Islamic Business Ethics Topic 4

4.0 ISLAMIC BUSINESS ETHICS

4.1ISLAMIC BUSINESS ETHICS

- The most related term in Islam for Ethics is KHULUQ.

- Other terms:

- khayr (goodness)

- birr (righteouness)

- qist (equity)

- adl (equilibrium and justice)

- Haqq (truth and right)

- Maruf (known and approved)

- Taqwa (piety)Factors Influencing Ethical Behavior In Islam

1. Legal Interpretation

2. Organizational factors

3. Individual factors

Legal Interpretation

In Secular practices, these factors were based upon contemporary. The factors often transient value & standards (SV) such as affirmative action and caveat emptor.

However, in Islam, the standards and value are guided by the syariah & the collection of previous Fiqh judgments. For instances, there is no discrimination in Islam.

Organizational factors

These factors consider the degree of commitment of the organizations leader to ethical conduct. Normally these factors were based on code of ethics, policy statements, speeches, publications etc. Islam perceives any organizations involve in haram activities as unethical.

Individual factors

There are six sub factors that influence individual factors:

i. Stages of moral development

ii. Personal Value and Personality

iii. Family Influences

iv. Peer influences

v. Life Experiences

vi. Situational Factorsi. Stages of moral development

There are two stages of moral development which are the minor or prepubescent stage and the adulthood stage.

The adulthood stage

The Apostle of Allah said: There are three (persons) whose actions are not recorded: a sleeper till he awakes, an idiot till he is restored to reason, and a boy till he reaches puberty.

Based on the above hadith, there are 2 guidelines given i.e:

i. There are certain types of people are not responsible for their behavior.

ii. An individual is not responsible for his actions until the age of reasons.

Islam scholars have suggested 3 stages of the development of human soul:

i. Ammarah; prone to evil, will lead to perdition.

ii. Lawwamah; feels consciousness of evil , resist it, ask for Allahs grace and pardon and tries to amend.

iii. Mutmainnah; the highest stage of all.

Therefore Islam suggests that any person may be more or less prone towards behaving ethically.

ii. Personal Value and Personality

Islam perceives that the decay and eventual disappearance of honesty is a sign of the eminence of the Day of Judgment. These factors can be either internal or external locus of control.

iii. Family Influences

Islam perceives that ethical standards were started in early childhood upbringing. As emphasized by the Prophet (SAW) on the importance of family nurturing when he said:

Command your children to pray when they become seven years old, and discipline them for it (prayer) when they become ten years old; and arrange beds (to sleep) separately.

iv. Peer influences

From Islam point of view, children can be easily influenced by their friends. Furthermore, life experiences can affect people ethical beliefs and behavior.

v. Situational Factors

People may behave unethically in certain situations because they may see no way out. The discouragement of applying debts as Islam perceives debts as a major reason why individuals behave unethically.Islamic Ethical System

Islam has its view points on other secular ethical systems.

Islam viewpoints on Relativism

Islam perceives the theory was direct contradicted with Islam as it focuses solely on the individual and excludes any interaction with or input from outside. Islam stays away from decisions based only ones perception of a situation but emphasizes on Syura system.

Islam viewpoints on Utilitarianism

i. Who determines what good is for the maximum number of people? (Wealth? Pleasure? Health?)

ii. What happen to the minority?

iii. How are the costs and benefits to be assessed when no quantifiable issues such as health are to be dealt with?

iv. Individual rights and responsibilities are ignored in favor of the collective rights and responsibilities.

v. The danger of pareto optimality.Islam viewpoints on Universalism (Kants ethics)

The problem of duty as ethical action can be derived only an individual perform it based on duty.

Islam viewpoints on Rights

The rights approach to ethics can be abused as it suggests that individual have moral rights that are non-negotiable. Islam is for freedom and balance yet rejects the notion of liberty without accountability. Islam perceives human beings bear responsibility for their actions.

Islam viewpoints on Distributive Justice

Islam is in favor of justice as Islam believes that every person is entitled to own property individually or in partnership with others. Islam argues that the poor have a claim on part of wealth accumulated by the rich to the extent that the basic needs of everyone in society are met. Islam discuss the concept of infaq and zakah, thus any human exploitation at any level, in any shape & under any circumstances is anti-Islamic and must be ended.

In general, Islam agrees with all the principles of the distributive justice approach to ethics, but in a balanced manner as Islam does not endorse blind justice.

Islam viewpoints on Eternal Law

Eternal law refers to other scripture or nature to be used as a guideline in making the ethical decisions. Some of the philosophers believe that by studying either the scripture or nature, man will become ethically aware. However, Islam suggests that Muslim have to study both items simultaneously.Seven distinct of Islamic Ethical System:

i. Actions & decisions are judged to be ethical depending on the intention of the individual.

ii. Good intentions followed by good actions are considered as acts of worship. Halal intentions cannot make haram actions halal.

iii. Islam allows an individual the freedom to believe and act however he/she desires, but not at the expense of accountability and justice.

iv. Belief in Allah endows the individual with complete freedom from anything or anybody except Allah.

v. Decisions that benefit the majority or a minority are not necessarily ethical in themselves. Ethics is not a numbers game.

vi. Islam uses an open system approach to ethics, not a closed, self-oriented system. Egoism has no place in Islam.

vii. Ethical decisions are based on a simultaneous reading of the Quran and the natural universe.

Islamic Ethical Philosophies

There are 5 axioms of Islamic Ethical Philosophy

i. Unity

ii. Equilibrium

iii. Free Will

iv. Responsibility

v. Benevolence

Unity

This axiom is related to the concept of tawhid. The political economic, social & religious aspects of mans life form a homogeneous whole (economic, political, religious & social), which is consistent from within, as well as integrated with the vast universe without. This is the vertical dimension of Islam. It holds with the following ideas:

i. Muslim cannot be biased in his thinking and behavior.

ii. Muslim is not overawed by anybodys greatness, and will not allow himself to be coerced into performing unethical acts by anybody.

iii. Muslim never despairs of Allahs Help and Mercy. He will act bravely in doing what is ethical and Islamic.

iv. Muslim will obey and observe Allahs law as the effect of La ilaha illallah.The application of the Unity Axiom to Business Ethics.

A Muslim businessman will not:

i. Discriminate among his employees, suppliers, buyers, or any other stake-holder on the basis of race, colour, sex or religion.

ii. Be coerced into unethical practice.

iii. Hoard his wealth avariciously. The concept of amanah is of critical importance to him because he knows that any worldly merit is transient, and must be used wisely.

Equilibrium

In Islam, this term refers to adl, describes the horizontal dimension of Islam, and relates to the all-embracing harmony in the universe. This sense of balance is achieved through conscious purpose.

The application of the Equilibrium Axiom to Business Ethics.

i. This principle applies both figuratively and literally to business.

ii. Allah admonishes Muslim businessmen to:

Give full measure when you measure and weigh with balance that is straight: that is the most fitting and the most advantageous in the final determination.

iii. Islam does not aim to create a society of martyr-like merchants, doing business for purely philanthropic reason.

Free Will

This axiom means humans ability to act without external coercion within the parameters of Allahs creation and as Allahs trustee on earth.

The application of the Free Will Axiom to Business Ethics.

i. A Muslim will honor all contracts.

ii. A Muslim must curb his free will to act according to the moral code laid out by Allah.

iii. Islam rejects the principles of laissez faire and the western reliance on the concept of the Invisible Hand.Responsibility

Islam perceives that humans need to be accountable for his actions. Islam also draws a distinction between fard al ayn and fard al kifayah.

The application of the Responsibility Axiom to Business Ethics

Allah S.W.T:

Every soul will be (held) in pledge for its deeds.

The above Al-Quran verse explained that all obligations must be honored unless morally wrong.

Benevolence

This term refer to an action that benefits persons other than those from whom the actions proceeds without any obligation.

The application of the Benevolence Axiom to Business Ethics

According to Al-Ghazali, there are 6 kinds of benevolence:

i. If a person needs a thing, one should give it to him, making as little profit as possible. If the giver forgoes the profit, it will be better for him.

ii. If a man purchases anything from a poor person, it will be more graceful on his part to suffer a little loss by paying him more than what he considers to be the proper price.

iii. In realizing ones dues and loans one must act benevolently by giving the debtors more time to pay than is due and, if necessary, one should make reductions in loans to provide relief to the debtors.

iv. It is only proper that people who want to return the goods they have purchased should be permitted to do so as a matter of benevolence.

v. It is graceful act on the part of a debtor if he pays his debts without being asked to do so, if possible long before they are due.

vi. When selling things on credit one should be generous enough, not to press Business Ethics/ MGT 3533Page 6