CIVIC ENGAGEMENT & GOOD GOVERNANCE
Governance refers to the exercise of economic, political, social or administrative powers to manage public affairs. All levels are involved, including corporations, federal and state governments, local governance and other entities. It comprises the mechanisms, processes, proper procedures and management tools.
It covers social institutions through which citizens and groups articulate their legitimate interests and exercise their legal rights; how do the civilians fulfil their obligations and duties, and how do they mediate their differences?
In the past few decades, we have witnessed the collapse of big corporations triggered by bad governance. Due to management misdemeanour such as false reporting and creative accounting, business enterprises with deep supply chain were declared insolvent and bankrupt. Thousand employees lost their jobs, impacting families and households.
One case that shocked the world at the turn of the millennium was ENRON, whose assets was apparently valued at almost USD 65 billion, when in reality, directors and executives were concealing huge losses. Its auditor Arthur Andersen was found to have shredded documents of critical importance and committed obstruction of justice that led to the irreparable damage to their reputations.
The subsequent bankruptcy of other corporations such as Lehman Brothers even surpassed ENRON as the biggest bankruptcy case in corporate history. This led to a series of exposé of accounting and corporate scandals. As a result, investors, clients, customers and employees lost their trust in mega financial companies. A global scale financial market meltdown was unstoppable.
Without good governance, even independent countries face a real risk of falling into sovereign debt crises, being unable to meet their outstanding liabilities. Argentina, Venezuela and Greece are all cases in point.
All these international and local cases that are unfolding before our eyes served as a warning — a warning of what could happen if virtues, transparency, and good corporate practices are not adhered to.
The Prophet Muhammad said, “Verily Allah has decreed that everything you do should be done with excellence” (narrated by Imam Muslim).
Based on this Prophetic saying, Dr Mostafa al-Badawi explains: “A Muslim is thus obliged to keep his activities under constant scrutiny and never allow himself to fall short of the required standard. If he fall short of the standard, he is guilty of neglect. The extent to which he fails to comply with this rule is the degree to which his faith and knowledge of the requirements of his religion is defective. A Muslim strives for excellence in every act, in the awareness that it is God who is watching him, not only his supervisor.”
In Malaysia, corporate governance encompasses the Board, Audit Committee, Risk Management, Internal Control, and Stakeholders.
The Company Board is expected to provide stewardship by performing its responsibilities well. Effective Board is ensured through a balanced composition of its members and remuneration that corresponds to their level of competence. Management must be based on trust, accountability and trustworthiness.
While leaders must play a role of providing strategic direction, it must be done through consultative deliberation, discussion, and collective responsibility. This requires effective audit committee, risk management and internal control.
Allah commands in the Qur’an: “and consult with them in all matters of public concern; then, when you has decided upon a course of action, place your trust in Allah: for Allah loves those who place their trust in Him.” (surah Ali ‘Imran, 3: 159).
In another verse, Allah describes true believers as “those who obeyed the command of their Lord and pray regularly; and whose affairs [in all matters of common concern] are settled by mutual consultation; and from what We have provided for them, they spend in Our cause.” (surah asy-Syura, 42:38)
Commentators of the Qur’an explain that governance must be done through consent and council. Mutual consultation must be regarded as one of the fundamental provisions of all Qur’anic legislation relating to governance: planning, enforcement, and implementation.
All authorities agree that the ordinance of consultation—although addressed in the first instance to the Prophet Muhammad—is binding on all Muslims and for all times.
When the Prophet was asked to explain the implications of the above verse, he replied, “It means taking counsel with knowledgeable people and then following them [in their sound, knowledge-based counsels].” This particular quality of true believers is regarded by the Prophet’s Companions as so important that they always referred to chapter no. 42 of the Qur’an by the key-word “consultation” (syura). It has two significant aspects: firstly, as a reminder of all followers of the Qur’anic universal teachings that they must remain united within one single community (ummah). Secondly, a prescriptive principle that all their collective concern must be monitored and accomplished by civic participation