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Executive compensation: the role ofShari'acompliance

Author

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  • William Marty Martin
  • Karen Hunt‐Ahmed

Abstract

Purpose - The purpose of this paper is to illuminate issues surrounding executive compensation as it relates to current understandings of Islamic business law. Design/methodology/approach - The emerging bodies of literature in the fields of executive compensation and opinions of stock options underShari'alaw are reviewed. Findings - It appears that the trend in offering employee stock options as part of aShari'acompliant compensation package is acceptable in most cases, yet because of its close association with the more problematic idea of derivative transactions, the company must be vigilant in obtaining the approval from itsShari'aStandards Board before offering it as part of an overall compensation package. Research limitations/implications - Existing quantitative data in this area are limited. Given the qualitative, exploratory nature of the design, generalizability is not as robust as other designs. Practical implications - The paper makes recommendations about the inclusion of employee stock options as part of aShari'acompliant executive compensation package. Originality/value - This paper advances the extant literature on the ethics of executive compensation in general as well as adding to the extant literature onShari'acompliance of executive compensation packages.

Suggested Citation

  • William Marty Martin & Karen Hunt‐Ahmed, 2011. "Executive compensation: the role ofShari'acompliance," International Journal of Islamic and Middle Eastern Finance and Management, Emerald Group Publishing Limited, vol. 4(3), pages 196-210, August.
    • Handle: RePEc:eme:imefmp:v:4:y:2011:i:3:p:196-210
    DOI: 10.1108/17538391111166449
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