Business Ethics

REPORT OF BUSINESS ETHICS ON Qurani Dimensions Of Business Ethics SUBMITTED TO

Dr. RAHAT ALAM

SUBMITTED BY
MAHRUKH RASHEED BB-25059

SEMESTER FALL 2011

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INTRODUCTION
Islam is the only major world religion founded by a businessman, although, in a sense, Judaism, Christianity and Islam all trace their origins to another businessman, Abraham, the ancestor of Moses, Jesus and Muhammad, peace be upon them all. Islam has never had any hostility to the profession of the merchant. In the traditions called hadth (sayings of the Prophet and his companions, distinct from Gods direct revelation to Muhammad, called the Qurn), the Prophet is reported to have said, The truthful and trusty merchant is associated with the prophets, the upright, and the martyrs. I shall begin with an introduction to the notion of spirituality in Islam using a story of the creation of Adam, a story familiar from the Bible, although the Quranic version differs in certain significant details. I shall then turn to the Islamic perspective on commerce, its value, the importance of property rights and contract, the laws that govern commerce, and the place of commerce in mans spiritual life. Finally I shall offer an observation as to what it will take to sell the concept of free markets to the modern Muslim world and the Third World in general. Theologically, man requires property in order to fulfill his function as the khalfah, Gods vicegerent on earth. The word khalfah is used in Muslim history to refer to the temporal leader of the Muslim community (the caliph), but in the Quran it refers to every individual man and woman as Gods agent, or steward, on earth. Legally, property has been sanctified in Islamic law. Morally, theft, fraud, and injustice of all kinds have been prohibited by the shariah, the Islamic law. Practically speaking, the objective of falh, prosperity, cannot be achieved without respect for economic realities. The historical success of Islam in providing the framework for a thriving world economy from the seventh to the fifteenth centuries is a matter of historical record, but it does not answer the question of whether Islam in particular, or religion and spirituality in general, are helpful to or necessary for the ethical conduct of business in the modern world. Modern institutions have allowed for corporate activity on an unprecedented scale, impossible in the era before the development of the modern corporation. I shall conclude by examining the advantages and disadvantages of those institutions, the moral challenges they pose and my opinions as to how religion and spirituality are necessary to deal with them.

THE KHALIFAH
Let me begin with a small sermon and some Quranic exegesis. Behold thy Lord said to the angels: I will create a vicegerent on earth. They said, Wilt thou place therein one who will make mischief therein and shed blood? Whilst we do celebrate Thy praises and glorify Thy holy (name)? He said: I know what ye know not (Quran 2:30, trans. Ali). God is telling the angels he will create mankind and make him His agent on earth. The angels dont understand and ask why He would place the earth under the agency of a being endowed with free will, having the choice whether to obey or disobey God and Institute of Business & Technology (BIZTEK) Page 2

Business Ethics therefore with the ability to create bloodshed and misery that the world might become a terrible place, while the angels are incapable of disobedience to the Lord. In other words, the angels are as baffled by the problem of evil as are some modern philosophers. God asks the angels to describe the nature of things and they confess that they only know what God tells them; they have no ability to independently struggle to acquire knowledge (2:31-32). Adam, however, is able to state the nature of things (2:33). Adams free will is inseparable from his ability to acquire knowledge. Thus, it is essential to Gods plan to give agency over the earth to a being capable of free choice. Now comes the most startling part, God tells the angels to bow down to Adam (2:34), indicating that this being who can choose to obey Him is superior to creatures that obey Him of necessity. Man is superior; the angels are like any other creature that obeys Gods will by its nature, a planet swimming in its orbit, a rock rolling down a hill, or the rain falling from the clouds. Their obedience is without moral merit. In the company of the angels was Iblis, who refused to bow down (2:34). Iblis is not an angel, obviously, if he can disobey Gods command. Iblis is another creature with free will called a jinn in the Quran. Jinns are like humans in that they have free will, but different in that they are not made of clay but of some alien nature described by the Quran as smokeless fire. Another section of the Quran adds a significant detail: God) said: What prevented thee from bowing down when I commanded thee? He said: I am better than he: thou didst create me from fire and him from clay (7:12). Satan (as Iblis is henceforth called) reveals his nature in this response. If he had instead said, I bow down to no one but You, that would have been a positive response. Instead he asserts superiority over man on the grounds of his material nature, a petty arrogance reminiscent of the racist who professes superiority because of the color of his skin. Men and jinns are volitional beings that God shall judge on their morality, not on their material nature. Thus, God curses Satan (7:13-15), yet when Satan asks for respite, the allmerciful God immediately grants it (7:15). Satan is neither grateful for this mercy nor repentant of his arrogance. He threatens to use the time God has granted him to lead men astray (15:62). God said: Go thy way; if any of them follow thee verily Hell will be the recompense of you (all) an ample recompense. Lead to destruction those whom thou canst among them with thy (seductive) voice; make assaults on them with thy cavalry and thy infantry; mutually share with them wealth and children; and make promises to them. But Satan promises them nothing but deceit. As for My servants no authority shalt thou have over them. Enough is thy Lord for a Disposer of affairs (15:63-65). In Islam, the devil is the Whisperer. He can put suggestions into our hearts, but if we choose to follow him, that choice is ours, not his. Therefore, we have full responsibility Institute of Business & Technology (BIZTEK) Page 3

Business Ethics for our actions. Adam and his wife are invited to dwell in the garden and eat of the bountiful things therein as they will but warned not to approach the tree, not of knowledge, but of harm and transgression (2:35). When Adam and Eve listen to Satan and eat from the tree, they are evicted from the Garden (2:36, 7:21-22). The Quran does not dump the blame on on the woman. Adam and Eve share the responsibility. Both ask for mercy (7:23) and God turns in mercy towards them (7:37-38). The biggest difference between Islam and the Judeo-Christian tradition is that, in Islam, there is no original sin. All this is preamble, a microcosm of our life on earth, but made simple. There is only one rule for Adam and Eve, stay away from the tree of harm and transgression. While our lives are more complicated, the principle is the same. The rules that govern our lives are also designed to keep us from harm and transgression.

Islamic ethics Islamic ethics ( ,) defined as "good character," historically took shape gradually
from the 7th century and was finally established by the 11th century.[1] It was eventually shaped as a successful amalgamation of the Qur'anic teachings, the teachings of the Sunnah of Muhammad, the precedents of Islamic jurists (see Sharia and Fiqh), the pre-Islamic Arabian tradition, and nonArabic elements (including Persian and Greek ideas) embedded in or integrated with a generally Islamic structure.[1] Although Muhammad's preaching produced a "radical change in moral values based on the sanctions of the new religion and the present religion, and fear of God and of the Last Judgment", the tribal practice of Arabs did not completely die out. Later Muslim scholars expanded the religious ethic of the Qur'an and Hadith in immense detail.[1] Foundational motifs The foundational source in the gradual codification of Islamic ethics was the Muslim understanding and interpretations of the Qur'an and practices of Muhammad. Its meaning has always been in context of active submission to God (Arabic: Allah), performed by the community in unison. The motive force in Islamic ethics is the notion that every human being is called to "command the good and forbid the evil" in all spheres of life. Muslims understand the role of Muhammad as attempting to facilitate this submission. Another key factor in the field of Islamic ethics is the belief that mankind has been granted the faculty to discern God's will and to abide by it. This faculty most crucially involves reflecting over the meaning of existence. Therefore, regardless of their environment, humans are believed to have a moral responsibility to submit to God's will and to follow Islam (as demonstrated in the Qur'an This natural inclination is, according to the Qur'an, subverted by mankind's focus on material success: such focus first presents itself as a need for basic survival or security, but then tends to manifest into a desire to become distinguished amongst one's peers. Ultimately, the focus on materialism, according to the Islamic texts, hampers with the innate reflection as described Institute of Business & Technology (BIZTEK)

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Business Ethics above, resulting in a state of jahiliyya or "heedlessness."[2] Muslims believe that Muhammad, like other prophets in Islam, was sent by God to remind human beings of their moral responsibility, and challenge those ideas in society which opposed submission to God. According to Kelsay, this challenge was directed against five main characteristics of pre-Islamic Arabia:[2] 1. The division of Arabs into varying tribes (based upon blood and kinship). This categorization was confronted by the ideal of a unified community based upon Islamic piety, an "ummah;" The acceptance of the worship of a multitude of deities besides Allah - a view challenged by strict Islamic monotheism, which dictates that Allah has no partner in worship nor any equal; The trait of muruwwa (manliness), which Islam discouraged, instead emphasizing on the traits of humility and piety; The focus on achieving fame or establishing a legacy, which was replaced by the concept that mankind would be called to account before God on the day of resurrection; The reverence of and compliance with ancestral traditions, a practice challenged by Islam which instead assigned primacy to submitting to God and following revelation.

2.

3. 4. 5.

These changes lay in the reorientation of society as regards to identity and life of the Muslim belief, world view, and the hierarchy of values. From the viewpoint of subsequent generations, this caused a great transformation in the society and moral order of life in the Arabian Peninsula. For Muhammad, although pre-Islamic Arabia exemplified "heedlessness," it was not entirely without merit. Muhammad approved and exhorted certain aspects of the Arab pre-Islamic tradition, such as the care for ones near kin, for widows, orphans, and others in need and for the establishment of justice. However, these values would be re-ordered in importance and placed in the context of strict monotheism.[2] Moral commandments The Qur'an defines and sets the standards of social and moral values for Muslims. S. A. Nigosian, Professor of religious studies at the University of Toronto, states that a lengthy passage in the Qur'an "represents the fullest statement of the code of behavior every Muslim must follow". Nigosian and Ghamidi hold that these resemble the Ten Commandments in the Bible. In the 17th chapter, "Al-Israa" ("The Night Journey"), verses , the Qur'an provides a set of moral stipulations which are "among the (precepts of) wisdom, which thy Lord has revealed to thee" that can be reasonably categorised as ten in number. According to S. A. Nigosian, Professor of religious studies at the University of Toronto, these resemble the Ten Commandments in the Bible and "represents the fullest statement of the code of behavior every Muslim must follow".[5] However, these verses are not regarded by Islamic scholars as set apart from any other moral

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Business Ethics stipulations in the Qur'an, nor are they regarded as a substitute, replacement, or abrogation of some other set of commandments as found in the previous revelations. 1. 2. Worship only God: Take not with Allah another object of worship; or thou (O man!) wilt sit in disgrace and destitution. (Quran 17:22) Be kind, honourable and humble to one's parents: Thy Lord hath decreed that ye worship none but Him, and that ye be kind to parents. Whether one or both of them attain old age in thy life, say not to them a word of contempt, nor repel them, but address them in terms of honour. (Quran 17:23) And, out of kindness, lower to them the wing of humility, and say: "My Lord! bestow on them thy Mercy even as they cherished me in childhood." (Quran 17:24) Be neither miserly nor wasteful in one's expenditure: And render to the kindred their due rights, as (also) to those in want, and to the wayfarer: But squander not (your wealth) in the manner of a spendthrift. (Quran 17:26) Verily spendthrifts are brothers of the Evil Ones; and the Evil One is to his Lord (himself) ungrateful. (Quran 17:27) And even if thou hast to turn away from them in pursuit of the Mercy from thy Lord which thou dost expect, yet speak to them a word of easy kindness. (Quran 17:28) Make not thy hand tied (like a niggard's) to thy neck, nor stretch it forth to its utmost reach, so that thou become blameworthy and destitute. (Quran 17:29) Do not engage in 'mercy killings' for fear of starvation: Kill not your children for fear of want: We shall provide sustenance for them as well as for you. Verily the killing of them is a great sin. (Quran 17:31) Do not commit adultery: Nor come nigh to adultery: for it is a shameful (deed) and an evil, opening the road (to other evils). (Quran 17:32) Do not kill unjustly: Nor take life which Allah has made sacred except for just cause. And if anyone is slain wrongfully, we have given his heir authority (to demand qisas or to forgive): but let him not exceed bounds in the matter of taking life; for he is helped (by the Law). (Quran 17:33) Care for orphaned children: Come not nigh to the orphan's property except to improve it, until he attains the age of full strength...(Quran 17:34) Keep one's promises: ...fulfill (every) engagement [i.e. promise/covenant], for (every) engagement will be enquired into (on the Day of Reckoning). (Quran 17:34) Be honest and fair in one's interactions: Give full measure when ye measure, and weigh with a balance that is straight: that is the most fitting and the most advantageous in the final determination. (Quran 17:35) Do not be arrogant in one's claims or beliefs: And pursue not that of which thou hast no knowledge; for every act of hearing, or of seeing or of (feeling in) the heart will be enquired into (on the Day of Reckoning). (Quran 17:36) Nor walk on the earth with insolence: for thou canst not rend the earth asunder, nor reach the mountains in height. (Quran 17:37)

3.

4.

5. 6.

7. 8. 9.

10.

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Business Ethics Early reforms under Islam Many reforms in human rights took place under Islam between 610 and 661, including the period of Muhammad's mission and the rule of the four immediate successors who established the Rashidun Caliphate. Historians generally agree that Muhammad preached against what he saw as the social evils of his day,[6] and that Islamic social reforms in areas such as social security, family structure, slavery, and the rights of women and ethnic minorities improved on what was present in existing Arab society at the time.[7][8][9][10][11][12] For example, according to Bernard Lewis, Islam "from the first denounced aristocratic privilege, rejected hierarchy, and adopted a formula of the career open to the talents."[7] John Esposito sees Muhammad as a reformer who condemned practices of the pagan Arabs such as female infanticide, exploitation of the poor, usury, murder, false contracts, and theft.[13] Bernard Lewis believes that the egalitarian nature of Islam "represented a very considerable advance on the practice of both the Greco-Roman and the ancient Persian world."[7] The Constitution of Medina, also known as the Charter of Medina, was drafted by Muhammad in 622. It constituted a formal agreement between Muhammad and all of the significant tribes and families of Yathrib (later known as Medina), including Muslims, Jews, and pagans.[14][15] The document was drawn up with the explicit concern of bringing to an end the bitter inter tribal fighting between the clans of the Aws (Aus) and Khazraj within Medina. To this effect it instituted a number of rights and responsibilities for the Muslim, Jewish and pagan communities of Medina bringing them within the fold of one community-the Ummah.[16] The Constitution established the security of the community, freedom of religion, the role of Medina as a haram or sacred place (barring all violence and weapons), the security of women, stable tribal relations within Medina, a tax system for supporting the community in time of conflict, parameters for exogenous political alliances, a system for granting protection of individuals, a judicial system for resolving disputes, and also regulated the paying of blood-wite (the payment between families or tribes for the slaying of an individual in lieu of lex talionis). Muhammad made it the responsibility of the Islamic government to provide food and clothing, on a reasonable basis, to captives, regardless of their religion. If the prisoners were in the custody of a person, then the responsibility was on the individual.[17] Lewis states that Islam brought two major changes to ancient slavery which were to have far-reaching consequences. "One of these was the presumption of freedom; the other, the ban on the enslavement of free persons except in strictly defined circumstances," Lewis continues. The position of the Arabian slave was "enormously improved": the Arabian slave "was now no longer merely a chattel but was also a human being with a certain religious and hence a social status and with certain quasi-legal rights."[18] Esposito states that reforms in women's rights affected marriage, divorce, and inheritance.[13] Women were not accorded with such legal status in other cultures, including the West, until centuries later.[19] The Oxford Dictionary of Islam states that the general improvement of the Institute of Business & Technology (BIZTEK)

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Business Ethics status of Arab women included prohibition of female infanticide and recognizing women's full personhood.[20] "The dowry, previously regarded as a bride-price paid to the father, became a nuptial gift retained by the wife as part of her personal property."[13][21] Under Islamic law, marriage was no longer viewed as a "status" but rather as a "contract", in which the woman's consent was imperative.[13][20][21] "Women were given inheritance rights in a patriarchal society that had previously restricted inheritance to male relatives."[13] Annemarie Schimmel states that "compared to the pre-Islamic position of women, Islamic legislation meant an enormous progress; the woman has the right, at least according to the letter of the law, to administer the wealth she has brought into the family or has earned by her own work."[22] William Montgomery Watt states that Muhammad, in the historical context of his time, can be seen as a figure who testified on behalf of womens rights and improved things considerably. Watt explains: "At the time Islam began, the conditions of women were terrible - they had no right to own property, were supposed to be the property of the man, and if the man died everything went to his sons." Muhammad, however, by "instituting rights of property ownership, inheritance, education and divorce, gave women certain basic safeguards."[23] Haddad and Esposito state that "Muhammad granted women rights and privileges in the sphere of family life, marriage, education, and economic endeavors, rights that help improve women's status in society."[24] Sociologist Robert Bellah (Beyond belief) argues that Islam in its seventh-century origins was, for its time and place, "remarkably modern...in the high degree of commitment, involvement, and participation expected from the rank-and-file members of the community." This because, he argues, that Islam emphasized on the equality of all Muslims, where leadership positions were open to all. Dale Eickelman writes that Bellah suggests "the early Islamic community placed a particular value on individuals, as opposed to collective or group responsibility."[25] Environmentalism Perhaps due to resource scarcity in most Islamic nations, there was an emphasis on limited (and some claim also sustainable) use of natural capital, i.e. producing land. Traditions of haram and hima, an Arabic term meaning "protected place", and early urban planning were expressions of strong social obligations to stay within carrying capacity and to preserve the natural environment as an obligation of khalifa or "stewardship".[26] After Muslims established themselves in Madinah, Muhammad surveyed the natural resources in the regionthe wadis (riverbeds); the rich, black volcanic soil; the high rangelandsand decreed that they be preserved and set aside as a hima.[27] Hadiths on agriculture and environmental philosophy were compiled in the "Book of Agriculture" of the Sahih Bukhari, which included the following saying:[28]

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Business Ethics "There is none amongst the believers who plants a tree, or sows a seed, and then a bird, or a person, or an animal eats thereof, but it is regarded as having given a charitable gift [for which there is great recompense]."[29] Several such statements concerning the environment are also found in the Qur'an, such as the following:[30] "And there is no animal in the earth nor bird that flies with its two wings, but that they are communities like yourselves."[31] The earliest known treatises dealing with environmentalism and environmental science, especially pollution, were Arabic medical treatises written by al-Kindi, Qusta ibn Luqa, al-Razi, Ibn Al-Jazzar, al-Tamimi, al-Masihi, Avicenna, Ali ibn Ridwan, Ibn Jumay, Isaac Israeli ben Solomon, Abd-el-latif, Ibn al-Quff, and Ibn al-Nafis. Their works covered a number of subjects related to pollution such as air pollution, water pollution, soil contamination, municipal solid waste mishandling, and environmental impact assessments of certain localities.[32] Cordoba, AlAndalus also had the first waste containers and waste disposal facilities for litter collection.[33] "In order to preserve the natural environment by not polluting, plant trees, support environmentally-friendly goods and products, Muslims must rectify themselves through simplicity, contentment, resisting endless desires, and then remembering God as well as following His commands".[34] Politics Many medieval Muslim thinkers pursued humanistic and rational approaches in discourses regarding values. Democratic participation In the early Islamic Caliphate, the head of state, the Caliph, had a position based on the notion of a successor to Muhammad's political authority, who, according to Sunnis, were ideally elected by the people or their representatives.[36] After the Rashidun Caliphs, later Caliphates during the Islamic Golden Age had a lesser degree of democratic participation, but since "no one was superior to anyone else except on the basis of piety and virtue" in Islam, and following the example of Muhammad, later Islamic rulers often held public consultations with the people in their affairs.[37] Fred Donner, in his book The Early Islamic Conquests (1981), argues that the standard Arabian practice during the early Caliphates was for the prominent men of a kinship group, or tribe, to gather after a leader's death and elect a leader from amongst themselves, although there was no specified procedure for this shura, or consultative assembly. Candidates were usually from the Institute of Business & Technology (BIZTEK) Page 9

Business Ethics same lineage as the deceased leader, but they were not necessarily his sons. Capable men who would lead well were preferred over an ineffectual direct heir, as there was no basis in the majority Sunni view that the head of state or governor should be chosen based on lineage alone. Al-Mawardi has written that the caliph should be Qurayshi. Abu Bakr Al-Baqillani has said that the leader of the Muslims simply should be from the majority. Abu Hanifa an-Numan also wrote that the leader must come from the majority.[38] Traditional Sunni Islamic lawyers agree that shura, loosely translated as 'consultation of the people', is a function of the caliphate. The Majlis ash-Shura advise the caliph. The importance of this is premised by the following verses of the Qur'an:[original research?] ...those who answer the call of their Lord and establish the prayer, and who conduct their affairs by Shura. [are loved by God][42:38] ...consult them (the people) in their affairs. Then when you have taken a decision (from them), put your trust in Allah[3:159] The majlis is also the means to elect a new caliph. Al-Mawardi has written that members of the majlis should satisfy three conditions: they must be just, they must have enough knowledge to distinguish a good caliph from a bad one, and must have sufficient wisdom and judgment to select the best caliph. Al-Mawardi also said in emergencies when there is no caliphate and no majlis, the people themselves should create a majlis, select a list of candidates for caliph, then the majlis should select from the list of candidates.[38] Some modern interpretations of the role of the Majlis ash-Shura include those by Islamist author Sayyid Qutb and by Taqiuddin al-Nabhani, the founder of a transnational political movement devoted to the revival of the Caliphate. In an analysis of the shura chapter of the Qur'an, Qutb argued Islam requires only that the ruler consult with at least some of the ruled (usually the elite), within the general context of God-made laws that the ruler must execute. Taqiuddin al-Nabhani, writes that Shura is important and part of "the ruling structure" of the Islamic caliphate, "but not one of its pillars," and may be neglected without the Caliphate's rule becoming unIslamic. Non-Muslims may serve in the majlis, though they may not vote or serve as an official. Religious pluralism Islamic legal framework included religious pluralism. Classical Sharia, the religious laws and courts of Christians, Jews and Hindus, were usually accommodated within the Islamic legal framework, as seen in the early Caliphate, Al-Andalus, Indian subcontinent, and the Ottoman Millet system.[39][40] Non-Muslims were allowed to engage in religious practices that was usually forbidden by Islamic law. In a notable example, Zoroastrian practice of incestuous "self-marriage" where a man could marry his mother, sister or daughter, was to be tolerated according to Ibn Qayyim (12921350). He based his opinion on the precedent that the prophet Muhammad, who did not forbid such self-marriages among Zoroastrians despite coming in contact with them and Institute of Business & Technology (BIZTEK) Page 10

Business Ethics having knowledge of their practices. Religious minorities were also free to do whatever they wished in their own homes, provided they did not publicly engage in illicit sexual activity in ways that could threaten public morals. Freedom of expression Citizens of the Rashidun Caliphate were also free to criticize the Rashidun Caliphs, as the rule of law was binding on the head of state just as much as it was for the citizens. In a notable incident, when Umar tried to investigate a disturbance, by entering a home without permission, he was criticized for his behavior; he was also later criticized for the judgement he gave in that case.[43] There were also numerous other situations where citizens insulted Caliph Umar, but he tolerated the insults and simply provided them explanations. Similar situations also occurred during the time of Caliph Ali. For example, there was an occasion when he was giving a sermon and a Kharijite rudely interrupted him with insulting language. Though he was urged to punish the interrupter, Ali declined on the grounds that his "right to freedom of speech must not be imperilled." During the Abbasid Caliphate, freedom of speech was also declared by al-Hashimi, a cousin of Caliph al-Ma'mun, in a letter to a non-Muslim he was attempting to convert:[45] "Bring forward all the arguments you wish and say whatever you please and speak your mind freely." According to George Makdisi and Hugh Goddard, "the idea of academic freedom" in universities was "modelled on Islamic custom" as practiced in the medieval Madrasah system from the 9th century. Islamic influence was "certainly discernible in the foundation of the first deliberately planned university" in Europe, the University of Naples Federico II founded by Frederick II, Holy Roman Emperor in 1224.[46] In a letter written by the fourth Rashidun Caliph and first cousin of the prophet Muhammad, Ali ibn Abi Talib to his governor of Egypt, Malik al-Ashtar. The Caliph advices his governor on dealings with the poor masses thus:[original research?] "Out of your hours of work, fix a time for the complainants and for those who want to approach you with their grievances. During this time you should do no other work but hear them and pay attention to their complaints and grievances. For this purpose you must arrange public audience for them during this audience, for the sake of Allah, treat them with kindness, courtesy and respect. Do not let your army and police be in the audience hall at such times so that those who have grievances against your regime may speak to you freely, unreservedly and without fear." Nahjul Balaagha letter 53

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Business Ethics Human rights In the field of human rights, early Islamic jurists introduced a number of advanced legal concepts which anticipated similar modern concepts in the field. These included the notions of the charitable trust and the trusteeship of property; the notion of brotherhood and social solidarity; the notions of human dignity and the dignity of labour; the notion of an ideal law; the condemnation of antisocial behavior; the presumption of innocence; the notion of "bidding unto good" (assistance to those in distress); and the notions of sharing, caring, universalism, fair industrial relations, fair contract, commercial integrity, freedom from usury, women's rights, privacy, abuse of rights, juristic personality, individual freedom, equality before the law, legal representation, non-retroactivity, supremacy of the law, judicial independence, judicial impartiality, limited sovereignty, tolerance, and democratic participation. Many of these concepts were adopted in medieval Europe through contacts with Islamic Spain and the Emirate of Sicily, and through the Crusades and the Latin translations of the 12th century. The concept of inalienable rights was found in early Islamic law and jurisprudence, which denied a ruler "the right to take away from his subjects certain rights which inhere in his or her person as a human being." Islamic rulers could not take away certain rights from their subjects on the basis that "they become rights by reason of the fact that they are given to a subject by a law and from a source which no ruler can question or alter." There is evidence that John Locke's formulation of inalienable rights and conditional rulership, which were present in Islamic law centuries earlier, may have also been influenced by Islamic law, through his attendance of lectures given by Edward Pococke, a professor of Islamic studies. Early Islamic law recognized two sets of human rights. In addition to the category of civil rights and political rights (covered in the Universal Declaration of Human Rights), Islamic law also recognized an additional category: social, economic and cultural rights. This latter category was not recognized in the Western legal tradition until the International Covenant on Economic, Social and Cultural Rights in 1966. The right of privacy, which was not recognized in Western legal traditions until modern times, was recognized in Islamic law since the beginning of Islam.[51] In terms of women's rights, women generally had more legal rights under Islamic law than they did under Western legal systems until the 19th and 20th centuries.[52] For example, "French married women, unlike their Muslim sisters, suffered from restrictions on their legal capacity which were removed only in 1965." Noah Feldman, a Harvard University law professor, notes: As for sexism, the common law long denied married women any property rights or indeed legal personality apart from their husbands. When the British applied their law to Muslims in place of Shariah, as they did in some colonies, the result was to strip married women of the property that Islamic law had always granted them hardly progress toward equality of the sexes.[54]

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Business Ethics In the North Carolina Law Review journal, Professor John Makdisi of the University of North Carolina School of Law writes in "The Islamic Origins of the Common Law" article: [T]he manner in which an act was qualified as morally good or bad in the spiritual domain of Islamic religion was quite different from the manner in which that same act was qualified as legally valid or invalid in the temporal domain of Islamic law. Islamic law was secular, not canonical... Thus, it was a system focused on ensuring that an individual received justice, not that one be a good person.[55] Count Leon Ostorog, a French jurist, wrote the following on classical Islamic law in 1927: Those Eastern thinkers of the ninth century laid down, on the basis of their theology, the principle of the Rights of Man, in those very terms, comprehending the rights of individual liberty, and of inviolability of person and property; described the supreme power in Islam, or Califate, as based on a contract, implying conditions of capacity and performance, and subject to cancellation if the conditions under the contract were not fulfilled; elaborated a Law of War of which the humane, chivalrous prescriptions would have put to the blush certain belligerents in World War I; expounded a doctrine of toleration of non-Moslem creeds so liberal that our West had to wait a thousand years before seeing equivalent principles adopted.[56] Some scholars have suggested that the idea of "a charter defining the duties of a sovereign toward his subjects, as well as subjects toward the sovereign", which led to the "genesis of European legal structures" and the development of the Magna Carta, may have been "brought back by Crusaders who were influenced by what they had learned in the Levant about the governing system" established by Saladin. It has also been suggested that "much of the Wests understanding of liberalism in law, economics and society has roots in medieval Islam."[57] Another influence of Islamic law on European law was the presumption of innocence, which was introduced to Europe by King Louis IX of France soon after he returned from Palestine during the Crusades. Prior to this, European legal procedure consisted of either trial by combat or trial by ordeal. In contrast, Islamic law was based on the presumption of innocence from its beginning, as declared by the Caliph Umar in the 7th century.[58] Other freedoms and rights recognized in the Islamic legal system based on the Qur'an since the 7th century, but not recognized in the Western world until much later, include "the rights to know, to choose belief and behaviour, to read and write, the right to power, and even the right to choose government."[59] Rule of law Islamic jurists anticipated the concept of the rule of law, the equal subjection of all classes to the ordinary law of the land, where no person is above the law and where officials and private citizens are under a duty to obey the same law. A Qadi (Islamic judge) was also not allowed to discriminate on the grounds of religion, race, colour, kinship or prejudice. There were also a Institute of Business & Technology (BIZTEK) Page 13

Business Ethics number of cases where Caliphs had to appear before judges as they prepared to take their verdict.[60] The following hadith established the principle of rule of law in relation to nepotism and accountability:[61] Narrated Aisha: The people of Quraish worried about the lady from Bani Makhzum who had committed theft. They asked, "Who will intercede for her with Allah's Apostle?" Some said, "No one dare to do so except Usama bin Zaid the beloved one to Allah's Apostle." When Usama spoke about that to Allah's Apostle Allah's Apostle said: "Do you try to intercede for somebody in a case connected with Allahs Prescribed Punishments?" Then he got up and delivered a sermon saying, "What destroyed the nations preceding you, was that if a noble amongst them stole, they would forgive him, and if a poor person amongst them stole, they would inflict Allah's Legal punishment on him. By Allah, if Fatima, the daughter of Muhammad (my daughter) stole, I would cut off her hand." Various Islamic lawyers do however place multiple conditions, and stipulations e.g. the poor cannot be penalised for stealing out of poverty, before executing such a law, making it very difficult to reach such a stage. It is well known during a time of drought in the Rashidun caliphate period, capital punishments were suspended until the effects of the drought passed[citation needed]. According to Noah Feldman, a law professor at Harvard University, the legal scholars and jurists who once upheld the rule of law were replaced by a law governed by the state due to the codification of Sharia by the Ottoman Empire in the early 19th century:[54] How the scholars lost their exalted status as keepers of the law is a complex story, but it can be summed up in the adage that partial reforms are sometimes worse than none at all. In the early 19th century, the Ottoman empire responded to military setbacks with an internal reform movement. The most important reform was the attempt to codify Shariah. This Westernizing process, foreign to the Islamic legal tradition, sought to transform Shariah from a body of doctrines and principles to be discovered by the human efforts of the scholars into a set of rules that could be looked up in a book. Once the law existed in codified form, however, the law itself was able to replace the scholars as the source of authority. Codification took from the scholars their all-important claim to have the final say over the content of the law and transferred that power to the state. Accountability of rulers Sunni Islamic lawyers have commented on when it is permissible to disobey, impeach or remove rulers in the Caliphate. This is usually when the rulers are not meeting public responsibilities obliged upon them under Islam. Al-Mawardi said that if the rulers meet their Islamic responsibilities to the public, the people must obey their laws, but if they become either unjust or severely ineffective then the Caliph or ruler must be impeached via the Majlis ash-Shura. Similarly Institute of Business & Technology (BIZTEK)

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Business Ethics Al-Baghdadi believed that if the rulers do not uphold justice, the ummah via the majlis should give warning to them, and if unheeded then the Caliph can be impeached. Al-Juwayni argued that Islam is the goal of the ummah, so any ruler that deviates from this goal must be impeached. AlGhazali believed that oppression by a caliph is enough for impeachment. Rather than just relying on impeachment, Ibn Hajar al-Asqalani obliged rebellion upon the people if the caliph began to act with no regard for Islamic law. Ibn Hajar al-Asqalani said that to ignore such a situation is haraam, and those who cannot revolt inside the caliphate should launch a struggle from outside. Al-Asqalani used two ayahs from the Qur'an to justify this: ...And they (the sinners on qiyama) will say, 'Our Lord! We obeyed our leaders and our chiefs, and they misled us from the right path. Our Lord! Give them (the leaders) double the punishment you give us and curse them with a very great curse'...[33:6768] Islamic lawyers commented that when the rulers refuse to step down via successful impeachment through the Majlis, becoming dictators through the support of a corrupt army, if the majority agree they have the option to launch a revolution against them. Many noted that this option is only exercised after factoring in the potential cost of life.[38] According to scholar Bernard Lewis, the Qur'an and Sunnah have several points to make on governance regarding the right of revolution in Islam: The Quran, for example, makes it clear that there is a duty of obedience: "Obey God, obey the Prophet, obey those who hold authority over you." And this is elaborated in a number of sayings attributed to Muhammad. But there are also sayings that put strict limits on the duty of obedience. Two dicta attributed to the Prophet and universally accepted as authentic are indicative. One says, "there is no obedience in sin"; in other words, if the ruler orders something contrary to the divine law, not only is there no duty of obedience, but there is a duty of disobedience. This is more than the right of revolution that appears in Western political thought. It is a duty of revolution, or at least of disobedience and opposition to authority. The other pronouncement, "do not obey a creature against his creator," again clearly limits the authority of the ruler, whatever form of ruler that may be. What is Ethics? 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 behaviour 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.

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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. Ethics in Islam 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 Quran 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 behaviour. Moral principles and codes of ethics are repeatedly stressed throughout the Holy Quran. Besides, there are numerous teachings of the Prophet (sws) which cover the area of moral and ethical values and principles. Says the Holy Quran: 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[1], 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 socalled 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 behaviour is a part of I%man (faith) itself. According to the Islamic teachings, Muslims have to jealously guard their behaviour, 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 neighbours 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. Given the nature of Islamic ethical and moral codes, it would be beyond the capacity of one paper to fully comprehend the subject. In the following pages, our effort will be to confine ourselves to the discussion of some specific principles of business ethics in Islam. Freedom of Enterprise Islam gives complete freedom to economic enterprise. Each individual in an Islamic society Institute of Business & Technology (BIZTEK)

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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 Shariah. However, freedom does not and must not operate without a sense of responsibility. An individual is free to pursue his economic activities provided he respects the code of conduct prescribed for the profession, which broadly means choosing things lawful and shunning matters unlawful. The dictates of the Holy Quran and the teachings of the Prophet (sws) serve to set a scale in everybodys mind to distinguish between the lawful and the unlawful means of earning, and to prohibit or disapprove of all things that are either morally wrong or socially unacceptable. 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 Quran 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 Quran 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 Islam demands a certain type of behaviour from the economic agents the consumers and the producers. The behaviour prescribed for the economic units of the society are so devised as to lead to a happy state of affairs, which is the ultimate goal of Islam. An Islamic market is characterized by certain norms that take care of the interests of both the buyer and the seller. There are a number of rules of ethical discipline in Islamic commercial transactions without which business contract would be regarded as lacking perfection in the light of the code of good manners, decency and ethical excellence. Some of these tenets are as follows: Keenness to Earn Legitimate (Halal) Earnings Islam places great emphasis on the code of lawful and unlawful in business transactions. Many Quranic verses disapprove the wrongful taking of the property. Says the Holy Quran: Do not devour one anothers property wrongfully, nor throw it before the judges in order to devour a portion of others property sinfully and knowingly. (2:188) Do not devour anothers 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 Institute of Business & Technology (BIZTEK)

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following words: Asked what form of gain is the best? [the Prophet] said, A mans 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: Leave what makes you doubt for things that do not make you doubt. (Tirmidhi, No: 2442) Things legitimate and illegitimate are clearly defined in Islam and, in between them, are doubtful things, which should be avoided. A true Muslim businessman should be wary of the doubtful things in order to keep himself clear in regard to his faith and his honour because one who falls into doubtful matters is sure to fall into that which is unlawful (Haram). A tradition of the Prophet (sws) states: A time will come upon the people when one will not care as to how he gets his money whether legally or illegally. (Bukhari, No: 1941) Foremost among the unacceptable business practices strongly condemned in Islam is Riba. Riba (interest), by definition, is the extra sum the moneylender charges from the borrower for deferred payment. Islam has forbidden all forms of Riba since it involves both oppression and exploitation. Islam strictly forbids this form of tyrannical dealings and condemns it in severe terms. The Holy Quran says: 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[2] 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 Quran and traditions of the Prophet (sws) clearly demonstrate that all those business transactions which involve interest in one form or other, are Institute of Business & Technology (BIZTEK)

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unlawful in the sight of Islam. According to the Quranic 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 someones plight and charging high price is also a form of pecuniary exploitation and as such forbidden in Islam. The Holy Quran 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)

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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 Quran: 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 Allahs mercy thus: May Allahs mercy be on him who is lenient in his buying, selling, and in demanding back his money [or debts]. (Bukhari, No: 1934) The Prophets 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 fouryear 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 Quran emphasizes the moral obligation to fulfil ones 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 Daud, No: 3120) Another tradition condemns promise-breaking as the hallmark or trait of a hypocrite: If he makes a promise, he breaks it, and if he makes a compact, he acts treacherously. (Bukhari, No: 32) Institute of Business & Technology (BIZTEK)

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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. Fair Treatment of Workers 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) The Prophet (sws) also said: 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 Institute of Business & Technology (BIZTEK)

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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 Quran 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 Quran also says: O you who believe! intoxicants and gambling [dedication of] stones and [divination by] arrows are an abomination of Satans 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) Sale of Al-Gharar (Uncertainty, Risks, Speculation) 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 shecamel; 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 pricefixing 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: Institute of Business & Technology (BIZTEK)

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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 Daud, 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 [Allahs] curse upon him. (Ibn Majah, No: 2144) Exploitation of ones Ignorance of Market Conditions One of the most common unethical practices in modern business is to exploit ones 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 newcomer 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 ones 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: A town dweller should not sell the goods of a desert dweller. (Bukhari, No: 2006) Institute of Business & Technology (BIZTEK)

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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 dont exist. They try to persuade the buyers to purchase their commodity by invoking Allahs 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 Institute of Business & Technology (BIZTEK)

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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 Allahs blessing. (Bukhari, No: 1945) Giving Short Measures 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 Shuayb (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)

THE VIRTUES OF COMMERCE

We see from the Quranic narration of the story of Adam that life on earth is not a punishment, but a trial. Man is not a being born into a state of sin punished by consignment to a world in which toil is misery, but a rational, volitional being placed on a stage in which he has blessed with the opportunity to demonstrate his moral worth. 2 Reward or punishment, whichever he may deserve, will come as the consequence of his own choices, not as an inherited punishment for the acts of his ancestors. Every soul shall have a taste of death: and We test you by evil and by good by way of trial: to Us must ye return (21:35) This is the Qurans answer to the problem of evil: evil, like good, in this life is a test. God knows what is the best way to test us, whether we will be faithful, not to abandon hope in bad times and not to become arrogant in the good times, but to remain true at all times. Now when trouble touches man he cries to Us; but when We bestow a favor upon Institute of Business & Technology (BIZTEK) Page 25

Business Ethics him as from Ourselves he says This has been given to me because of a certain knowledge (I have)! Nay but this is but a trial but most of them understand not (9:49)! When we suffer in this world we say Why is God punishing us? and when something good happens we think we are so great, but God says we are wrong on both counts, the bad and the good are both tests. The call to prayer is a call to success, falh. Falh means success both in this life and the next. In their prayers of supplication, Muslims routinely pray for the good in this life and the next. The Quran never argues against self-interest, rather it takes it for granted that man seeks his self-interest and seeks to explain to man what is in his true selfinterest. There are men who say: Our Lord! give us (thy bounties) in this world! but they will have no portion in the hereafter. And there are men who say: Our Lord! give us good in this world and good in the Hereafter and defend us from the torment on the fire! To these will be allotted what they have earned and God is quick in account (2:200-202). The merit of a man is not measured by the amount of his wealth (nor his poverty, for that matter) but by how he acquired whatever wealth he has and what he shall do with it now that he has it. Property is a necessity for man to fulfill his calling as khalfah. The freedom of action by which we are tested is hampered by the absence of property. You are not as free, in the sense that you are not as empowered, if you have no property. Property is an extension of the self that leverages our freedom of choice and therefore provides the best opportunity for testing our morality. Historically, Islam has been favorable to the merchant, beginning with the Prophet Muhammad (peace be upon him), who was a merchant, and his wife Khadijah (may God be pleased with her) who was also a merchant. Indeed, she was the wealthier of the two, and he worked for her before their marriage. It was, in fact, because she was so impressed by his strong business ethics that she proposed marriage to him, fifteen years before he received the call to prophethood. Although she was fifteen years his senior he admired her character so much that he accepted her proposal.3 Property is strongly protected in Islamic law. The punishment for theft is very severe. In his farewell pilgrimage the Prophet said to the assembled pilgrims: O Men, your lives and your property shall be inviolate until you meet your Lord. The safety of your lives and of your property shall be as inviolate as this holy day and holy month (Haykal, 1976, p. 486). O Men. Harken well to my words. Learn that every Muslim is a brother to every Muslim and that Muslims constitute one brotherhood. Nothing shall be legitimate to a Muslim which belongs to a fellow Muslim unless it was given freely and willingly. Do not therefore, do injustice to your own selves (Haykal 1976, p. Institute of Business & Technology (BIZTEK) Page 26

Business Ethics 487).

A CONTRACTUAL CONCEPTION OF COMMERCIAL LAW

The Quran holds contracts in very high regard. It has already been noted at this conference (Khawaja 2004) that the Quran even uses contract as a metaphor for our relationship with God, referring to the great bargain man obtains in entering a contract with God which will render him a huge profit.4 The Quran contains some details of contract law. This is further testimony to the importance of contracts as, contrary to what you may have heard, the Quran contains few laws and little legal detail. The legal structure of Islamic law comes from the legal precedents of the early community and from the jurisprudential analyses of the legal scholars through a process called ijtihd. This word comes from the same root as jihd, which means struggle in general, and ijtihd means the struggle of the individual scholar to understand the law. In Islam, the law is analogous to the natural law of the physical sciences, something to be discovered rather than invented.5 The natural law is whatever it is, whatever God has ordained it to be, and the physicists theories are their articulation of their understanding of that law. So in Islam, the word shar`ah, which is usually translated as Islamic law, literally means the path to the well. Like the path to the well, like the natural laws of physics, Islamic law is whatever it is, and like the map to the path to the well, like the theories of the physicists, the struggle of the scholars to understand, is the jurisprudence of Islam, called the fiqh. The books of jurisprudence written by these scholars contain their conclusions as to God wants us to do, after looking at the Quran, the practice of the Prophet, after considering what is equitable, what is in the public interest, etc. The overall view of human relations in Islam is contractual. Within the broad scope of the law as to what is permitted and what is prohibited, all else is determined by contract among ourselves, by mutual agreement. The adoption of democratic formalisms that has been properly urged upon Muslims will not relieve the Muslim world of its economic stagnation if it is not accompanied by a return of the civil society institutions that were prevalent in the Muslim world during its glory era from the seventh to the sixteenth centuries when Islam was the preeminent civilization from Spain to India. In that era economic infrastructure was generally built not by the state, but by civil society institutions like the awqf (charitable endowments). The economic recovery of the Muslim world will require free markets, just government, and a well-defined and protected system of private property. Today we speak of globalism but in the Muslim era trade was international and a Muslim could travel from one end of the Muslim world to the other without a passport. A non-Muslim only needed a letter of introduction to travel freely throughout that period. Of course, Islamic society, despite its wonderful dynamism, was not utopia. The Muslims had to contend with the same problems we have to contend with of overweening Institute of Business & Technology (BIZTEK) Page 27

Business Ethics government. Government would perpetually exceed its allotted boundaries. The scholars were often the brakes on that government. The scholars in those days were completely independent of the government. The founders of all four Sunni6 schools of Islam were persecuted for refusing to be co-opted by the government. Ibn Malik rejected the Caliphs proposal to use his political power to give Maliks magnum opus a privileged status among the books of law. Abu Hanifa was imprisoned for refusing to accept a judgeship. Ibn Hanbal was tortured for refusing to endorse the state-sanctioned doctrine. Early on the Muslim governments began to insist that the scholars were no longer qualified to engage in this process of ijtihd, independent critical thinking, and should simply blindly imitate the decisions of previous scholars. This process of blind imitation was called taqld, and gradually, after many centuries, as later generations of scholars without the intellect or the courage of the early schools caved in to the pressure, accepted government positions, and unsurprisingly rubber-stamped the governments decisions. It is to this that I attribute the Muslim civilizations gradual decline over the centuries to its present unenviable state. Despite these problems, Muslim society remained remarkably vibrant for a long time because of its liberality. For example, in the matter of religious tolerance, the Quran explicitly commands that religious minorities, particularly the Jews and Christians (5:43), have their own legal systems under Islamic law. For example, Christians, who needed wine in their sacraments, were exempt from the absolute prohibition on wine applicable to all Muslims. Thus, there was a pluralism hardwired into the system in the concept of the protected minority, the dhimmi. The dhimmi was not really an equal citizen in the sense that all American citizens are equal. Yet too much should not be made of this. Non-Muslims sometimes reached ranks equivalent to prime minister. While a non-Muslim could not become Caliph, naturalized Americans cannot become President. A dhimmi paid a special tax in lieu of military service, but that tax was much smaller than the tax Lincoln imposed on persons seeking exemption from service in the Civil War. Most important to a minority living in a given society is to be free to practice their religion, to earn their living, and to relate to their families unimpeded. For the most part of Muslim history, this is what religious minorities were allowed to do. In the West, Spain is often put forth as a romanticized example of a glorious period of tolerance, and certainly it was compared to what was happening elsewhere in Europe, but it was similar to what was the practice throughout the Muslim world. When the Reconquista occurred and the Jews and Muslims were driven out of Spain, the Jews as well as the Muslims sought refuge in the Muslim world.

BUSINESS ETHICS IN ISLAM

THE term business ethics refers to the behaviour that a business organisation is supposed to adhere to in its interaction with society, transactions with customers and in its internal affairs. The concept of business ethics is as old as business itself. Institute of Business & Technology (BIZTEK) Page 28

Business Ethics Initially, different cultures and regions had different ethics of business. With increasing globalisation, the various sets of business ethics are continuously acquiring common values and forms. Islam has given guiding principles for all human activities and also prescribes and explains the ethics of business. However, the Quran is not the only divine text that lays down such instructions and Muslim thinkers were not the first to conceive this idea. The Bible, for instance, also has many notions that can be and have been applied to commercial activities. Hammurabi, in his famous code, addressed various commercial issues. Plato discussed justice in The Republic, and Aristotle explicitly discussed economic relations, trade and commerce in his Politics. Many Muslims are unaware that Aristotle too condemned usury. Also, he gave the classic definition of justice as giving each his due, treating equals equally and trading equals for equals. These issues were also analysed by Christian scholars. For instance, Thomas Aquinas discussed business in the context of justice and honesty, and condemned usury. Luther, Calvin and John Wesley, among other personalities of the Reformation, discussed trade and commerce, and led the development of the Protestant work ethic. However, in the modern West, economic activity has been divorced from religion just as politics has been separated from the church. Still, if we compare Islamic business ethics with present-day western business ethics, we find numerous similarities. For instance, workplace harassment, discrimination in hiring and promotion, employment benefits, layoffs, conflict of interest, quality control, misuse of business assets, environmental pollution, etc., are matters on which Islamic and western approaches are more or less similar. In fact, regarding such matters of common approach, Islam often lays down more benevolent provisions and puts more stress on their observance. For example, about employee-employer relationship, Islam very clearly declares that both enjoy the same dignity socially and legally. As a general rule, Muslims are instructed to choose for their fellow men what they choose for themselves. The Prophet (PBUH), in his farewell sermon, instructed Muslims not only to feed and clothe their slaves just like themselves, but also not to treat them harshly even if they committed a fault. Applying this to employees, one can imagine the standard of the working environment and employment benefits that Islam entails. Just as there are differences between other aspects of Islamic and western practices, Islamic and western business ethics too have certain differences. The most important discerning features are their sources and nature. While western business ethics are secular, Islamic business ethics originate from revelation and the traditions of the Prophet (PBUH), the Quran and Sunnah. A breach of western business ethics never results in the violator incurring a sin. In the case of Islamic business ethics, a breach always causes divine displeasure. Consequently, Muslims must abide by these instructions not only for the betterment of society, but also to secure their afterlife. This also means that even if there is no supervisory authority, a Muslim is still bound to comply with the norms of fair business practices. For instance, Islam does not allow an entity to deal in alcohol, drugs, gambling, gharar, pork, pornography, prostitution and riba. In jurisdictions where all or some of these are allowed, Muslims there must avoid them because Islam has prohibited these trades. Institute of Business & Technology (BIZTEK) Page 29

Business Ethics In other words, Islamic business ethics must be observed by the believers in Muslim and nonMuslim jurisdictions alike. Thus, a true Muslim must never neglect the welfare of employees, performance of business covenants, quality standards, the environment, social responsibilities of the enterprise, etc., whether he is running a venture in Pakistan or in the US. Unfortunately, present-day Muslims mostly just talk about the Islamic way of life without actually practising it. Ask a Muslim entrepreneur about Islamic business ethics and he will gladly give a lengthy sermon on the instructions given in the Quran and Sunnah on the topic and will accurately narrate numerous examples set by early Muslim businessmen regarding honesty in trade and employee welfare. However, his real conduct will be the opposite. Unfortunately, this is the general rule. No wonder, in a report recently published in Financial Times, some Islamic financial experts openly criticised Islamic financial institutions for resorting to juristic engineering to bypass Islamic restrictions in order to maximise profits. Thus, Islamic financial products and services, in most of the cases, are Islamic only in form, not substance. Does this mean that Islam makes hypocrites or that the provisions given in the Quran and Sunnah are no more practical? Not at all. Can we say that Christianity makes thieves just because there are thieves who happen to be Christian? Does the Quran not say that revelation is valid for all times? The fault lies with corrupt and selfish Muslim businessmen who disregard Islamic injunctions for worldly enrichment. By growing a beard, praying five times a day and fasting in Ramazan, they believe it is enough to fulfil their obligations to God. Can the beard, prayers and fasting really absolve them from ignoring their duties to their employees, clients, competitors, consumers and society as a whole? Is it possible to deceive God? The religious framework of business is very different. One talks about trade, buying, selling, and transactions that deal with things and services of physical and spiritual value. Transactions must follow all rules of justice and equity and be fully understood by the parties involved. There must be full disclosure of the qualities and quantities of the merchandise. The rules for such transactions are based on the Quran, the traditions and practices of the Prophet and his companions and are laid out in the books of jurisprudence. In this piece, we want to introduce the reader to a few words used in the Quran. 1. Ishtira. Purchasing, Buying, Exchanging. This word, in its various forms is used in the Quran about 25 times. The context is always otherworldly and spiritual. The pursuit of the momentary gains and worldly comforts and conveniences should never be at the expense of the ultimate success in the hereafter. Typical examples are in Aayat 174 and 175 of Surah Al Barqara (2).

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Business Ethics 174. Those who conceal Gods revelations in the Book, and purchase for them a miserable profit, they swallow into themselves naught but fire; God will not address them on the Day of Resurrection, nor purify them: grievous will be their penalty. 175. They are the ones who buy error in place of guidance and torment in place of forgiveness. Ah! What boldness (they show) for Fire. 2. Bai. Selling, Buying from (committing to a transaction). This word, in its various forms appears in the Quran about 11 times. In some places, it refers to worldly trades but considers them less important than the real reason for our being. Surah Al Baqara (2), Aayah 282 but take witnesses whenever ye make a commercial contract.... (The commercial contract is the translators rendering for one form of the above word).

In Surah Ibrahim (14), Aayah 31, we read: Speak to my servants who have believed, that they may establish regular prayers, and spend (in charity) out of the Sustenance we have given them, secretly and openly, before the coming of a Day in which there will be neither mutual bargaining nor befriending. In one form, the word is used in extending and accepting fealty. As an example, the Prophet is told in Surah Al Mumtahana (60), Aayah 12: O Prophet, when believing women come to thee to take the oath of fealty to thee, that they will not associate in worship any other thing whatever with God, that they will not commit adultery (or fornication), that they will not kill their children, that they will not utter slander, intentionally forging falsehood, and that they will not disobey thee in any just matter, then do thou receive their fealty, and pray to God for their forgiveness (of their sins): for God is Oft-Forgiving, Most Merciful. 3. Tijarah. Trade, Transaction, Commerce. I placed the quotation marks on the word commerce, because Yusuf Ali, whose English translation I am using here, translates tijarah with this word in one place out of about 9 occurrences of tijarah or its variances in the Quran. Curiously, however, that place is Surah Fatir (35), Aayah 29 where the context is not commercial. He translates this Aayah, and Aayah 30 as follows. 29. Those who rehearse the Book of God, establish regular Prayer, and spend (in Charity) out of what We have provided for them, secretly and openly, hope for a Commerce that will never fail.

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Business Ethics 30. For He will pay them their meed, nay, He will give them (even) more of His Bounty; for He is OftForgiving. Most Ready to appreciate (service). (Yes! Yusuf Ali uses the word meed which is the same as reward) Even this most common of the words for trade, is used to draw spiritual and ethical themes. Explicit use for trade however is used when emphasizing rules that are not generally observed. The very long Aayah 282 of Surah Al Baqara (2) talks about defining the terms and conditions of a transaction with a fixed time period and documenting the agreement of the parties in the presence of witnesses who understand the deal and would remember it in case their testimony is needed. A part of this Aayah was translated above. Some other pieces are given here: O you who believe! When ye deal with each other, in transactions involving future obligations in a fixed period of time, reduce them to writing. Let a scribe write down faithfully as between the partiesDisdain not to reduce to writing (your contract) for a future period, whether it be small or big: it is juster in the sight of God, more suitable as evidence, and more convenient to prevent doubts among yourselves... and let neither scribe nor witness suffer harm. If ye do (such harm), it would be wickedness in you. So fear God; for it is God that teaches you. And God is well acquainted with all things. Trade and commercial transactions are better for distribution of wealth than the use of brute force for the control of resources. Surah Al Nisa (4), Aayat 29 and 30 say: 29. O ye who believe! Eat not up your property among yourselves in vanities; but let there be among you traffic and trade by mutual good-will: nor kill (or destroy) yourselves: for verily God hath been to you Most Merciful! 30. If any do that in rancor and injustice, soon shall We cast them into the Fire: and easy it is for God. 4. Fulk. The Ships, Trade, and Passenger-boats. This word is mentioned in the Quran more than 23 times. The word is used in the moral context of telling the story of a prophet or to remind humanity of the power and blessings of God. In Surah Al Baqara (2), Aayah 164, we read: Behold! In the creation of the heavens and the earth; in the alternation of the night and the day; in the sailing of the ships through the ocean for the profit of mankind; (here) indeed are Signs for a people that are wise. Surah Ar Rum (30), Aayah 46 says: Institute of Business & Technology (BIZTEK)

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Business Ethics Among His Signs is this, that He sends the Winds, as heralds of Glad Tidings, giving you a taste of His (Grace and) Mercy, that the ships may sail (majestically) by His Command and that ye may seek of His Bounty: in order that ye may be grateful. In Surah Az Zukhruf (43), Aayah 12, we read: (the same God)that created pairs in all things, and has made for you ships and cattle on which ye ride. Read the Aayat 9 through 15 to get a flavor for the full context. 5. Kaal and Wazan. Measuring and Weighing (in general, the process that requires comparing equals and equivalents that balance them). The word Wazan and related variants are mentioned in the Quran about 23 times. The word Kaal is mentioned together with the above 6 times. Some examples are given below. Surah Al Israa (17), Aayah 35: Give full measure when ye measure, and weigh with a balance that is straight; that is the most fitting and the most advantageous in the final determination. Read Aayat 23 through 40 to see the whole context. Surah Al Mutaffifin (83), Aayat 1 through 3: Woe to those that deal in fraud, those who, when they have to receive by measure from men, exact full measure, but when they have to give by measure or weight to men, give less than due. Surah Ar Rahman (55), Aayat 7 through 9 read: And the firmament has He raised high, and He has set up the Balance (of Justice), in order that ye may not transgress (due) balance. So establish weight with justice and fall not short in the balance. 6. Saiyr. To move, To set out, To travel. (A planet is called sayyarah) The above word, with its variations, appears in the Quran about 26 times. Most of the usage is in the formulation of tell them to travel, or why dont they travel? Traveling for a purpose, but not a purposeless journey, is highly recommended. The emphasized purpose is learning about others and about the fate of previous peoples and civilizations. What happened to all the great powers of the past? Why were they destroyed? The Quran tells us that they were destroyed for their refusal to be God-conscious and for being unjust. But He wants us to see the evidence ourselves and learn about them

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Business Ethics Surah Al Mumin (40), Aayah 82 tells us: Do they not travel through the earth and see what was the End of those before them? They were more numerous than these and superior in strength and in the traces (they have left) in the land.Yet all that they accomplished was of no profit to them. Aayah 21 of the same Surah ends with: but God did call them to account for their sins, and none had they to defend against God. Surah Al Hajj (22), Aayah 46 adds: Do they not travel through the land, so that their hearts (and minds) may thus learn wisdom, and their ears may thus learn to hear? Truly, it is not their eyes that are blind, but their Hearts which are in their breasts. Allah Almighty says, [To the Madyan people (We sent) Shu'aib, one of their own brethren: he said: "O my people! Worship Allah: ye have no other god but Him. And give not short measure or weight: I see you in prosperity, but I fear for you the penalty of a day that will compass (you) all round. "And O my people! give just measure and weight, nor withhold from the people the things that are their due: commit not evil in the land with intent to do mischief. "That which is left you by Allah is best for you, if ye (but) believed! but I am not set over you to keep watch!" They said: "O Shu'aib! does thy (religion of) prayer command thee that we leave off the worship which our fathers practiced, or that we leave off doing what we like with our property? Truly, thou art the one that forbeareth with faults and is right-minded!" He said: "O my people! see ye whether I have A Clear (Sign) from my Lord, and He hath given me sustenance (pure and) good as from Himself? I wish not, in opposition to you, to do that which I forbid you to do. I only desire (your) betterment to the best of my power; and my success (in my task) can only come from Allah. In Him I Trust, and unto Him I look.] (Hud 11:84-88) Prophet Shu`aib (peace be upon him) was a great prophet of Allah. He was sent to the people of Madyan around the time of Prophet Abraham (peace be upon him). Prophet Shu`aib was sent among a people who were very much involved in business. These people were very proud of their business knowledge and success, but they were dishonest. He told them to observe ethics in business. They became very angry with him and told him, Dont mix religion with business. The Quran tells us that Allahs punishment came upon those people and only Prophet Shu`aib and his followers were saved.] (Al-Ahzab 33:21). It is indeed serious that every one must adhere to ethical standards in business. Business and ethics are not separate, rather they are interconnected. Allah says in the Quran,[For you in the Messenger of Allah, there is a fine example to follow Institute of Business & Technology (BIZTEK) Page 34

Business Ethics Prophet Muhammad (peace and blessings be upon him) was an ideal human being in every respect. He was the best teacher, preacher, and guide; the best statesman, lawgiver, judge, diplomat, negotiator of treaties, and military commander; the best family man, a good husband, a compassionate father and grandfather, a good neighbor, and friend of his people. He was also a very honest and successful businessman. Prophet Muhammad was chosen by God to be His last prophet and messenger at the age of 40. Before that he was very much involved in business. He was born in Makkah, which was a popular trade center in Arabia. Caravans from Syria in the north and Yemen in the south used to pass by Makkah. Prophet Muhammad would join in these caravans. It is reported that he traveled to Syria, Yemen, Bahrain, and many other places in Arabia in these caravans. Some historians have also suggested that he probably traveled to Iraq and Ethiopia. From his early age, he was involved in commerce. He had a good reputation as a hardworking, honest, truthful, and very successful businessman. It was due to this reputation that Khadijah, a wealthy businesswoman, hired him to work for her business. Many people in Makkah had asked for her hand and worked for her, but they either cheated her or she was not satisfied with their work. Finally, she found Muhammad (he was not a prophet at that time) and she asked him to work for her. He made several business trips on behalf of her and was very successful. She was impressed with his work as well as his impressive personality, they later got married. After marrying Khadijah, Prophet Muhammad continued his work and took several business trips throughout parts of Arabia. Ancient Arabia used to have commercial fairs in almost all major towns and regions; it is probable that Prophet Muhammad visited some of these commercial fairs. After becoming a prophet, his business activities decreased, although he would occasionally participate in business transactions. His vast business experience helped him in dealing with people with great care. He often used to mention the names of people and tribes whom he met in his journeys. People were often amazed of his knowledge of people and their regions. The Prophet emphasized that honesty and kind dealings with customers are the secrets of success in business. He said, "The truthful and honest merchant is associated with the Prophets, the upright and the martyrs" (Al-Tirmidhi ). "God shows mercy to a person who is kindly when he sells, when he buys and when he makes a claim" (Al-Bukhari). Prophet Muhammad gave many teachings on business and economic issues, he covered almost every aspect of business and economics. Here are only a few major principles of fair business dealings according to Islam. 1. No fraud or deceit, the Prophet (peace and blessings be upon him) is reported to have said, " When a sale is held, say, "There's no cheating" (Al-Bukhari). 2. Sellers must avoid making too many oaths when selling merchandise. The Prophet (peace and blessings be upon him) is reported to have said, "Be careful of excessive oaths in a sale. Though it finds markets, it reduces abundance" (Muslim). Institute of Business & Technology (BIZTEK)

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Business Ethics 3. Mutual consent is necessary. The Prophet (peace and blessings be upon him) is reported to have said, "The sale is complete when the two involved depart with mutual consent" (AlBukhari). 4. Be strict in regard to weights and measures. The Prophet (peace and blessings be upon him) is reported to have said, "When people cheat in weight and measures, their provision is cut off from them" (Al-Muwatta '). He told the owners of measures and weights, "You have been entrusted with affairs over which some nations before you were destroyed" (Al-Tirmidhi ). 5. The Prophet forbade monopolies. "Whoever monopolizes is a sinner" (Abu Dawud ). 6. Free enterprise, the price of the commodities should not be fixed unless there is a situation of crisis or extreme necessity.

CORPORATISM AND PUBLIC CHOICE

The limits to contract under Islamic law, it appears to me, are: that contracts must be voluntary; they must be entered into by informed consent; they must be among real persons; they must not impose costs on persons who have not entered the contract; and no agreement to commit an unconscionable act is binding. How does commerce today differ from the heyday of Muslim civilization? In most respects they are remarkably similar. The hawala, a kind of bank permitting remote payments, was the beginning of modern credit. Instead of carrying heavy and easily stolen gold, Medieval Muslims used paper checks to make payments in international trade. When the Crusaders invaded the Muslim lands they quickly learned of Muslim innovations in credit transfer and the Knights Templar emulated many of the ideas, introducing them into Europe. There are two issues that stand out as differences: rib (usually translated as usury) and the status of fictitious persons (corporations). Most Muslim scholars throughout history have interpreted any form of interest on a loan as rib. I disagree with this interpretation. I have argued elsewhere that rib means any unconscionable overcharging (whether on an interest rate or a spot price), and charging a market rate of interest does not constitute rib. (See Ahmad 1996 for a full discussion.) The idea of a corporation as a fictitious legal person was not part of medieval Muslim law. They did have various kinds of organizations. Business partnerships, for example, existed and were similar to the limited partnerships in American law. There were also trusts of various kinds, for example a trust for the property of an orphan. I have already mentioned the charitable trusts that played an important part in the development of hospitals, clinics, roads, irrigation systems, and schools. People would write a charter for an endowment, donate assets dedicated for a specific purpose, and appoint its initial board. These organizations were perpetual, but they were considered to be property, not legal persons. Orphans trust funds were the property of the orphans and endowments Institute of Business & Technology (BIZTEK) Page 36

Business Ethics were the property of the people who set them up. It is people who have freedom of choice; it is people who are the khalifah; it is people who are held responsible for their actions. Corporations have no consciences. The problems of corporations are well dealt with by public choice theory. The bigger an organization becomes, the more divorced the interest of the various stakeholders become from one another. In a one-man operation, labor, management, and the owner is the same person. It is simply impossible for the worker to slack off on management or for management to cheat the owner, or for the owner to be oblivious to the working conditions. In a small family enterprise such things become theoretically possible, but remain unlikely because the common interests of the family are strong, the individuals engaged in the enterprise are too intimate with one another to allow things to go beyond certain limits. When you get to organizations the size of Enron the problem becomes enormous, and thus we have developed complex rule of business ethics, rules of governance and accounting in an effort to develop transparency and accountability. Such rules did not develop in the Muslim world because the state-imposed protections given to fictitious corporations were not there. The fact that some individual or individuals must retain personal responsibility for the actions of an organization put a natural limit on the size of commercial enterprises. Thus if modern state-protected forms of corporate organization (fictitious persons) are to exist in the Muslim world, then safeguards that attempt to deal (however imperfectly) with the problems such institutions generate will have to be developed. The existence of corporations certainly leverages the productivity of commerce, the problems of corporations (limited liability, for example), which after all are artificial creations of the state, must be addressed. For example, limited liability is a privilege given to corporations that seems to violate the spirit of individual responsibility that we associate with true free enterprise. When the colonial powers conquered the Muslim world they dismantled the civil society institutions and turned their functions over to the state. The state was the only corporate entity they permitted in the Muslim world, yet, because of its monopoly on the use of force, the state is the corporation most susceptible to the abuses engendered by the public choice dilemma. Add to this the view that the cultural bias that sees a corporation as the private property of its founder or CO, and you can understand why the Muslim world is plagued with dictators. We must find a way to overcome that cultural attitude but it is naive in the extreme to think it can be overcome by turning on some light switch. Ellen Kleins (2004) observation about teaching democracy in Bosnia can be applied to teaching good corporate governance in the Muslim world in general: Its a messy and painful process like any birth. As recent events have demonstrated, the idea that one can march an army into a country and, within months, set up a healthy democracy is a fantasy divorced from the real world. I think the most effective way to deal with these issues is to plant seeds among the Institute of Business & Technology (BIZTEK) Page 37

Business Ethics intellectuals of the society to explain the need for these institutional issues to be addressed and to tie them to the principles and precedents of that culture and especially the Muslim religion, to let them evolve a spontaneous order that accommodates these ideas and accept that fact that it may take a while and there may be many wrong turns and failed experiments en route. It took Britain a long time to establish a liberal democracy and even building on the shoulders of the British, America had to go through the Articles of Confederation before writing the Constitution, and then have a civil war before giving the vote to black men, decades more before giving the vote to women, and more decades before giving it to 18 year olds. (Iran is the only country that gives the vote to 16 year olds.)

THE ROLE OF RELIGION AND SPIRITUALITY

Is there a role for religion and spirituality in a global and postmodern business world? When Muhammad was a young man, before he had received the call to Prophethood, he co-founded a group called the League of Ethical Businessmen, intended to encourage the merchants of Mecca to be honest in their dealings and to share with the poor a part of their wealth. His efforts there may have added to his personal reputation for honesty and generosity, but whatever influence the league may have had on others, it pales against the influence Muhammad has had on history as a prophet. In his book, The One Hundred Most Influential Men in History, Michael Hart rated Muhammad at the top of the list, not for founding the League of Ethical Businessmen, but for establishing a religion that that to one degree or another impacts the lives of 1.3 billion people in many ways, including their business ethics. If there were no role for religion and spirituality in the modern world, it would be because other forces have squeezed them out, either assuming their role or making fulfillment of their purpose impossible. Have institutional safeguards and state regulation made ethical self-regulation obsolete? Hardly. Enron is only the tip of an ugly iceberg. Have the scale and competitiveness of global markets today made it impossible for religion to fulfill its role in inspiring good business ethics? On the contrary, unless people have faith in markets they will either collapse or be made impossible by popular pressure and/or political interference. Consider the hope that market interventionists have placed in environmental issues. The same people who once openly pushed socialism have in the face of that ideologys undeniable failure sought to bring it back by calling it environmental protection. These people are called watermelons, green on the outside and red on the inside. Human actors who voluntarily embrace their appointment as Gods stewards on earth will avoid the actions that make them vulnerable to such predators. In the first few hundred years of Islamic history, Muslim legal scholars developed a sophisticated and detailed commercial law in which all agreements are by voluntary, informed consent within the limits of the law. The general limits put on commercial activity by the Quran are of four kinds: the prohibition of theft, of fraud, of taking unfair advantage, and of engaging in a generally prohibited activity. Thus, as extramarital sex is prohibited, so is prostitution, which is only a commercial example of a prohibited act. Institute of Business & Technology (BIZTEK) Page 38

Business Ethics The act is prohibited because of its social and personal consequences, not because it is commercial. Theft, being an example of the initiation of coercion is not a free market activity. Similarly, few would argue that fraud is admissible in a free market. An agreement made without the informed consent of both parties is no agreement at all, and the attempt of one party to impose it on another is just a variation on theft. While we may call on the state to enforce violations of these standards, the fact is that a society in which we had to call on the state in every case would be a dysfunctional society. Only where the strength of moral imperatives make the need for coercive enforcement the exception rather than the rule can economy be expected to flourish. If we had to sue to enforce every clause of every contract we entered into, commerce would grind to a halt. This self-enforcement is the hallmark of the religious society, by which I mean a society of religious people, those people for whom the enforcer is not Hobbes Leviathan but Divinity. The prohibition on unfair advantage is more controversial. What constitutes an unfair advantage? A contract between A and B, the enforcement of which you might favor if you were A, but would oppose if you were B, would be a contract that fails the fairness test. A boatman who sees a man drowning offers him a ride to the shore not for his usual fare of $2 but in exchange for all his worldly goods is clearly at an unfair advantage. Because it is more difficult to obtain a general consensus on this, it is even less desirable to rely on litigation here. Legal determination of fairness is possible, but the efficiency of the market will be severely impaired by frequent resorts to the courts to make such determinations. A willingness on the part of the people not impose contracts on others that they would deem unfair if imposed upon them is a spiritual issue best enforced by a sound conscience. Because the above issue is controversial among market liberals, I want to make the point very clear. I am not claiming that the moral duty to help others is enforceable by the state. In any case that is a different issue from the question of the enforceability of an unfair contract. Denying the enforcement of a contract between a drowning man and the boatman who demands all the wealth of Fortunes victim is not a violation of market principles, but rather recognition that there is no market in the hypothetical example. Markets regulate prices better than the state can, but only where they exist, that is, where there is competition. Had six boatmen been present near the drowning man, the price they would have asked would have been reasonable. The boatman in my example can be unreasonable only because of the absence of a market. Thus, we have identified at least three cases where overcharging is possible: by coercion, by fraud, and by the absence of a market. The category of generally prohibited activities is the most controversial. Conservatives may have no problem with general principle, but may disagree as to which activity should be prohibited, depending on their own choice of religion or moral code. Most Christians would seek to prohibit polygyny (marriage to multiple wives) but allow liquor Institute of Business & Technology (BIZTEK) Page 39

Business Ethics sales, while most Muslims would hold the opposite view. Libertarians would oppose state intervention prohibiting any such activity, leaving it to individual conscience. This is the area where religion and spirituality must fill the gap that market regulation in a free society cannot fill. In addition to avoiding force, fraud, and unfairness, the religious businessman will not engage in pandering. If market research shows that the four most profitable enterprises in a potential market are, in order of decreasing profitability: recreational drugs, gambling, prostitution, and health-care, he will choose health-care. He will not make the excuse that since his customer has voluntarily chosen a course harmful to the self, his pandering has no moral significance.

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CONCLUSIONS
It has been correctly noted that many leftists who oppose globalization are really opposed to freedom of trade in itself and not any real or imagined side effects. However, to ignore real harm that is being done under the cover of globalization is to drive the mass of humanity that is victimized by those crimes into the arms of those leftists.7 Muslims have no inherent sympathy for either atheistic Marxism or anti-market socialism. However, leftists have confused the issue by associating imperialism with capitalism. On my first visit to Turkey I found that when we spoke of free markets to students they never argued with us over any of the economic issues. They only demanded to know why did the liberal thinkers not speak out against imperialism. It is a faint defense to assert that Edmund Burke and Ludwig von Mises opposed imperialism, as that was a long time ago. They want to know about whats happening in our time: Why didnt market proponents speak out against American support of the Shah of Iran, or of Saddam Husseins aggression against Iran; or of the Mubarak regime in Egypt; or of the Israeli occupation of the West Bank and Gaza. They want to know what does the philosophy of liberty have to say about the decision of the American government to invade Iraq and depose its former ally on the pretext that he had weapons of mass destruction and fanciful links to persons who did wish us ill but who came from another country entirely. We have to become good salesmen by becoming sensitive. When we talk about free markets we must broaden our attention beyond the evils of price controls. Even the most conservative of Muslim scholars, Ibn Taymiyyah, was opposed to controls over prices set by market forces (i.e., absent a monopoly). He quoted the Prophet who, when a natural disaster caused the price of a particular commodity to soar, rebuffed the pleas of his people to fix the prices of the commodity. The Prophets response was, Allah grants plenty or shortage; He is the sustainer and real price maker (musa`ir). I wish to go to Him having done no injustice to anyone in blood or in property(Islahi 1988, p. 94). In other words, God has set one price and you want me to set another? Selling free markets to Muslims is easy. We need to address the politically sensitive issues that have been attached to the issues of economic reform. We need to distinguish the free market from the crony capitalism in which politically influential corporations in the Western world take advantage of the relationship between the American government and Third World dictators to enrich themselves and the dictators at the expense of American taxpayers and potential Third World entrepreneurs who are denied a place in the market. The pattern of which I speak is well characterized by the following example given by Lederer (1961, pp. 14-17). In the late 1950s the largest recipient of aid per capita in the world was Laos. That money did not provide a rising tide to float all the Laotian boats. Rather, a small elite became enormously wealthy, spending their money not in trade with their fellow Laotians, who had nothing to sell them, but in buying luxury goods beyond the reach of the Laotian masses from including Communist China (from which the aid Institute of Business & Technology (BIZTEK) Page 41

Business Ethics was intended to distance the Laotians). All Laos knew of the government corruption engendered by the American aid and the population responded to the Communist propaganda that capitalized on it. In the next election the Communists won a resounding victory. That pattern is still repeated around the world, notably in the Muslim countries. Now, in Iraq, in the name of the war on terrorism, major American corporations are becoming wealthy on American tax money while displacing the masses of Iraqi engineers (a disproportionate part of the Iraqi people are engineers) that could be doing the job using Iraqs own dead capital.8 The effort to establish an environment of commercial laws and business ethics that could revive and deploy dead capital would be much assisted by putting on the front burner opposition to crony capitalism and neoimperialist policies that contribute to keeping the capital of the Third World in its morbid state. Good salesmanship requires that we relate the benefits of free markets to the needs of the people we wish to embrace them. A recognition of their spiritual and religious heritage and its links to the principles and history of the development of markets and a frank admission of where we have betrayed those principles are indispensable to the propagation of the blessings of commerce and good business ethics. There is a parable about a man who had four wives. He loved the fourth the best and would dress her in the finest clothes and shower her with gifts. He loved the third a great deal and would boast of her to his friends. He loved the second somewhat, but never gave her the time and attention she deserved. The first he had lost affection for and never paid her any attention. One day the man learned that he was dying. He turned to his fourth wife and asked if she would accompany him into death. No way, she replied. When youre dead, Im out of here. The man was crushed by this response. He asked the third wife if she would accompany him into death and she said she would not, that when he was gone she would find another man to marry. Disappointed, he turned to his second wife and asked if she would accompany him into death. She said, I love you a lot, but what you ask is impossible. When you are dead, all I can do is to bury and praise you. Finally, he turned to his first wife and asked if she would follow him into death and she replied, Nothing could separate me from you, and he became ashamed of the way he had neglected her. His fourth wife was his body, and when he died it would turn to dust. His third wife was his possessions, and when he died they would belong to someone else. His second wife was his friends and family, and when he died all they could do is to bury him and mourn his loss. His first wife is his soul, mind and spirit, the very essence of his self. In Islamic law a man may only have more than one wife if he treats them equally, and that is the key to understanding this parable. While we are on this earth we should take care of everything: our bodies, our property, our friends and family, and our mind and spirit. This is summed up in the Muslim proverb attributed to the Prophets cousin Ali Ibn Abu Talib: Work for this life as Institute of Business & Technology (BIZTEK) Page 42

Business Ethics though you are going to live forever; work for the next life as though you will die tomorrow. 1 O ye children of Adam! We have bestowed raiment upon you to cover your shame as well as to

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 Quran, 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

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