Corporate Governance and Ethics Compliance in Islamic Financial Institutions – Legal Perspectives

Corporate governance systems are continuously converging and inherently presuppose the predominance of law. Strong emphasis is put on checks and balances and monitoring systems. However, despite convergence tendencies there are also differences in corporate governance systems that often stem from different commercial and legal cultures, the prevailing political and economic conditions and the development of the macroeconomic model. Religious traditions and moral aspects also come into play. Islamic financial institutions are significantly subject to multi-level governance systems. They are not only required to comply with applicable laws but also with Sharia and ethical principles. If legality is insufficient to frame governance policies or where the law is silent, ethical norms can have a supplementary regulative effect. After inquiring the relationship between law and morals the paper will argue that the two distinct spheres of law and morals can sometimes conflict with each other. T