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					Economics




EGYPT   -- "The Islamic bank directors, management team and auditors have to carry out their
professional duties having in mind satisfying the needs of the shareholders as well as Allah.
Corporate governance is aimed to enhance accountability, transparency and trustworthy", said
Hany Abou-El-Fotouh, ABC Bank – Egypt First Vice President & Corporate Governance Group
Head.
 Abou-El-Fotouh was speaking at Islamic Finance & Investment World – Africa 2008, held last
week in Johannesburg, South Africa. He said that corporate governance is the system by which
companies are directed and controlled as defined in UK Combined Code. It involves a set of
relationships between a company’s management, its board, its shareholders and other
stakeholders.

According to this definition, shareholders appoint directors of the board. The board oversees
management, appoints CEO and is accountable to shareholders. The management team
manages the organization and in turn is accountable to the board and shareholders for
long-term shareholders value maximization

Addressing the delegates about the main stakeholders in Islamic banking corporate governance
framework, Abou-El-Fotouh said “ the stakeholders include, among others, law- & rule makers;
Central Bank; stock exchange; regulations, listing rules, Islamic Accounting Standards Board,
employees, Murabaha Investment account holders; Murabaha financing partners; Current
account creditors and the Islamic community. Islam itself is the most important stakeholder, he
added.

About the Islamic concept of corporate governance, Abou-El-Fotouh said that it stresses the
three main areas of accountability, transparency and trustworthiness. Additionally, good
governance is consistent with Islamic principles, such as preventing gharar (risk, uncertainty,
and hazard) and avoiding business transactions that cause injustice to any of the parties.
Islamic financial institutions abide by the Shariah which governs the operations and transactions
in accordance with Islamic principles derived from the Quran and Hadith. As to supervisions,
Islamic financial institutions must have Shariah boards which review and ensure that all
transactions, contracts, products and applications relating to the Islamic financial institution
comply to Shariah rules and principles with the specific fatwa, rulings and guidelines that have
been issued.

Abou-El-Fotouh explained that every Islamic bank should be headed by an effective board,
which assumes specific responsibilities. The vision, strategy and corporate values of the Islamic
bank should be clearly specified and understood. He further pointed out that there should be an
effective board composition, with a strong independent element where no individual or small
group of individuals should be allowed to dominate the board’s decision making. Additionally,
there should be a clear division of responsibilities at the helm of an Islamic bank, which will
ensure balanced and clear lines of role, responsibility, authority and accountability throughout
the Islamic bank

He explained that an Islamic bank must have a formal and transparent process for the
appointment of directors to the board and the appointment of CEO. Additionally, the directors
must be persons of caliber, credibility and integrity with the necessary skills and experience and



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Economics




be able to devote time and commitment. The board as a whole, the directors and CEO must be
subject to a formal and an ongoing assessment of their effectiveness.

Abou-El-Fotouh concluded by saying that there is no “single model” of corporate governance
that can work well in every country. Each Islamic financial institution should develop its own
model that can cater for its specific needs and objectives. Similarly, there is no hard and fast
rule that can be applied in nurturing good governance culture in Islamic financial institutions




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Hany Abou-El-Fotouh Hany Abou-El-Fotouh Chief of Satff & Grop Board Secretary http://www.linkedin.com/in/hanyfotouh
About Hany Abou-El-Fotouh is Chief of Staff & Group Board Secretary, CI Capital Holding - the investment banking arm of Commercial International Bank which is the largest private bank in Egypt . He provides advice and direction to the Board and management with respect to corporate governance practices and formulates corporate policies. Hany is a leading expert on money laundering and terrorist financing controls in the MENA region. Founder of the Middle East Compliance Officers' Forum (MECOF), he has been honored for his work in promoting compliance culture and awareness in the MENA region Hany writes articles to different newspapers and journals on a variety of subjects. He is a public speaker and professional trainer. Previously, he worked in various senior positions in leading banks in Egypt and GCC countries like HSBC, Oman International Bank, Banque Saudi Fransi among others Hany is a certified member of the Association of Certified Anti-Money Laundering Specialists (ACAMS) and Certified Director by Egyptian Institute of Directors http://www.linkedin.com/in/ hanyfotouh hanyfotouh@yahoo.com