Aug 12th, 2007 by
abuyusoef
What is Ethics?
By Dr. Sahabudin Azmi
Ethics may be defined
as the set of moral principles that distinguish what is right from what is
wrong. Ethics has a twofold objective: it evaluates human practices by calling
upon moral standards; also it may give prescriptive advice on how to act
morally in a given situation. Ethics, therefore, aims to study both moral and
immoral behavior in order to make well-founded judgments and to arrive at
adequate recommendations. Sometimes ethics is used synonymously with morality. An action, which is morally
right, is also called an ethical one. Codes of morality are called ethical
codes. Business ethics can also be defined as business morality.
Business Ethics
Business Ethics is the
branch of ethics that
examines ethical rules and principles within a commercial context; the various moral or ethical problems
that can arise in a business
setting; and any special duties or obligations that apply to persons engaged in
commerce.
Generally speaking, business ethics is a normative discipline, whereby
particular ethical standards are formulated and then applied. It makes specific
judgments about what is right or wrong, which is to say, it makes claims about what ought to be done or what ought not to be done. Generally
speaking, business ethics is concerned with the study of what is good and bad,
right and wrong, and just and unjust in business.
Islam places the highest
emphasis on ethical values in all aspects of human life. In Islam, ethics
governs all aspects of life. Ethical norms and moral codes discernable from the
verses of the Holy Qur’an and the teachings of the Prophet (sws) are numerous, far reaching and comprehensive. Islamic
teachings strongly stress the observance of ethical and moral code in human behavior.
Moral principles and codes of ethics are repeatedly stressed throughout the
Holy Qur’an. Besides, there are numerous teachings of
the Prophet (sws) which cover the area of moral and
ethical values and principles. Says the Holy Qur’an:
You are the best nation
that has been raised up for mankind; You enjoin right
conduct, forbid evil and believe in Allah. (3:110)
The Prophet (sws) also says:
I have been sent for the
purpose of perfecting good morals. (Ibn Hambal, No: 8595)
This goes without saying
that there is a general consensus among human beings about certain fundamental
ethical values. However, the Islamic ethical system substantially differs from
the so-called secular ethical systems as well as from the moral code advocated
by other religions and societies. In the Islamic scheme of things, adherence to
moral code and ethical behavior is a part of Iman (faith) itself. According to the Islamic
teachings, Muslims have to jealously guard their behavior, deeds, words,
thoughts, feelings and intentions. Islam asks its believers to observe certain
norms and moral codes in their family affairs; in dealings with relatives, with
neighbors and friends; in their business transactions; in their social affairs,
nay in all spheres of private and public life.
Islam has its own
distinctive value-based ethical system for business dealings. It prescribes
certain specific guidelines for governing business ethics. It (i) enumerates the general ethical rules of business
conduct, (ii) identifies ethically desirable forms of business, and, (iii)
specifies the undesirable modes of transactions.
Freedom of
Islam gives complete freedom
to economic enterprise. Each individual in an Islamic society enjoys complete
freedom in the earning of his livelihood. He can start, manage and organize any
kind of business enterprise within the limits set by the Islamic
Islam, as a matter of
principle, prohibits all activities which may cause harm either to the traders
or the consumers in the market. It encourages the prevalence of free market
where everyone earns his sustenance without government intervention. However,
it puts certain restraints in order to eliminate the incidence of injustice and
check malpractices and unlawful operations. In all other respects market in
Islam is free from any state intervention. However, if the people fail to take
guidance from the Holy Qur’an in matters relating to business
transactions, an Islamic state will strive to organize the market transactions
on sound Islamic principles. Freedom of enterprise in an Islamic market will,
therefore, be regulated by the (i) dictates of the
Holy Qur’an and the teachings of the Prophet Muhammad
(sws) and (ii) the directives of the temporal
authority. During the early centuries of Islam, this function was mainly
performed by the institution of Muhasbah (headed by a Muhtasib
or market inspector). The institution of Muhasbah was an important institution whose
functions were broad-based and multifarious, chief among them being keeping a
watch on the harmful practices prevalent in the market and the society and
checking the incidence of injustice and malpractices in the market.
Islamic Tenets Concerning Business Transactions
Keenness to Earn Legitimate (Halal) Earnings
Says the Holy Qur’an:
Do not devour one another’s
property wrongfully, nor throw it before the judges in order to devour a
portion of other’s property sinfully and knowingly. (2:188)
Do not devour another’s
property wrongfully – unless it be by trade based on
mutual consent. (4:29)
The above verses prohibit
the believers in no uncertain terms to devour the property of others by illegal
means. The Prophet (sws) endorsed the importance of
legitimate ways of earning in the following words:
Asked
‘what form of gain is the best? [the Prophet]
said, ‘A man’s work with his hands, and every legitimate sale’. (Ahmad, No: 1576)
From the above it is clear
that a Muslim trader must be determined to earn only through legitimate means.
He should not only avoid illegitimate means in earning his provisions and
livelihood but also distance himself from matters dubious and doubtful. The Prophet (sws) is also reported to have said:
Allah has permitted trading
and forbidden Riba (usury). (2:275)
Devour not Riba doubled and re-doubled. (3:130)
It further states:
O you who believe! fear Allah and give up what remains of your demand for usury
if you are indeed believers.
If you do it not, take notice of war from Allah and his Apostle: but if you
turn back you shall have your capital sums; deal not unjustly and you shall not
be dealt with unjustly. (2:278)
The Sunnah is equally emphatic in denouncing Riba. The
Prophet (sws) is reported to have said:
May Allah send down His
curse on the one who devours Riba and the one who pays it and on the two
witnesses and on the person writing it. (Ahmad, No: 624)
These and many other verses
of the Qur’an and traditions of the Prophet (sws) clearly demonstrate that all those business
transactions which involve interest in one form or other,
are unlawful in the sight of Islam. According to the Qur’anic teachings there is a clear distinction
between genuine business profits and interest; while the former is recommended
and desirable, the latter is hated and undesirable.
Trade through Mutual Consent
Mutual consent between the
parties is a necessary condition for the validity of a business transaction.
It, therefore, follows that a sale under coercion is not acceptable in Islam. A
sale transaction is to be regarded as legal only if it is made through the
mutual consent of the parties concerned. Taking advantage of someone’s plight
and charging high price is also a form of pecuniary exploitation and as such
forbidden in Islam. The Holy Qur’an says:
O you who believe! eat not up your property among yourselves in vanities: but
let there be amongst you traffic and trade by mutual goodwill: nor kill [or
destroy] yourselves: for verily Allah has been to you Most Merciful. (4:29)
Thus two key elements of
general theory of contract are endorsed emphatically in these verses: mutual
consent and gainful exchange. One can also find importance of mutual consent
for legality of a business deal. The Prophet (sws) is
reported to have said:
A sale is a sale only if it
is made through mutual consent. (Ibn Majah, No: 2176)
Truthfulness in Business Transactions
Islam encourages
truthfulness in business transactions and raises the status of a truthful
merchant so much so that he will be at par with the holy warriors and martyrs,
in the Hereafter. The Prophet (sws) is reported to
have said:
The
truthful merchant [is rewarded by being ranked] on the Day of Resurrection with
prophets, veracious souls, martyrs and pious people. (Tirmidhi,
No: 1130)
The Prophet (sws) has also exhorted the believers to strictly adhere to
truthfulness in business transactions. He says:
The seller and the buyer
have the right to keep or return the goods as long as they have not parted or
till they part; and if both the parties spoke the truth and described the
defects and qualities [of the goods], then they would be blessed in their
transaction, and if they told lies or hid something, then the blessings of
their transaction would be lost. (Bukhari, No: 1937)
The tradition implies that
Allah blesses business dealings if both the buyer and the seller are true to
each other. Telling lies and hiding facts will result in the loss of divine
blessing. A tradition reads.
The Holy Prophet said:
‘Traders are wicked people’. The Companions asked: ‘O Messenger,
has Allah not permitted business?’ The Messenger replied: ‘Of course He has
declared trading lawful. But they (i.e. the traders) will swear by Allah and do
evil, they will not speak but tell lies’. (Ahmad, No: 14982)
Trustworthiness in Business Transactions
Trustworthiness is one of
the most important principles of ethical discipline in commercial transactions.
Trust is a moral virtue and duty incumbent on a Muslim in the performance of
his affairs. It demands sincerity in work and purity of intention from every
believer. A true Muslim trader will not, therefore, barter his Akhirah (hereafter)
for worldly gains. He will avoid fraud, deception, and other dubious means in
selling his merchandise. The sense of mutual trust demands that the pros and
cons of commodity be revealed to the buyer so that he purchases the commodity
in full satisfaction. Says the Holy Qur’an:
O you believers! Do not
betray Allah and the Messenger, nor knowingly, betray your trusts. (8:27)
Generosity and Leniency in
Business Transactions
One should be lenient and
generous in bargaining. Therefore, whoever demands his debt back from the
debtor should do so in a decent manner. The Prophet (sws)
invokes Allah’s mercy thus:
May Allah’s mercy be on him
who is lenient in his buying, selling, and in demanding back his money [or
debts]. (Bukhari, No: 1934)
The Prophet’s exhortation
to Muslims means that a creditor should be easy and generous in demanding back
his money. The debtor, in turn, should also give back the debt to the creditor
on time with due thanks and politeness. The Prophet (sws)
was the best of all people in repaying the debts.
Abu Rafi‘ reports that the Prophet (sws)
took a young camel on loan. When camels came to him in charity, he asked Abu Rafi‘ to give the creditor a young she camel. Abu Rafi‘ pointed out that there was no young camel except
for a four–year old camel of a very good quality. The Prophet (sws) said: ‘Give him the best one, for the best amongst you
is he who repays the rights of others handsomely’. (Muslim, No: 3002)
Honouring and fulfilling Business
Obligations
Islam attaches great
importance to the fulfilment of contract and
promises. Islamic teachings require a Muslim trader to keep up his trusts,
promises and contracts. The basic principles of truth, honesty, integrity and
trust are involved in all business dealings. The Holy Qur’an
emphasizes the moral obligation to fulfil one’s
contracts and undertakings. A verse states thus:
O you who believe! Fulfil [your] obligations. (5:1)
A tradition of the Prophet
(sws) states thus:
The Muslims are bound by
their stipulations. (Abu Da’ud, No: 3120)
Another tradition condemns
promise-breaking as the hallmark or trait of a hypocrite:
In order to safeguard the
interest of both the buyer and the seller it is desirable, according to the
Islamic teachings, to clearly define all the necessary details concerning the
business deal. Each business contract should clearly specify the quality, the
quantity and the price of the commodity in question. Thus, in a business
contract the offer and acceptance should be made between the parties concerned
on a commodity which is with the buyer and, which he is able to deliver. Any
commodity which is non-existent or not deliverable is not allowed to be transacted.
A contract must be explicit with regard to the rights and obligations of the
parties concerned so that it does not lead to disputes and disagreements
between them.
Islam puts certain
conditions and restrictions to obviate the chances of bitterness between the
employer and employees. Islam encourages and promotes the spirit of love and
brotherhood between them. According to the Islamic teachings it is the
religious and moral responsibility of the employer to take care of the overall
welfare and betterment of his employees. Fair wages, good working conditions,
suitable work and excellent brotherly treatment should be provided to the
workers. The last Prophet of Allah (sws) has
explained this principle in the following words:
Those are your brothers
[workers under you] who are around you, Allah has
placed them under you. So, if anyone of you has someone under him, he should
feed him out of what he himself eats, clothe him like what he himself puts on,
and let him not put so much burden on him that he is not able to bear, [and if
that be the case], then lend your help to him. (Bukhari, No: 2359)
I will be foe to three
persons on the Last Day: one of them being the one who, when he employs a person
that has accomplished his duty, does not give him his due. (Bukhari,
No: 2109)
The Prophet (sws) is also reported to have said:
The wages of the labourers must be paid to him before the sweat dries upon
his body. (Ibn Majah, No:
2434)
Prohibited Matters in Business Transactions
So far we have focused on
one aspect of the business ethics – guidelines prescribed by Islam for
conducting business transactions. Another aspect of business ethics is the
various forms of unethical business practices a Muslim businessman must avoid
in his business dealings. Some of these prohibited and undesirable business
practices are as follows:
Dealing in Prohibited (Haram) Items
Dealing in unlawful items
such as carrion (dead meat), pigs and idols is strongly prohibited in Islam.
Dead meat would mean the flesh of any bird or animal dead from natural causes,
without being properly slaughtered in an Islamic way. A Muslim, therefore, will
not eat the flesh of such an animal or bird. Flesh of an electrocuted animal,
or of an animal killed by the blow of a blunt weapon, and of the strangled one
is also proscribed in Islam. Also proscribed is the flesh of the animal that
has been killed or slaughtered in ways other than Islamic. It is, therefore,
not permissible for a Muslim to trade in dead meat. Likewise, trading in pork
or intoxicants and sale of idols and statues is not permitted in Islam. A verse
of the Holy Qur’an says:
Forbidden to you [for food]
are: dead meat, the blood, the flesh of swine and that on which name of other
than Allah has been mentioned. (5:1)
The Holy Qur’an
also says:
O you who believe! intoxicants and gambling [dedication of] stones and
[divination by] arrows are an abomination of Satan’s handiwork: so avoid it in
order that you may prosper. (5:90)
The Prophet (sws) is also reported to have said;
Allah and His Messenger
made illegal the trade of alcoholic liquors, dead animals, pigs and idols. (Bukhari,
No: 2082)
The Prophet (sws) also said;
If Allah makes something
unlawful, he makes its price also unlawful. (Ahmad, No: 2546)
In Islamic terminology,
this refers to the sale of a commodity or good which is not present at hand; or
the sale of an article or good, the consequences or outcome of which is not yet
known; or a sale involving risks or hazards where one does not know whether at
all the commodity will later come into existence. Such a sale is strictly
prohibited in Islam because the quality, whether good or bad, is not known to
the buyer at the time of the deal and there is every possibility that the
contract may give rise to disputes and disagreements between the concerned
parties. The Prophet (sws), therefore, prohibited the
sale of what is still in the loins of the male; or sale of whatever is in the
womb of a she–camel; or sale of birds in the air; or the sale of fish in the
water, and any transaction which involves Gharar. (i.e. anything
that involves deception). He also forbade the sale of fruits before they look
healthy and also the sale of crops until the grain hardens. Nevertheless, such
advance sales would be acceptable if the element of Gharar does not exist and the quality and the quantity of the goods
are pretty well known and predictable.
Arbitrarily Fixing the Prices
Islam grants absolute
freedom to traders provided they adhere to the code of lawfulness. It does not,
therefore, encourage the practice of price–fixing and
leaves the traders to earn the profits from each other within the lawful
limits. As a matter of principle public authorities are not allowed to fix the
prices of commodities by force. This is because rise and fall in the prices are
linked to various factors other than the greediness of the traders and fixing
the prices may endanger both public and private interests.
It is reported that once
the prices shot up during the period of the Prophet (sws).
The people said:
O Messenger of Allah!
Prices have shot up, so fix them for us. Thereupon the Messenger of Allah said:
‘Allah is the One Who fixes prices, withholds, gives lavishly, and provides,
and I hope that when I meet Allah, none of you will have any claim on me for an
injustice regarding blood or property.’ (Tirmidhi, No: 1235)
However, the role of public
authorities comes into play if it becomes absolutely essential to do so,
especially in order to prevent exploitation and other unjust practices in the
market. Thus, if a trader adopts unfair means, charges unjust prices and
indulges in undercutting with a view to doing harm to the smaller traders,
public authorities have the right to intervene in the market. They can and
should take steps to fix or control the prices so as to eliminate injustice
from the market and allow the trader to earn reasonable profit and the buyer to
pay a just and equitable price.
Hoarding of Foodstuff
The Arabic word for
hoarding is Ihtikar. It means storing foodstuffs or withholding
them in expectation of rise in their prices. Sometimes, a handful of traders
operating in the market buy the entire quantity of an item, rice for example,
and store it up with the object of selling it later at the time of scarcity to
draw maximum profit out of it and to dictate the prices. The consumers are left
with no choice but to purchase the article concerned from the one who hoards,
as he is the only one in the market who holds it. Sometimes, a trader hobnobs
with the suppliers who will only sell their merchandise to him. As a result, he
holds the entire stock of the essential items that other traders do not
possess. He is, therefore, in a position to dictate his terms in the market and
sell them at an exorbitantly high price to the needy people. This is an unjust
practice and a clear case of exploitation and deservedly condemned by Islam.
The Prophet (sws) is reported to have condemned the
hoarders when he said:
No one hoards but the
traitors (i.e. the sinners). (Abu Da’ud, No. 2990)
He (sws)
also said:
The importer [of an
essential commodity] into the town will be fed [by Allah], and the hoarder will
have [Allah’s] curse upon him. (Ibn Majah, No: 2144)
Exploitation of one’s Ignorance of Market Conditions
One of the most common
unethical practices in modern business is to exploit one’s ignorance of market
conditions. Sometimes it may happen that a buyer arrives in a town with objects
of prime and general necessity for selling them in the market. A local trader
may persuade the new-comer to transfer all of the goods to him so that he will
sell them on his behalf in the market. He obtains the commodities on a price
that is lower than market price and then sells them at a high or exorbitant
price. Islam condemns this act of intermediary intervention which involves
exploitation of one’s ignorance of market conditions. The practice was
prevalent in pre-Islamic society. The Prophet (sws)
has prohibited this practice through a number of instructions. A tradition
reads:
Al-Najsh (Trickery)
The term Al-Najsh means an action in which a person offers a high price for something,
without intending to buy it, but just to cheat or defraud another person who
really means to buy it. The person practising it may
collaborate with the seller to offer high prices in front of the buyers merely
as a means to cheat them. This type of fraudulent transaction is totally
prohibited in Islam. The Prophet (sws) is reported to
have said:
Do not harbour
envy against one another; do not outbid one another [with a view to raising the
price]; do not bear aversion against one another; do not bear enmity against
one another; one of you should not enter into a transaction when the other has
already entered into it; and be fellow brothers and true servants of Allah. (Muslim, No: 4650)
As is clear from the above,
Islam also forbids the practice of sale over sale and purchase over purchase.
This means that it forbids someone to offer a higher price for a commodity
after the deal has been accomplished between the parties. Obviously he is
offering a higher price in order to spoil the agreement reached between the
parties. As a result of this offer the buyer may feel tempted to cancel his
contract to sell it at a higher price. It may give rise to disputes and
disagreements between brothers. Hence it is strictly prohibited in Islam.
Cheating and Fraud in Business Transactions
The traders and businessmen
generally have a tendency to motivate the customers by adopting fraudulent
business practices. Islam strongly condemns all such practices in business
transactions (Al-Ghashsh). The Messenger of Allah has commanded
the believers not to indulge in cheating and fraudulent practices in business
transactions. Sale of dead animal, dubious and vague transactions, manipulating
the prices, selling the items belonging to a desert dweller by a townsman Al-Najsh (trickery), false eulogy and concealment of defects are all examples of
cheating and fraud i.e. Al-Gashsh. The Prophet (sws)
has strongly condemned all such practices in a number of traditions and the
believer to abstain from them.
The Prophet (sws) is reported to have said:
The seller and the buyer
have the right to keep the goods or return them as long as they have not
parted. He also said that if both the parties have spoken the truth and
described the defects as well as the merits thereof (the goods), they would be
blessed in their deal. If they have told lies or concealed something, then
blessings of their transaction would be lost. (Bukhari, No: 1937)
Swearing
The traders often take
recourse to swearing to emphasize that their items are of good quality. They
claim qualities in the merchandise, which don’t exist. They try to persuade the
buyers to purchase their commodity by invoking Allah’s name. Swearing in
business for such purposes is forbidden in Islam, be it false or true. False
swearing is an act of sin punishable by hellfire. Swearing by Almighty Allah is
too great a thing to be used as a means to sell a commodity. The desirable
thing in business transaction is that both the buyer and the seller remain
straightforward and truthful in their dealings, so that no one will feel the
need to swear by Allah in order to create conviction in the mind of the other
party. The Prophet (sws) is reported to have said:
Swearing [by the seller]
may persuade the customer to purchase the goods but the deal will be deprived
of Allah’s blessing. (Bukhari, No: 1945)
Another form of deceit is
to manipulate weights and measures. It refers to the act of taking full
measures from others and giving them short measures in your turn. Giving short measures
was a common malaise plaguing the pre-Islamic days. The community of the
Prophet Shu‘ayb (sws) was known for practising it with impunity. Consequently, they were
destroyed for their persistence in deceit and disbelief in Allah and His
Messenger. Allah the Almighty has repeatedly commanded exactitude in weights
and measures. One of the verses says:
And give full measure when
you measure, and weigh with a just balance. That is good and better in the end.
(17:35)
Dealing in Stolen Goods
Almighty Allah has declared
thievery unlawful and warned of severe punishment such as cutting the hand of
the thief from the wrist joint if the necessary legal conditions for the award
of punishment are met. Even if the thief escapes worldly punishment and gets
away with stolen goods, it is not permissible for a Muslim to knowingly
purchase or sell these items. The stolen items are neither to be bought nor
sold by those who know the reality. The Prophet (sws)
made the person knowingly buying a stolen commodity a partner to the crime. He
said:
The one
who knowingly purchases a stolen good, is a partner to the act of sin and the
shame. (Kanz Al-‘Ammal, No: 9258)
In modern times business
ethics has become a major topic of discussion among business communities and
other related organizations. Each and every society has evolved ethical and
moral codes of conduct for business transactions. However, the Western secular
ethical values are by and large supposed to be utilitarian, relative,
situational and devoid of any spiritual sanctioning power. The Islamic ethical
codes, on the contrary, are humane rather than utilitarian or relative. They
are good for all times and absolute. Ethical and moral codes in Islam are part
of the overall Islamic faith and observing them will not only lead to a happy
state of affairs in this world but also holds the promise of manifold returns
in the Hereafter. Islamic ethical and moral codes thus create a sense of
responsibility and accountability in the minds of the believers, be they buyers
or sellers.
Our effort in this paper
has been to present the Islamic perspective concerning business ethics. As we
saw, the ethical code of Islam is multidimensional, far reaching and
comprehensive. Islamic ethical framework is repeatedly stressed throughout the
Holy Qur’an, and the teachings of the Prophet and
encompass all spheres of life including business financial dealings and
obligations. The fundamental codes of moral behaviour
such as truthfulness, trustworthiness, generosity and leniency, adherence to
business commitments and contracts, fair treatment of workers, avoidance of
evil practices (such as fraud, cheating, deceit, hoarding of foodstuff,
exploitations, giving short measures etc.) provide, to a large extent, the
general background of Islamic business ethics. The writer believes that there
is a pressing need to study and implement Islamic moral values in the context
of the present day business situations.