Corporate Governance and Stakeholder Rights in Islamic Insurance
Corporate governance (CG) has been a major preoccupation of public policy and in academia since the 1990s. In the U.K., for example, the government commissioned a series of reports on the subject from various committees, starting with the Cadbury Report in 1992. However, awareness of some of the main factors that give rise to CG issues has deeper historical roots, notably in the work of Berle and Means (1932) and Coase (1937). This work highlighted the problems that arise from the separation between the ownership (that is, shareholders) and the control (that is, management) of industrial corporations. Managers have both the incentive and the means to run the corporations in their own interests rather than in the interests of the shareholders. This can be considered as the classical statement of the problematic nature of corporate governance. Economists have addressed this problematic through Agency Theory (AT—Jensen and Meckling, 1976) and through Transactions Cost Economics (TCE—Williamson, 1975, 1996).
For reasons that will be elaborated below, this classical statement, with its exclusive focus on conflicts of interest between shareholders and managers, may be thought to offer an excessively narrow view of the CG problematic. For the purpose of this chapter, a definition of corporate governance will be used that avoids this narrow ...