Consultation, Moral Hazard, & Shariah Boards

Joe Bradford

| 02/23/2010

While preparing my Masters thesis, I came a across an interesting quote from Muhammad b. Idris al-Shafi’i, the famous jurist and author of the first work of Islamic legal theory, al-Risalah. After explaining the need to consult others before issuing juristic opinion:

[Consultation should be sought] regardless of whether those consulted agree or disagree; in fact those that disagree [with you] should be given priority, so as to help resolve what juristic opinion is applicable. One should ponder over their evidences, then decide. [al-Bahr al-Mudhhab of al-Ruyani 11/170]

Shariah Boards tend to lean towards one legal methodology; that is expected in any decision making group. There has been a trend though to filter opinions until the only thing you are left with are those that you agree with (or should I say, agree with you).

This seems similar to a moral hazard, when a party insulated from risk may behave differently than it would behave if it were fully exposed to the risk. Excluding dissenting opinions would protect any group from the risk of re-evalution, analysis, and reputation risks. If we consider Shariah Boards to be representative of general shareholder assembly, any Shariah Board which is asymmetric in its makeup would seem to be susceptible to a double-sided principal–agent problem.


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