[Extract from Foreword by Prof. Rodney Wilson on Islam and Business Ethics by
Dr S M Hasanuzzaman, published by the Institute of Islamic Banking and Insurance 2003]

Many question why the global economy appears so unjust, with huge income and wealth disparities and exploitation all too apparent. Rewards in business are too often unrelated to effort.

At the heart of capitalism there appears to be an immoral core, where CEOs get ever-larger pay rises and bonuses while the asset values of their companies slump. Pension rules are unilaterally changed without consulting those who will lose out, and insurance companies that are supposed to offer protection try to escape from their obligations through legal loopholes embedded in the small print of their contracts.

Although there has been a growing interest in business ethics with courses offered as an integral part of most MBA degrees, the ethics taught are essentially socially derived, relative and secularist rather than being based on religious moral authority. It is often difficult enough to ensure that national laws are enforced in business, but business ethics, which promotes codes of good conduct over and above the legal minimum, lacks any enforcement mechanism, and instead relies on individual moral conscience. In the absence of a higher moral authority and religious guidance, personal conscience cannot determine social standards but merely results in individuals determining their own rules, moral uncertainty and even chaos.

Muslims have a huge advantage in being able to turn to their religious teaching for guidance in their business dealings. Belief in God provides not merely the motivation, but the imperative for adhering to shariah law, which is to be applied in all spheres of life. For Muslims moral conduct in their daily lives is part of their devotion. Revealed teaching provides moral certainty, and a set of standards to which the entire community of believers can adhere.

Islamic ethical values are not a substitute for universal values and virtues, but rather build on these by stressing compassion, tolerance, leniency, benevolence and hospitality. These are matters of principle and faith, but Dr Hasanuzzaman readily admits that many Muslim societies have abandoned both religious and universal values for the sake of material wealth. Paradoxically despite the decline in the influence of religion in the West, there has been a reaction by many to corporate excesses and the malpractices associated with capitalism. This has resulted in a proactive approach in the West to ensure more widespread awareness of ethical issues in business. In some respects there is scope for the ethical business movement in the West and Islamic scholars to learn from each other and move forward together.

Clearly ethics, as Syed Hasanuzzaman notes, should not be merely at the margins of business, imposing constraints, but rather at the heart of management decision-making, providing the motivation. He emphasises that Islamic ethics is not simply about justice in the legal sense, but ihsan, benevolence that transcends justice. Moral business is successful business, as although immorality can result in short term gains by taking advantage of others, in the longer term such business is unsustainable. Trust matters in business, and where there are shared religious values, this creates great opportunities for industry and commerce as analysts of Muslim history have observed from the time of Ibn Khaldun.

The desire for wealth is seen as natural, but there is a need for balance, and wealth should not be worshiped. Man may work hard, strive to make his business profitable and seek value for money in expenditure; but for the devout Muslim justice, honesty and compassion should temper these efforts. Dr Hasanuzzaman believes that man must train his inner self to abandon selfishness in favour of social interests. Markets are seen as a legitimate institution for economic transactions, but regulation is needed to prevent fraud, hence the institution of the hisba, which provides ethical guidelines for monitoring and managing business transactions.

This relates to the discussion of the concept of the just price and the Islamic law on contracts and the shariah position on options. Marketing issues are considered in considerable depth, as it is in this area that some of the greatest abuses occur with misleading and inappropriate advertising and publicity material and pressurised selling that neglects the interests of the client. The issue of insider trading is also considered, a practice that is illegal in most jurisdictions, but which too often goes undetected to the detriment of shareholder and other stakeholder interests.

There is much that non-Muslim students of business ethics can learn from Islamic teaching, with its emphasis on khilafah or responsibility to God for the management of resources. Those concerned with corporate governance should be aware of the concept of shura that implies consultation on policy formulation rather than simply the introduction of new initiatives by management dictate.

There is nothing to discover with regard to business ethics in Islam. The edifice of the entire Islamic way of life rests on absolute ethical values. One cannot be a true Muslim unless one adheres to these values. Justice and equity, honesty, integrity, veracity, leniency, compassion, tolerance, selflessness, benevolence, cooperation, mutual consideration, sacrifice and harmlessness, are the guiding values in all walks of life, business being no exception. Muslims are ordered truly to observe these values in whatever position they are: whether employer or employee, landlord or peasant, trader or customer, ruler or ruled, officer or subordinate, transporter or passenger, depositor or fiduciary, relatives or strangers, neighbours or fellow-workers, nobody is allowed to disregard these values at any time. To recognise these values as binding is a concomitant of true faith; to neglect them in practical life means a serious lapse these values are laid down and emphasised in the Qur'an and reinforced in the sayings of the Prophet Muhammad (may peace be upon him).

In addition to these general values, there are sector-specific injunctions to guide different sectors of activities meticulously. These relate to each department of life, trade being one of them. A person who observes the basic values and abides by the guiding principles of trade, as laid down in the Qur'an and the Hadith, is deemed to be commendable in this world and in the Hereafter. Thus a businessman whose object is earning his livelihood through a business activity without violating these principles is treated, in the next world, as being on par with the apostles.

Many of the ethical values laid down in Islam are not unique to Islamic society. No civilisation could progress and no social, economic, political, scientific or technological development would be possible without people adhering to the values of patience, perseverance, determination, tolerance, strength of resolution, self-control, cool temperament and mutual consideration. These universal ethical values and virtues are, however, constrained by temporal and spatial limitations because of the need to apply them to achieving the interest of some particular person, society, class or territory. These virtues are necessary to win over other societies and find a respectable place in them require some additional values, such as justice, honesty and integrity, kindliness, selflessness and sympathy. A strong, prospering society may overawe smaller and weaker societies with its material prosperity and strength and scientific and technological achievements, but cannot command true respect, love and popular support in these societies. The latter would claim their alliance and friendliness simply share their prosperity and progress.
Islamic ethical values are but a complement of universal ethical values. They prescribe compassion, tolerance, leniency, benevolence and hospitability over and above the basic universal values.

The value system set forth in Islam does not accept any constraints, because of its source and the objective behind observing it. God has laid down these eternal values in His revealed Book and conveyed them through His Prophet. These values, whether in the Qur'an or in earlier Scriptures, are not amenable to restriction to a particular society or region; they are of universal import. God has ordained these values to the entire human race for all time. These values are observed with the object of seeking God's pleasure and earning regards in the next world, rather than pleasing any group with which one is identified or from whom one seeks to obtain some benefit. Thus both the source of the values and the objective in observing them prevent them being confined to any specific place or time.

The capitalist countries in the West, where ethics have been alien to business activity for some time, are not in search of a moral code for business. This is apparently a paradoxical situation. The secularist intellectual orientation in the West had pushed ethical values to a secondary position and divorced economic activity from its fold. According to Solomon, “the way we think about business all too often tends to relegate ethics to the margins, to see morals as a set of side constraints, necessary but tangential to the real business of business'. The multifarious problems that the secular orientation created triggered a reaction first among religious leaders and philosophers and then among intellectuals. The reaction against business malpractices was so strong that some thinkers tried to divest business of its primary object — earning a livelihood. Those who fail to distinguish between business ethics and ethical business do not seem to be clear headed on the issue. They have mixed up myth and reality and attempted to suppress the symptoms rather than to cure the malady.

Changes in modes of production and trade, development in information technology, globalization of the market, the role of international financing agencies, and the role and impact of multinational corporations, have given rise to new challenges, problems and dilemmas. There is now a genuine need to meet these challenges and discover which set of Islamic principles can be applied to these problems, and how.

Trade and industry are but a part of the business, but not the whole of it. Banks, insurance companies, transport, education and health are also among the most thriving businesses. Banks and insurance companies are the ultimate repositories of all the earnings and expenditures of society. These have not been examined by our scholars. As critically as they deserve. Banking business, a centre of misappropriation and exploitation of its owners — the depositors — insurance companies which inherit a propensity for trickery and fraud, health and education, which trade on the life and intellectual growth of generations, are also going unnoticed by our scholars and critics. Stock markets, a hotbed of organised swindling, confederacy and complicity, also need serious treatment.


Source : islamic-banking.com