Ethics in Business: An Islamic Perspective

‘Business ethics’ is often viewed as an oxymoron, in the way that ‘seriously funny’ and ‘open secret’ are considered to be counterintuitive. The fact that business has to do with profit maximisation or promoting self-interest while ethics emphasises on caring for others or having social responsibility makes the term ‘business ethics’ sounds contradictory.  As such, questions were raised on whether business ethics truly exist or how does a businessman be ethical in a highly competitive business environment these days.

Major religions today would try to answer these questions through what is called a Golden Rule -from books and traditions. To quote some examples:

Christianity – “Whatever you want men to do to you, do also to them.” (Matthew 7:12)

Islam – “No one of you is a believer until he loves for his neighbour what he loves for himself.” (Hadith Prophet Muhammad s.a.w.

Judaism – “What is hateful to you, do not do to your fellow man. This is the entire Law; all the rest is commentary.” (Talmud, Shabbat 31a)

Buddhism – “Hurt not others with that which pains yourself.” (Udana-Varga 5,1).

How should a Muslim react to the questions above? Should he feel that business activities have potential to reduce a Muslim’s commitment to his religion? Will Islamic values be a hindrance to business success? If not, what Islamic ethics can offer us pertaining to business? Allow me to bring to your attention two key Islamic principles, among many others, that shaped Muslim businessmen in the past and will be of great help in this challenging era.

1. Trade through mutual consent

Mutual consent between the parties is a necessary condition for the validity of a business transaction. The concept of two willing parties, the buyer and the seller, is a requirement to a valid sale. It, therefore, implies that a sale under force is not tolerable in Islam. A sale transaction is considered as legal only if it is made through the mutual consent of the parties concerned as freedom to contract is protected under Islamic business law. 

From the buyer’s perspective, he takes comfort from knowing that a seller taking advantage of someone’s difficulties and marking up unreasonably high prices for a product or service are deemed as forms of financial exploitation and as such are forbidden in Islam.

For these reasons, we have seen Islamic finance flourish in the last decade. The central themes in Islamic finance that prohibits leverage and riba, and promotes asset-backed transactions are now increasingly being universally accepted. Alongside these Islamic ethics also emphasizes on no reward without risk (al ghormi bil ghonm) and profit comes with responsibility (al kharaj bil dhaman).

2. Honouring and fulfilling business obligations

The second Islamic principle is fulfilling promises and contracts. Islamic teachings require a Muslim businessman to be trustworthy and to keep to his 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)

If a businessman is in a rental of house units business, each business contract should clearly specify the content, the quantity and the price of the unit in detail. Thus, in a business contract, the offer and acceptance on the rental should be made clear between the parties concerned which must be reasonable and deliverable. Any promise 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 — which emphasize the need for a very high level of transparency.

Summary

Generally speaking, earning profits from business activities is encouraged in Islam. It also encourages its followers to be self-reliant financially. Business activities should lead Muslim businessmen to work hard and achieve material success. Islam holds committed Muslim businessman in high esteem due to the fact that Prophet Muhammad s.a.w. said “An honest and trustworthy business man will be the martyrs on the day of resurrection”.

On another occasion, a tradition of the Prophet (Peace be upon him) states: “A time will come upon the people when one will not care as to how he gets his money whether legally or illegally.” These statements give us an insightful view of Islamic ethics. If other major religions, such as Christianity, call for a review to inculcate religious values in Christian businessmen, Muslim businessmen can be proof of success stories where business ethics and religious values can merge harmoniously for the betterment of the individual and his community.

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Reference:

1. JOHN C. MAXWELL. There’s no such thing as “Business” Ethics. 2003: Hachette Book Group, Inc.
2. Dr. Sabahuddin Azmi, Ph. D. (Economics). An Islamic Approach to Business Ethics. College of Islamic Banking, World Al-Lootah University (Internet), Dubai

KEWANGAN ISLAM ISLAMIC PERSPECTIVE SOCIETY ETHICS ISLAM AND ETHICS BUSINESS ISLAMIC FINANCE