First of all, I would like to express my sadness at the
passing of the late Ruler of Perak, Almarhum Sultan Azlan Muhibbudin Shah last
week.
He was the exemplar of leadership in Malaysia for decades not
just as a Ruler but also as a consummate professional in the Malaysian Judiciary
and the Malaysian sports fraternity. He was one of the most respected and
well-loved Sultans that Perak has ever had.
As a Perakian, I mourn the loss of a great man but at the same
time I rejoice as we welcome the anointment of a new Ruler of Perak, Sultan
Nazrin Muizzuddin Shah. I have had the opportunity to work alongside His
Highness in the realm of Islamic finance in his capacity as the ambassador of
the Malaysia International Islamic Finance Centre. He has been an inspirational
and exemplary leader to many of us in the Islamic finance industry.
I am looking forward to His Highness able and wise
leadership to help steer Perak Darul Takzim to greater heights. And I pray and
hope that His Highness will continue to lend the Islamic finance industry his support
and most importantly his voice to the cause. We still need His Highness
leadership in this space. Daulat Tuanku!
Talking about leadership, Islamic finance as a growing component
of the Malaysian and global financial markets need to have strong and sound leadership.
For us to be able to build leadership strength in our ranks, we first must
identify what elements or aspects of leadership that are critically needed and
valued in the industry and for what roles.
There are many key leadership roles in Islamic finance such
as CEOs, CFOs, chief shariah officers (CSOs), COOs, chief people officers,
chief technology officers, chief information officers, chief compliance officers,
chief auditors as well as the various other general and line managers.
This whole thing may look obvious but it is not as easy as it
seems considering the lack of talent with the right skill sets for Islamic
finance in the financial market. It has caused many organisations within the Islamic
finance industry to spend enormous sums of money and time trying to define needed
competencies for the various leadership positions found. It makes leadership management
within Islamic finance more difficult when organisations involved in the industry
do not have effective organisational structure and the right focus.
To put it simply, the industry leadership in Islamic finance
today is weak because of the following:
1. We lack the talent with the right competencies. Many in
positions do not have the right skills sets or competencies to provide
effective leadership.
2. And when we are successful in identifying the right talent,
we put them in positions that are not fully empowered to provide effective leadership.
It is not enough to just find the right talent with the
right competencies. Leadership in Islamic finance can only become effective if
these talents are put in leadership positions that are appropriately empowered
within their organisations.
Let’s analyse some of the different organisations that we have
in the markets to identify the issues that prevent effective leadership in
Islamic finance today.
Standalone Islamic bank:
A standalone Islamic bank rightfully has all the key
positions in place. However, we still have leadership failure because of the
following:
1. Practically all the “C” level executives are talents who are
educated, trained and experienced in conventional “riba” based financial market.
2. The people who know Islamic finance do not have the
needed leadership skills or experience to take up “C” level positions.
3. In some organisations in the Middle East, the Shariah Committee
comprising pure Shariah scholars sit above the Board of Directors and they
dictate the course of business when they are not fully equipped with the right competencies
to determine policies and directions of the organisations.
4. In some organisations, CSOs are not even members of the
management committee.
5. In some organisations in the Middle East, the competent CEOs
have to report to both the Board of Directors and Shariah Committee/Board on equal
basis thus getting confused as to what he or she can do and needs to do. Focus
goes out the window due to misaligned direction.
Islamic bank subsidiary of a conventional financial group:
1. Practically all the “C” level executives are talents who are
educated, trained and experienced in conventional “riba” based financial market.
2. The people who know Islamic finance do not have the
needed leadership skills or experience to take up “C” level positions.
3. In some organisations in the Middle East, the Shariah Committee
comprising pure Shariah scholars sits above the Board of Directors and they
dictate the course of business when they are not fully equipped with the right competencies
to determine policies and directions of the organisations.
4. In some organisations, the “C“ level executives of the parent
company actually dictate the policy and business direction of the Islamic bank
subsidiary even when the “C” level executives of the subsidiary are competent
talents.
5. In some organisations, them competent talents in the Islamic
bank subsidiary are actually only responsible for Shariah governance and
nothing more.
They are not involved in business direction and development.
And even in this situation the CSOs are not part of the key management
committee member.
6. In some organisations, the competent CEO is not even a
member of the key management of the bigger financial group and does not report
to the group CEO or group MD but to some second or third line management below
the group CEO/MD.
For Islamic finance to go beyond what it is today, there is
a need to correct the leadership structure in many of the organisations within
the industry and fit them with the right talents. The industry cannot afford to
rely on the leaderships of only the few organisations that have got their
structure right.
[Badlisyah Abdul Ghani’s column, STRAIGHT TALKING, in The
Malaysian Reserve on 2 June 2014. Badlisyah is Executive Director and CEO of
CIMB Islamic Bank Bhd]
