Over the centuries, as state and church separated, particularly in western

societies, religion became a private matter. The so-called value-free society

developed and economists focused exclusively on the mechanics of economics.
There is a growing realization that value-free economics is a misnomer. Postmodern thinkers have advocated changes over the past few decades and there
has been a reintroduction of a moral dimension in business
An important task for many managers is how to integrate this moral
dimension into business conducted across borders. Managers need an
appreciation of the ethical norms of different groups and cultures in order to gain
complete understanding of the cultural environment in which the firm must
operate (Al-Khatib et al., 1995). Relatively few empirical studies have addressed
culturally-related ethical issues (see for example, Becker and Fritzsche, 1987;
Akaah, 1990; Vitell et al., 1993; Nyaw and Ng, 1994). Based upon the results of a
study that found some surprising significant differences between the values of
American and Thai marketers, Singhapakdi et al. (1995) suggest that
multinational corporations should train their marketing professionals differently
in different parts of the world. Amine (1996) goes further and urges that the role
of global managers should be one of moral champions, committed to pursuing
the best in ethical and moral decision-making and behavior. The definition of
best is not an easy task, however, when one takes into account the many
different moral philosophies that exist.
In recent years there have been a number of articles published in the
Journal of Business Ethics which have discussed the positions of various faiths
regarding the relevance of religious ethical principles to business decisionmaking (see for example, Williams, 1993; Green, 1993; Rossauw, 1994; Gould,
1995). The Popes Centesimus Annus argues that what is lacking in our time is a
moral culture capable of transforming economic life so that it has a context in a
humane community (Williams, 1993).
My focus in this paper is on the ethical principles which relate to business
and which are contained in the religion of Islam. Islam is generally
misunderstood and it is often surprising to some that it contains an entire socioeconomic system. In Islam, it is ethics that dominates economics and not the
other way around (Naqvi, 1981). My purpose is twofold: (1) to share a
perspective on business ethics, little known in the west, which may stimulate
further thinking and debate on the relationships between ethics and business,
and (2) to provide some knowledge of Islamic philosophy in order to help
managers doing business in Muslim cultures deal with cultural differences. The
paper is organized as follows. First is a description of the Islamic ethical system.
Next is a discussion of the differences between philosophy and practice in Islamic
business ethics. This discussion forms the basis for guidelines on doing business
with people in Muslim cultures. Egypt is used as an illustrative case.
The Islamic ethical system
Muslims derive their ethical system from the teachings of the Quran
(which Muslims believe is a book revealed by God to Muhammad in seventh

century Arabia), and from the sunnah (the recorded sayings and behavior of
Muhammad). The goals of Islam are not primarily materialist. They are based on
Islamic concepts of human well being and good life which stress
brotherhood/sisterhood and socioeconomic justice and require a balanced
satisfaction of both the material and spiritual needs of all humans (Chapra,
1992).
1. A moral filter
There exists in most societies a relative scarcity of resources with
unlimited claims upon them. A free-market capitalist economy uses
marketdetermined prices as a filtering mechanism to distribute resources.
The use of the price system alone, however, can frustrate the realization
of socio-economic goals. Under a system of state control, the allocation of
resources is in the hands of a bureaucracy, which is cumbersome and
inefficient. According to Chapra (1992), the Islamic worldview implies that
the market system should be maintained, but that the price mechanism be
complemented with a device that minimizes unnecessary claims on
resources. This device is the moral filter. This means that people would
pass their potential claims on resources through the filter of Islamic
values so that many claims would be eliminated before being expressed
in the marketplace. Resources would not be allowed to be diverted to the
production of luxuries until the production of necessities was ensured in
sufficient quantities (Siddiqi, 1981). The definition of luxurious or
extravagant is related to the average standards of consumption in a
society, the idea being that large departure from the standards would not
be permissible.
Keynes (1972) observations on this subject may be useful. He
stated that even though the needs of human beings may seem to be
insatiable, . . . they fall into two classes those needs which are
absolute in the sense that we feel them whatever the situation of our
fellow human beings may be, and those which are relative ones in the
sense that their satisfaction lifts us above or makes us feel superior to
others. Needs of the second class, which satisfy the desire for superiority,
may indeed be insatiable; for the higher the general level, the higher still
are they. But this is not so true of the absolute needs. Islamic jurists
categories of necessities (daruriyyat), conveniences (hayiyyat) and
refinements (tahsiniyyat) would fall into Keynes first class of needs. These
are any goods and services which fulfill a need or reduce a hardship and
make a real difference in human well-being. Thus comforts are included
here (Chapra, 1992). Luxuries (the second class of needs), however, are
goods and services derived for their snob appeal and make no difference
to a persons well-being. Galbraith (1958) refers to this second class of
needs as wants.
Consumer advocates in the U.S. have long been critical of business
practices that increase the desire for wants and subsequently have
adverse cultural and social effects (Williams, 1993). For example, in
pursuit of profit maximization, businesses often subject the consumer 346
Gillian Rice to advertising and sales promotion campaigns that appeal to

the consumers vanity, sex appetite and envy, either overtly or covertly.
Consumers are encouraged to believe that their actualization and social
esteem are dependent on the frequency and value of their purchases. This
leads in turn to a tremendous amount of wasteful production, with adverse
environmental as well as social implications. According to the United
Nations Development Program (UNDP) Human Development Report
(1994), the lifestyles of the rich nations must change; the north has a fifth
of the worlds population and four-fifths of its income and it consumes
seventy percent of the worlds energy, seventy-five percent of its metals
and eighty-five percent of its wood. Even in these rich countries, some of
the essential needs of the poor remain unfulfilled, and high pollution and
rapid depletion of non-renewable resources occur
The question, of course, is how to implement the moral filter
without coercion or despotism. The filter mechanism of values must be
sociallyagreed upon and some way has to be devised to motivate
consumers and businesspeople to abide by these values. From an Islamic
point of view, social change must be gradual and cannot be achieved
through force. The Quranic injunction There is no compulsion in religion
(Quran 2:256) is relevant here. Change can occur by inviting people to
alter their ways or by setting an example. Historically this is how Islam
rapidly spread through a large part of the world in the seventh and eighth
centuries (Eaton, 1994). For example, when Muslim merchants traveled to
distant lands, the inhabitants of those lands were impressed by the
traders social and business conduct and so became curious about their
beliefs. Many of these inhabitants subsequently became Muslims. A
parallel exists today with respect to the green movement which
continues to spread around the globe. The adoption of environmentally
conscious behavior is occurring through example, encouragement and
education, as well as by legislation. Indeed, in the environmental context,
legislation is insufficient. Only when the political will and support of the
populace are strong enough, are environmental laws adequately enforced.
2. Unity (tawhid)
The key to the business philosophy of Islam lies in a persons
relationship with God, His universe and His people. In common with other
revealed religions is the moral appeal to humans to surrender themselves
to the will of God. Islam goes beyond this exhortation and teaches that all
life is essentially a unity because it also provides the practical way to
pattern all facets of human life in accordance with Gods will. There should
be unity of ideas and actions in a persons existence and consciousness
(Asad, 1993). Muslims believe that because people are accountable to
God, and their success in the hereafter depends on their performance in
this life on earth, this adds a new dimension to the valuation of things and
deeds in this life (Siddiqi, 1981). Islam is simply a program of life in accord
with the laws of nature decreed by God. A definite relationship between
fellow humans is thus prescribed. This is the relationship of brotherhood or
sisterhood and equality (Abu-Sulayman, 1976). In this sense, unity is a
coin with two faces: one implies that God is the sole creator of the

universe and the other implies that people are equal partners or that each
person is a brother or sister to the other. As far as business is concerned,
this means cooperation and equality of effort and opportunity
3. Justice (adalah)
Islam is absolutely unambiguous in its objective of eradicating from
society all traces of inequity, injustice, exploitation and oppression. The
Quran also condemns vicarious guilt or merit and teaches the greatest
possible individualism . . . no bearer of burdens can bear the burdens of
another; . . . man can have nothing but what he strives for . . . (Quran
53:389). This indiIslamic Ethics 347 vidualistic outlook on the spiritual
destiny of humanity is counterbalanced by a rigorous conception of
society and social collaboration. In their acquisition of wealth, however,
people should not lie or cheat; they must uphold promises and fulfill
contracts. Usurious dealings are prohibited. Islam teaches that all wealth
should be productive and people may not stop the circulation of wealth
after they have acquired it, nor reduce the momentum of circulation
(Chapra, 1992).
The intense commitment of Islam to justice and brotherhood
demands that Muslim society take care of the basic needs of the poor.
Individuals are obliged to earn a living and only when this is impossible
does the state intervene. The Islamic institution of zakah, that is, a wealth
tax comprising compulsory charitable-giving for specially designated
groups in society, facilitates the care of all members of society. The rich
are not the real owners of their wealth; they are only trustees. They must
spend it in accordance with the terms of the trust, one of the most
important of which is fulfilling the needs of the poor. The word zakah
means purification and as such, income redistribution is not only an
economic necessity but also a means to spiritual salvation (. . . of their
wealth take alms so that you might purify and sanctify. Quran 9:103).
Thus, economics is effectively integrated with ethics (Naqvi, 1981).