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This paper aims to show that zakat solves the collective action problem by changing the framework of giving. An additional purpose of this paper is an attempt to fill a critical gap in the Islamic economics literature. This gap concerns the nature and role of zakat in effectively delivering aid to those in need while mitigating the potential for free riding. There is also a general gap in the current literature on Islamic economics that the issues of zakat and charity have not received the same attention as the focus remained mostly on money, banking and the issues of interest and usury. The paper is also an attempt to provide a refocus.

This paper attempts to build an argument to show how zakat can function as a unique solution to the free-rider problem in voluntary charity. The author’s argument is based on a precise theoretical framework, namely the “free-rider problem,” and how zakat can function as a unique solution to this problem. The author also uses game theory to show how reputation can lead to cooperation in a repeated game. The author uses an example from Pakistan to show how reputation can be a disciplinarian of zakat collection organizations.

Zakat solves both the free-rider problem in ordinary charity and the coordination problem between members in a large group. The free-rider problem is solved by changing the very framework of giving and the coordination problem between Muslims around the globe disappears because the rates and details of levying zakat are centrally created based on divine revelation.

This paper presents an important topic as it addresses one of the most popular giving practices in Muslim societies, called zakat. It also provides a framework in examining the meaning and function of zakat in Muslim societies.

Purpose – Institutional investors are facing increased pressure and threats of legislation from the European Union to abandon passive ownership strategies. This chapter investigates the legal prerequisites for active ownership among institutional investors in two Scandinavian countries to highlight differences in the legal framework that potentially account for apparent dissimilarities in the practice of shareholder activism.

Design/methodology/approach – Data on shareholder proposals from Danish and Swedish annual general meetings from 2006 throughout 2010 suggest that institutional investors are approximately a thousand times more active in Sweden than in Denmark.

Findings – The comparative study of the legal framework for shareholder activism shows diminutive legal distance in general, however, we find that the shareholder-based nomination committee employed in Sweden constitutes an exception. This is relevant, as such a setup transfers power from the board of directors to the owners. Presumably, this reduces the impact of free-rider and collective action problems, and increases the shareholders’ inclination to make proposals, which is also what we find. Moreover, we find other differences in the legal framework that support the transfer of power to the owners.

Research implications – We contribute to literature by investigating the importance of local governance mechanisms created by the legal framework – an area where research is scarce. The chapter discusses how two classical theoretical dilemmas – free-rider problems and collective action problems among shareholders – can be reduced by the implementation of local corporate governance elements.

Originality/value – The chapter outlines the actual practice of shareholder activism, in terms of proposals, in Denmark and Sweden, and highlights divergent legal elements which theoretically transfer power to the shareholders. Thus, regulators should be aware of the impact by local governance mechanisms, and how shareholders react under different legal prerequisites.

Blockholders can behave opportunistically because small shareholder voting suffers from coordination problems. In this chapter, we investigate the features of small shareholder voting using a theoretical framework. Specifically, we investigate when defeating a blockholder’s resolution is optional for shareholders. Regulatory initiatives that facilitate communication between small shareholders or focus on institutional investors and corporate governance tools that alter or add the threshold in the voting game also contribute to solving the coordination problem. These corporate governance initiatives can increase the relevance of AGMs in Europe.

Free-riding behaviour may threaten the success of teamwork, when one or more group members receive the benefits of other members’ achievements with little effort or cost of their own. The purpose of this paper is to investigate students’ collaborative behaviour to address the problem of free riders (FRs) in university settings.

The research is an 11-week field study of three senior finance classes and incorporates mobile learning employing Quip and Google Docs applications to facilitate group work. A comprehensive set of quantitative and qualitative methods analysing students’ perceptions, instructors’ reflections, peer reflections and mobile learning methods are used to answer questions pertaining to group work, the work experience, FRs and ways to minimise the last.

In this paper, the author shows that students at the university level have positive views of group work despite the presence of FRs. Students like to form their own groups; consequently, peer evaluation appears to be unreliable. The study points to free riding as a serious threat to academic productivity and calls for actions and strategies from institutions and instructors to eradicate this behaviour. Mobile applications enable instructors to track FRs and to some extent discourage their behaviour.

There are limited studies that focus on FRs in higher education and, to the researcher’s knowledge, no such investigation has been applied in the Middle East and North Africa. Likewise, there is little research available on incorporating mobile learning to assess group work in higher education. This study aims at exploring the existence and associated experiences of free riding, along with methods to curtail the problem. The findings of this study provide a good platform for inquiry into the FR phenomenon in higher education and its impact on student learning, as well as the possible roles of instructors and mobile applications. The findings of this study could be developed further through more research with a view to providing a broader perspective of the situation in Middle Eastern and North African cultures.

From a theoretical agency perspective, the Annual General Meeting of Shareholders (‘AGM’) is an important corporate law solution for mitigating agency problems between shareholders and managers in large public corporations. At the AGM, shareholders are informed, they are offered a venue to discuss and ask questions, and they are involved in decision-making. Despite these theoretical important functions, the AGM is largely criticized in practice. Criticism contains, for example, rational apathy and free-rider behaviour that lead to low shareholder turnout, a lack of (meaningful) dialogue and side-stepping behaviour. Yet, fundamental empirical research on the AGM in practice is lacking, which makes this book highly relevant. This chapter provides the outline of the research that is conducted in this book.

Here I present a theory of collective action that emphasizes the role of status. I argue that collective action contributions earn individuals improved status by signaling their concern for the group's welfare relative to their own. Having received greater prestige for their contributions to group goals, individuals’ actual motivation to help the group is increased, leading to greater subsequent contributions to group efforts and greater feelings of group solidarity. This “virtuous cycle” of costly contributions to group efforts and enhanced standing in the group shows one way in which individuals’ prosocial behaviors are socially constructed, a consequence of individuals’ basic concern for what others think of them. I discuss a variety of issues related to the theory, including its scope of application, theoretical implications, relationship to alternative models of reputation and prosocial behavior, possible practical applications, and directions for future research.

Since the 1950s, Ocean Spray cranberry growers have typically seen themselves in terms of their membership in the Ocean Spray cooperative rather than as cranberry growers. This association with the cooperative is so powerful that both members and independents alike believe that without Ocean Spray, the cranberry industry would not exist as it does today. Yet, as a way to recoup the losses resulting from the recent cranberry glut, some member-growers have proposed selling the cooperative. Although the sale would have generated a large sum of money for them, growers voted overwhelmingly against it. In order to understand why growers identify so closely with the cooperative, this paper intends to demonstrate how Ocean Spray’s influence transcended its role as a marketing cooperative to that of a significant social institution.

The paper aims to better understand why borrowers do not sanction one another in group-lending microfinance programmes.

The paper utilises interviews conducted in 16 villages in Western China. The data were complemented by ethnographic fieldwork of an NGO in the region.

The paper confirms the relevance to microfinance of existing literature showing that punishing others is costly, so people tend to wait for others to do it. It also reveals the existence of particularistic metanorms – norms of sanctioning that focus on whom one can and cannot punish. Additionally, it shows that people may punish according to whether they believe others are punishing.

The results are not immediately generalisable to all group-lending programmes.

Fieldwork in rural China is difficult to conduct. Although cultural and social patterns are known to be important in development work, little is known about how it affects microfinance.

1. What are public goods? What are the defining characteristics of public goods?2. What is special about managing common resources like Markhors/Ibex (and other rare species)? What is the free rider problem?3. How the incentives-based system works?4. What are the consequences of Community Trophy Hunt Program (CTHP) in Pakistan?

Learning objectives are as follows:1. applying new approaches to manage common resources;2. understanding the various types of goods that society needs for its material progress;3. understanding the challenges associated with the management of common resources because of their particular nature; and4. understanding the need for incentive-based engagement in the management of public policies at the community level.

Management of shared resources is challenging. This case uses the problem of a forest officer who was given the task of managing the animal population of the region. The primary focus of the case is common resources and how it can be managed through incentive-based system. The case demonstrates how individual actions have external effects. These external effects are sometimes good for the community, but sometimes, they are bad. Many desirable outcomes require social cooperation, but they cannot be achieved because individual self-interest dominates collective well-being, the issue called Prisoners' Dilemma. Gulnar (the fictional forest officer) was convinced about the potential of managing common resources by means of a CTHP in the Gilgit–Baltistan region (in Pakistan). The CTHP provided not just environmental benefits but also substantial social and economic benefits to the local community. The financial gains from the initiative can be used in community projects that help locals become less reliant on their natural environment, create more space for wildlife and enhance the quality of life for people.

BS (Hons.) Economics, MS Economics (Public Policy), MBA (Business Economics)

Supplementary materials teaching notes are available for educators only.

CSS 4: Environmental Management