ETHICS ISSUES IN MANAGEMENT FROM THE

SECULAR’S AND THE ISLAMIC’S PERSPECTIVE:

A Port Klang Free Zone (PKFZ) case study

Alis Bin Puteh (CAS)

Ab.Wahab Mat (COB)

This paper will discuss ethics issues from Islamic and secular perspective. The concept of
ethics is difference between these two ideologists. According to secularist, ethics are
generally defined as the principles of morally acceptable conduct of individuals. It has
three characteristics: ethics are individually defined, ethical behaviour can be varying
from person to another and ethics is relative, not absolute. Meanwhile in Islam, ethics
prescription is contained in a verse of al-Quran which requires a Muslim at all times and
in all circumstances to act as a decent and benevolent way and to refrain from wrong
doing. This paper will focus on controversial Port Klang Free Zone (PKFZ) project in
Selangor which being criticise as “the huge project was managed by a very incompetent
people” (NST: July 30, 2009). This issue will be discuss from the Islamic managerial
ethics .
 ETHICS ISSUES IN MANAGEMENT FROM THE SECULAR’S
AND ISLAMIC’S PERSPECTIVE

Introduction

To date, corruption is recognised as a serious ethic issue in political, economic and moral

which significance representing a cost for growth and development. Offering bribes and

accepting bribes are the two core elements of corruption. Derived from the Latin

corrumpere (deceiving, betraying, bribing) the term „corruption‟ covers a wide range of

elements. According to Transparency International (2008), corruption defines the secret

abuse of entrusted power to gain a private advantage and must lead to a public or private

damage.

The central problems of corruption can be summarized as follows:

a. Criminal decision makers gain an economic advantage over honourable

competitors. The person offering a bribe will in all likelihood win the order,

although the offer is not based upon the lowest prize possible.

b. A businessman who bribes a civil servant or other official in order to obtain a

license for production will eventually endanger public welfare.

c. Bribery has often become a tradition, in the sense of corruption as a cultural

phenomenon. It would be naive to ignore the hardships doing business with

people who demand some sort of gift or payment as a cultural tradition or a

certain right.
All the meaning of corruptions above is one of the main issues in ethic. Corruption

occurred in seculars and Islamic countries.

Ethics From Secular’s Perspective

Ethics are generally defined as the principles of morally acceptable conduct of

individuals. We define ethics as an individual‟s personal beliefs about right and wrong

behaviours. According to secularist, ethics are individually defined where people have

ethics whereas organisations do not; what constitutes ethical behaviour can vary from

one person to another; and ethics are relative, not absolute. This means that although

what constitutes ethical behaviour is in the eye of the beholder, it usually conforms to

generally accepted social norms.

The Formation Of Individual Ethics

Various factors are instrumental in the formation of individual ethics such as family

influences, peer influence, life experience, personal values and morals and situational

factors.

a. Family influences

Individuals start to form ethical standards as children in response to their perception of

their parents‟ behaviours. Children are more likely to adopt high ethical standards if they

see that their family members adhere to high standards (such as being truthful) and they

receive rewards for conforming, and punishment for not conforming, to these standards.
If family members engage in unethical behaviours (such as being untruthful) and allow

their children to do the same, then the latter is likely to develop lower ethical standards.

b. Peer Influence

When children enter school, they are influenced by peers with whom they interact every

day. For example, if a child‟s friends engage in shoplifting, vandalism or drug abuse, the

child too, may decide to do the same. Conversely, if the child‟s peers have higher ethical

standards and reject the said behaviours, he likely to adopt these standards.

c. Life Experience

Dozens of important events, both positive and negative, shape people‟s lives and

influence their ethical beliefs and behaviour. These events are a part of growing up and

maturing. For example, a person who steals something and does not get caught may feel

no remorse and continue to steal. However, a person who is caught stealing may feel

guity enough to revise his ethical standards and not steal in the future.

d. Personal Values and Morals.

Values and morals also influence a person„s ethical standards. For instance, a person who

places financial gain and personal advancement at the top of his list priorities will adopt a

personal code of ethics that promotes the pursuit of wealth. Thus he may be ruthless in

attempting to gain these rewards regardless of the cost to others. A person who puts his

family at the top of his priority list will adopt different ethical standards.
 e. Situational Factors

Sometimes, people unexpectedly find themselves in situations that cause them to act

against their better judgement. For example, some people who cheat on their expenses

accounts do so because of personal difficulties. Although this does not justify their

dishonesty, it does provide some context for understanding why people may sometimes

behave unethically if they have no other choice.

The Views of Ethics

When individuals are confronted with ethical issues, they usually need guidance in

choosing the right course of action. The ultimate decision depends in part on the person‟s

view of ethics. There are four most common views such as utilitarian, golden rule,

Kantian rights and enlightened self interest.

a.Utilitarian

According to the utilitarian view of ethics, people should evaluate ethical dilemmas in

terms of the potential harm and benefits of an action. A morally correct action is one that

results in the greatest good for the greatest number of people. Greatest good refers to the

degree of pleasure or pain generated by an action, the degree to which people‟s a desire

are satisfied, or economic benefits. A good example is decision-making that accounts for

environmental issues. Damage to or preservation of the environment has a potentially

broad impact.
b. Kantian Rights

The Kantian Rights view assumes that in a moral universe, every person has certain basic

rights such as the right of consent, the right of privacy, the right of freedom of

conscience, the right of freedom and the right of due process. Under this view of ethics,

morally correct action is the one that minimises violations of these rights. To revolve an

ethical dilemma, one would have to consider which stakeholders were effected by the

action and to what extent their rights may be violated.

Analysis Of Ethical Problems In Management

Ethical decisions are not simple choices between right and wrong. They are complex

judgements on the balance between the economic and social performance of an

organisation. There has to be a balance between economic and social performance. How

do we reach this balance? There are three methods of analysis have been proposed to

resolve ethical dilemmas in management.

a. Economic Analysis

It is possible to look at many of the problems as having a definite ethical

content from the point of view of microeconomic theory, relying on

impersonal market forces to make the decision between economic and social

performance. Work force reductions and plant closures are admittedly

unpleasant for the workers who lose their jobs. However, there is a labour

market and these workers will be employed again, provided they are willing to

adjust their wage demands to market conditions.

 b. Legal Analysis

It is also possible to look each of the problems that have an ethical content

through the framework of legal theory, relying on impersonal social forces to

decide between „right‟ and „wrong‟. Work force reductions and plant closing

are unpleasant, but society has never felt that they are so harmful to the people

involved that a law prohibiting them is necessary. Should they become a

major problem, a law can be passed to deal with the situation.

c. Ethical Analysis

It is possible to look at each of the problems that have a moral content using

the structure of normative philosophy, relying on basic principles to decide

between „right‟ and „wrong‟. Work force reductions and plant closing are

unpleasant, but we can compute „the greatest good for the greatest number‟

and decide on that basis. The belief underlying normative philosophy is that if

all the rational men and women in a society acted on the same principle of

either beneficence or consistency, members of that society would be treated as

fairly as possible.

Ethics in Islam

The holistic approach of Islam is evident in its three core tenets such as the unity of god,

the unity of humankind and the unity of religion. Because of these tenets, Islam is

deemed universal and timeless. It applies to all peoples in all places. Islam is the

continuation and conclusion of the Creator‟s religion given to mankind. The law of Islam
is based on Koran. The syariah regulates almost every aspect of relationships, ranging

from that which is between the Creator and humankind, to intimate matters of

interpersonal relations.

Economic, Commerce and Business

Generally, Islamic economic and business conceptions are very much the equivalent of a

free enterprise, private sector market economy approach, though they do not exclude the

right of society to impose limitation for the greater benefit of the community. The syariah

recognises the right to private property but retains the community‟s right to what may be

termed „eminent domain‟ or collective interests. In fact, one of the important ethical

considerations in property is that its use is permissible, but abuse and waste are

forbidden. Profits are very much part of the activities of Muslims, if they are obtained in

a permissible way. However, profits cannot overshadow duties of brotherhood, solidarity

and charity. They are subject to zakat which is a tax imposed upon Muslims.

The syariah divides rules of conduct between halal and haram, meaning essentially that

which is permissible and that which is not. The distinction between the halal and the

haram applies to legitimate and illegitimate profits. Muslim is allowed to earn a profit

from his work or, if his capital is involved, whatever he shares the risk of loss. The

fulfilment of obligations in good faith and in accordance with principles of business

ethics is not only required but inseparable from the general obligation of piety. Fairness is

deemed both a means and an end, irrespective of the practical realities. Honesty is not

only virtue but an expected trait for every muslim.

The Port Klang Free Zone (PKFZ): A Case Study

PKFZ is a 405ha transhipment hub, comprising 298.4ha of open land for long term lease,

512 pre-build light industrial unit, four blocks of complexes, a 100,000 sq ft exhibition

centre and a four star hotel. The project grabbed public attention when the government

gave its nod to its agency, namely the Port Klang Authority (PKA), to buy land in Pulau

Indah to build a free zone for RM1.09 billion or RM25 per sq ft in 2002. Eyebrows were

further raised after it was revealed that its development cost had ballooned from RM2.5

billion to RM4.6 billion. A PricewaterhouseCoopers audit report, commissioned by PKA

and released in late May, had mentioned the involvement of several politicians and stated

that there could be some conflict of interest.

The Public Accounts Committee (PAC) which is investigating the controversial PKFZ

project saying it had been managed by “a group of incompetent people” from day one.

Based on the report, initial estimates show that the PKA has lost between RM500 million

and RM 1 billion to discrepancy, over billing and fraud. The report raised six points:

a. Evidence that KDSB had possibly made irregular claims under the

development agreements, in particular, for an electrical infrastructure system

worth RM55.8 million which has yet to be implemented, and another

electrical supply works and civil infrastructure worth RM83 million that was

rejected by TNB.

b. KDSB had not provided any documents to support claims for preliminaries

amounting to at least RM231 million under the development agreements.

 c. There was no basis for KDSB‟s claim for variation works of RM62 million

under the additional development works and new additional development

works.

d. There appeared to be an over-claim for the hotel works, wherein KDSB had

claimed RM69.6 million compared to a quantity surveyor consortium‟s

valuation of RM44.7 million.

e. KDSB had not produced any invoices and payment vouchers for RM121.6

million for professional fees which they are not entitle to. Their claimed also

appeared to be “ on the high side”.

f. KDSB may not be entitle to claim RM254.9 million for extra under the

development agreement 3 as it falls under the land agreement 1.

There were many weaknesses and lapses in governance that had been ignored in the past

and the ad hoc committee probing fiasco has already make eight recommendations aimed

at correcting these weaknesses. Among the recommendations were:

a. The PKA should implement a whistle-blower policy and strengthen its

internal auditing

b. The creation of the Ethics and Integrity Monitoring Committee

Conclusion

From the above study shown that PKA did not implemented either the secular theories or

the Islamic principle. These reflect the weaknesses of management team, public auditing,
and government agencies in spending the people money. Those who involved in PKFZ

case did not felt guilty by using millions of people money wrongly.