometimes unable to provide a competent governing mechanism as members are not experienced or independent enough to critically challenge decision-making. This difficulty has been compounded by the desire for the organizations to appoint trustees specifically from within the British Muslim community, who would be more empathic to the Islamic ethos of the organization:When I wanted to register the charity, I just asked these people if they wanted to be my trustees and they said yes. I don’t think they realized that I was going to take it global. [T1]The trustees nominate other trustees in the general meetings. [SM5]Well they are definitely known through somebody or directly known to the founder. But we are thinking of putting onto our website where people who are qualified and have something to offer they can apply too. [SM6]
Interviewees even stated that they were having difficulty in finding non-executive directors to sit on the audit committee due to a lack of willingness and experience amongst members of the Muslim community: “It is about finding quality people who can be on the audit committee” [SM7]. This was despite interviewees noting they employed junior staff members from different religious backgrounds. However, these members do not have a say in the running and strategy of the organizations. This therefore suggests that although there is an appreciation of the principle of appointing the right type of person on the basis of ability, the reality of this is problematic due to the desire to only appoint within the Muslim community. This is a specific consequence of operating within a non-Islamic context as there is a limited pool of potential applicants that can become trustees.I think the most important one is reputation and Islamic faith because as a trustee of an Islamic organization you need to have this experience and knowledge. [T5]Because even if I have all the skills, I’ll not be able to add any value to the work if I do not agree with the values of the organization. So I think reputation and values is the most important and then comes the rest. [T4]
Discussion and Complementary Survey Analysis
N=75 | % of organizations strongly agree | Strongly disagree | Mean | |||
---|---|---|---|---|---|---|
1 | 2 | 3 | 4 | 5 | ||
Panel A: Trustee characteristics | ||||||
Trustees have the right mix of skills and experience | 38 | 34 | 19 | 9 | 1 | 2.04 |
Trustees have the time to do the job well | 27 | 34 | 23 | 16 | 0 | 2.28 |
Trustees have a clear understanding of their role and responsibilities | 45 | 31 | 16 | 8 | 0 | 1.88 |
Trustees resolve any conflicts between themselves constructively | 59 | 27 | 8 | 5 | 1 | 1.64 |
Trustee board meetings have a clear structured agenda | 58 | 19 | 14 | 4 | 5 | 1.80 |
Panel B: Trustee and management relationship | ||||||
Trustees and management share a common vision on organizational goals | 50 | 32 | 12 | 4 | 1 | 1.74 |
Trustees and management periodically review how they are working together | 36 | 38 | 15 | 7 | 3 | 2.00 |
Communication between the trustees and management is good | 51 | 31 | 8 | 7 | 1 | 1.74 |
Misunderstandings between trustees and management are rare | 22 | 41 | 16 | 9 | 8 | 2.39 |
Trustees and management resolve conflicts between themselves constructively | 50 | 36 | 5 | 5 | 1 | 1.70 |
Panel C: The board of trustees is effective in | ||||||
Setting the organization’s mission and values | 41 | 32 | 22 | 4 | 3 | 1.97 |
Deciding the organization’s strategic direction | 41 | 30 | 23 | 7 | 1 | 2.00 |
Overseeing the financial management of the organization | 51 | 34 | 8 | 5 | 3 | 1.76 |
Ensuring the organization has adequate financial systems and procedures | 51 | 34 | 9 | 3 | 4 | 1.76 |
Monitoring organizational performance | 32 | 38 | 18 | 9 | 3 | 2.12 |
Taking action to resolve problems | 39 | 42 | 12 | 4 | 3 | 1.89 |
Monitoring the organization’s chief executive or senior staff | 41 | 27 | 19 | 3 | 5 | 2.00 |
Advising management | 36 | 35 | 14 | 8 | 1 | 1.97 |
Reviewing board performance | 23 | 31 | 19 | 16 | 1 | 2.36 |
Ensuring that the organization fulfils its legal obligations | 64 | 24 | 7 | 1 | 4 | 1.58 |
Panel D: The management is effective in | ||||||
Implementing the organization’s mission and values | 36 | 49 | 9 | 7 | 0 | 1.87 |
Implementing the organization’s strategic direction | 41 | 38 | 11 | 9 | 0 | 1.89 |
Overseeing the financial management of the organization | 53 | 28 | 16 | 3 | 1 | 1.73 |
Ensuring the organization has adequate financial systems and procedures | 51 | 35 | 7 | 7 | 1 | 1.73 |
Monitoring organizational performance | 42 | 38 | 12 | 7 | 1 | 1.88 |
Taking action to resolve problems | 43 | 38 | 11 | 5 | 1 | 1.82 |