Islamic Business Ethics: Book Review

by Dr. Rafik Issa Beekun (Published by The International

Institute of Islamic Thought, 84 pages)

Islamic Business Ethics, begins to identify the practical elements of managing

ethics within an organization that business leaders can use, offering the
framework of an overall Islamic ethics model for an organization to adopt.

The first part of the book gives a background to the concept of ethics in Islam, its
relevance today, and a comparison to other systems. It then leads into identifying
specific approaches to developing and managing ethics within an organization and
an individual's professional responsibilities.

Ethics defined

Ethics is defined as a set of moral principles that distinguish what is right from
wrong, and in an Islamic context, the Qur'anic term khuluq is closest to it. Also,
some other terms referenced from Qur'an describing the concept of good are
khayr (goodness), birr (rightousness), qist (equity), and 'adl (equilibrium and
justice).

Islamic Ethical System

The author compares six dominant ethical systems prevalent today and draws out
some of the key parameters that shape the Islamic ethical system. Some of these
referenced include the importance of an individual's intention in judging ethical
behavior, freedom to believe, and the importance of humankind to experience
tazkiyah through active participation in this life. By behaving ethically in the midst
of the tests of this worldly life, Muslims prove their worth to God.

The author has effectively used various references from the Quran and Sunnah to
draw these parameters. For example, in support of the freedom to choose one's
faith, Surah 2:256 from the Quran is referenced:

"Let there be no compulsion in religion: Truth stands out clear from

error: whoever rejects evil and believes in God has grasped the most
trustworthy handhold, that never breaks. And God hears and knows
all things."

In addition, an important reference to profit maximization not being the ultimate

goal or only ethical outcome of trade in Islam is supported through the following
Surah 18:46:

"Wealth and sons are allurements of the life of this world; But the
things that endure, good deeds, are the best in the sight of your
Lord, as rewards, and best as the foundation for hopes."

At the same time, the author makes clear references that Islam does not reject
profits or trade and does not aim to remove all differences in income and wealth
that may result in various social and economic classes.
Five Axioms of Islamic Ethical Philosophy

The book also describes five axioms that govern Islamic ethics: unity (related to
the concept of tawhid or oneness of God), equilibrium (related to the concept of
'adl or justice), free will (to a certain degree, man has been granted the free will
to steer his/her own life as God's vicegerent on earth), responsibility
(accountability for one's actions), and benevolence.

The book then derives the business implications of these axioms. In the case of
the Unity axiom, the application to Muslim businesses is not to discriminate
among employees, suppliers, buyers, or any other stake-holder on the basis of
race, color, sex or religion. One of the supporting Surahs (49:13) referenced in
this case is:

"O mankind! Lo! We have created you male and female, and have
made you nations and tribes, that you may know one another."

Similarly the concept of equilibrium is put in context for the businesses both
figuratively and literally. Figuratively, equilibrium relates to the all-embracing
harmony in the universe and is also seen as a dynamic characteristic for each
Muslim to strive for. An ayah on those "who will be rewarded with the highest
place in heaven" is referenced as follows:

"Those who, when they spend, are not extravagant and not
niggardly, but hold a just (balance) between those two extremes;"
(Surah 25:67-68)

The book then starts leading into the practical implications of a system based on
Islamic ethical principles for Muslim professionals. It identifies permissible and
non-permissible business areas. The author takes through various Ahadith and
Ayah's referencing Halal (permissible) earnings and Haram earnings (Non-
permissible.) Some of the Haram sources of income included are trading in
alcohol, drug dealing/ trading, prostitution and any kind of trade involving
uncertainty.

Developing an Ethical Organization

In framing a business organization's ethical responsibilities, the author first

reviews the need for developing an ethical organization. As done throughout the
book, the author uses examples of contemporary multi-national businesses, here
referencing the rash of scandals on Wall Street, in the savings and loan industry
in the U.S. and in other countries.

The author writes about how a culture of loose ethical oversight or leadership can
essentially impact the whole organization's business climate. Even though some
of the examples are outdated, we are very well aware of the Enron's of the world
today including the dismal ethical reputation of many businesses from the Muslim
world with issues such as bribery/ kickbacks, discriminatory labor treatment, non-
transparency, not upholding promises, cheating/lying etc.

For an organization to practice ethics from an Islamic perspective the author

switches to referring to the concept as an organizations 'social responsibility.' This
interestingly very much correlates to the existing global emphasis and debate on
Corporate Social Responsibility (CSR). Perhaps CSR is a separate topic, but
interesting comparisons could be made between the current global CSR models
and the Islamic perspective on Corporate Social Responsibility.

The three domains of Islamic perspective on corporate social responsibility

identified include its stakeholders, the natural environment, and the general social
welfare.

Ethics related organization stakeholders (i.e, those who represent the people
and/or organizations that are affected by the actions of an organization), are
categorized as a firms relationship to its employees, how employees relate to the
firm, and how the firm relates to other economic agents. A summary of the these
key stakeholders and their associated ethical issues to be addressed are shown
below:

Key Ethical Focus Areas

Focus Areas Stakeholder(s) Issues
Relationship of the firm to its Employees Hiring and firing; Wages and working
employees condition; Privacy
Relationship of employees to the Firm Conflicts of interest; Secrecy;
firm Honesty; Skills training and
qualifications
Relationship of the firm to key Suppliers Cost of Inputs
stakeholders
Buyers Hoarding and price manipulation;
quantity and quality of goods sold;
selling strategy; use of riba in
finaning sales

Debtors Repayment terms; hoarding; abuse of

General Public environment

Stakeholders/Owners/ Distribution of losses/ gains;

Partners Sadaqah; Fair competition
The Needy
Competition
Excerpt From: Islamic Business Ethics, pg 39

For each one of the issues identified above, the author addresses the Islamic
course of action for organizations. These are some of the key insights from the
book for organizations to incorporate.

For example, for any form of transaction with partners, suppliers or clients, the
importance of putting contractual obligations in writing is emphasized referencing
the Qur'anic imperative (2:282):

"O you who believe! When you deal with each other in transactions
involving future obligations in a fixed period of time, reduce them to
writing. [.] Let him who incurs the liability dictate, but let him fear
his Lord God, and not diminish aught of what he owes . [.]"

Similarly, the book covers an organization's obligations and responsibilities

towards the natural environment again providing practical perspectives on its
treatment of animals (application for animal based pharmaceutical research,
medicine etc.) and environmental pollution (applies to public safety and hazards
to air and water created through waste management by factories)
The third domain of the Islamic perspective on corporate social responsibility,
general social welfare, is also put in perspective for organizations.

Managing Ethics/ Social Responsibility

The book provides some practical tools for organizations to put a structured
ethical model in place.

Explicit tools referenced include:

• developing a Code of Ethics to guide the organization's ethical principles in

all its interactions;
• ensuring compliance by appointing key organization actors to an ethics
review panel;
• appointment of an ethics advocate to probe management's decisions
regularly;
• selection and training incorporating an employee's ethical responsibilities
to help set common expectations and understanding within the
organization; and,
• adjusting the award system to reward ethical behavior and encourage
repetition.

Individual Responsibilities

The book also highlights key business principles that Muslims are obliged to follow
given the Islamic code of ethics and Islam's emphasis on individual
responsibilities and accountability. These guidelines include honestly and
truthfulness; keeping your word; loving God more than trade; supporting intra-
Muslim trade; being humble; using mutual consultation in business affairs; not
dealing in fraud or bribery; and dealing justly.

Again, the author backs each of these with Islamic references. For example, in
discouraging the temptations to exaggerate and lie about one's products or
services during sales or marketing, the importance of honesty and truth is
referenced as laid out by this saying of the Prophet Mohammad (saaw):

"The merchants will be raised on the day of resurrection as evil-

doers, except those who fear God, are honest, and speak the truth."

Similarly, the following Ayah (4:29) is used in support of Muslims not resorting to
extravagance (the extravagant behavior of the dot-com companies during the
internet boom comes to mind here):

"O you who believe! Eat not up your property among yourselves in vanities: but
let there be amongst you traffic and trade by mutual good-will: nor kill (or
destroy) yourselves: for verily God has been to you Most Merciful."

Overall the book is indeed a great leap forward in helping Muslims engaged in
business to act in accordance with the Islamic system of ethics.

As mentioned earlier, this book is a rarity. Whereas in the global corporate

environment today there are numerous business/ management books that are
written providing practical perspectives for business leaders and managers,
insights relating to Islamic business ethics or other such managerial issues
written for the consumption of business leaders has been unheard of. Islamic
Business Ethics provides a framework for Islamic code of ethics; presenting
practical perspectives for organizations to incorporate and manage Islamic ethics.

It's a short book so it lacks the detail required for an organization to use as a
complete guide for managing ethics within their organization, but definitely
provides some key pieces to work with.