Chapter11 - Islamic Ethics

Chapter
11
Islamic Ethics
Learning Outcomes
At the end of this chapter, you should be able to:
 Define ethics from the Islamic perspective

 Explain the source and origin of the Islamic ethical system
 Describe the concept of Islamic worldview
 Explain the five axioms of Islamic ethical philosophy and their
importance to a Muslim’s life
 Explain the Islamic perspective of the relationship between
firms and their stakeholders
 Explain some prohibited matters in business transactions
Business Ethics All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2014 1– 3
Introduction
 In life, Muslims should strive to:

 live a life of worship by seeking and attaining Allah’s blessing
 have a good life
 promote justice, harmony and welfare of society
 Hence, in Islam, there is no separation between ethics and
religion – both are part of human nature.
 The teaching of Islam (Shari’ah) provides a comprehensive
guide for all aspects of life.
 to achieve maqasid al-Shari’ah (the ideals and objectives of the
Shari’ah)

Defining Islamic Ethics
 Islamic ethics refer to two interrelated terms – akhlaq and

adab.
 Akhlaq has two meanings:
 establishes the standards of right or wrong of human conduct;
and
 Islamic disposition or the practice of virtue and morality
 Adab refers to manners, etiquette or behaviour of an
individual.
 The Al-Quran and Sunnah prescribe the akhlaq and adab of
a Muslim.

Defining Islamic Ethics
 Islamic ethics can be defined as:

“a set of universal standards of right or wrong that prescribe the
acceptable or unacceptable human conduct as highlighted in the
Quran and shown by the exemplary life of the Prophet
Muhammad pbuh”
 In a nutshell, Islamic ethics represent all virtuous deeds
(al’amal assalih) in one’s personal life and professional life.
 Islamic ethics are absolute in nature – to be observed in all
situations, dealings and roles in one’s life.

Sources and Origins
of Islamic Ethics
 There are two primary sources of Islamic ethics:
A divine book of revelation that comprises verbatim and

Al Quran unalterable words of Allah revealed to Prophet
Muhammad pbuh
Hadiths or reports about the recorded sayings, personal

Sunnah teachings, character, deeds, actions and practices of
Prophet Muhammad pbuh in personal and public life that
exemplify the teachings of Islam
 They provide complete guidance for Muslims to live their life.

 Decisions that are based on the Quran and Sunnah are deemed
ethical.

Islamic Worldview and
Ethical System
 Worldview is defined as a ‘set of implicit and explicit

assumptions about the origin of the universe and the nature
of life’.
 It refers to how man perceives and explains the reality
regarding the existence of the universe and their role in it.
It is derived from the Al-Quran and founded on

Islamic the fact that Islam is a religion and also a way of
Worldview life in which Muslims must pay attention to the
world, the Hereafter and the Day of Judgement.

Core Ideas of Islamic Worldview
 Unity of God – Allah is the one and only Creator and Sovereign of the
entire universe. Man are as vicegerents of Allah on earth and must worship
and obey Allah, who is the cause and end of everything. Man should aim
for everlasting life after death.
 Man is accountable to Allah for which He will judge him based on his
actions in life. Disobedience will result in corruption and disorder in the
world.
 Allah has chosen a few humans as Prophets (peace be upon them) to
show others the right path to live in the world.
 All Prophets carried the same message –to worship only Allah and to obey
his commandments.
 Muhammad pbuh was the only one that Allah commanded to lead the
entire humanity. He was the last of all Prophets.

The Link Between Islamic
Worldview and Ethical System
 The Islamic worldview sets the foundation for four vital

principles in the Islamic ethical system.
Tawheed Khalifah
Taqwa ‘abd

Four Principles of
the Islamic Ethical System
Tawheed Taqwa
 Belief in the unity of Allah.  All-inclusive, inner consciousness

 The first and foremost of one’s duty and accountability
requirement to embrace the toward Allah.
Islamic faith.  It is a quality of human beings
that is related to the state of the
heart.
 It results in pious behaviour – to
be accountable and fear of
reprisals of Allah.

Four Principles of the Islamic
Ethical System
Khalifah ‘abd
 Someone who carries out his  This means servants of Allah.

or her role as the Khalifah  As servants, we have to follow
(vicegerency) of Allah on and obey His rules in all of our
earth. dealings.
 As a Khalifah, we must strive  Our way of life must be within the
to do the right thing and avoid boundaries of Shari’ah – life is a
doing harm. worship.
 We must also obey Allah,
make a good society and take
care of this world.
Responsibility of a Khalifah
 Responsibility to Allah – unwavering faith on the unity of Allah

and obey all his rulings.
 Responsibility to Himself – have a good life by making the right

choices that are in accordance with Shari’ah.
 Responsibility to Society – to foster brotherhood, peace and

harmony in the society.
 Responsibility to the Environment – to use natural resources in

accordance with the will of Allah and prevent destruction of the
environment.

Axioms of Islamic Ethical
Philosophy
Allah is one and only Creator of the earth and universe.

Unity Requires total submission of man to Allah.
Allah created this world in perfect balance and harmony.
Equilibrium Actions must be based on justice and maintenance of
social harmony.
Man has freedom to live his life but it must be exercised
Free will within the bounds of Shari’ah.
Man must fullfil various types of responsibilities in life.
Responsibility Every action will be accounted for in the Day of
Judgement.
Man must strive to show act of kindness toward other

Benevolence beings by doing things that benefits others and mankind.

Islam and Stakeholders
Relationship
 Islam encourages its believers to engage in trade to sustain their

life. The principle of unity of Allah requires man to engage in any
venture for the sake of Allah.
 So, the objective is not limited to making profit only. It should
also promote social justice and spiritual enhancement.
 Business dealings should be guided by the Quran and Sunnah
plus principles of tawheed, taqwa, khalifah, ‘abd and the five
axioms.
 Business owners are required to treat their stakeholders fairly
and to avoid from causing harm and destruction to the natural
environment.

Relationship with Stakeholders from the
Islamic Ethical System Perspective
Relationship with shareholders

 Shareholders must ensure that business activities are permissible
in Islam.
 First and foremost, board of directors is accountable to Allah, then
to shareholders.
 The objective of the firm is to make profit and to promote welfare
of the society.
 Ensure business is not based on riba – can only earn return once
capital is put into productive use.
 Expect board to be trustworthy and transparent.

Relationship with Stakeholders from the Islamic
Ethical System Perspective
Relationship with employees

 Employees must be treated fairly. The spirit of ukkhuwah (brotherhood)
must prevail as opposed to exploiting employees for profit.
 Wages: based on fair criteria and commensurate with the level of
responsibility and effort required.
 Recruitment and selection: based on fair criteria as opposed to
discriminating ones.
 Working conditions: employees are trustees (al-amanah) of employers,
so a safe and healthy workplace is required.
 Privacy: recognize employees right to privacy and do not disclose
personal information without consent.
 Performance appraisal: aimed toward promoting excellence and be done
in a fair manner.
Relationship with customers

 Customers must be treated fairly and honestly.
 Products must exist, owned by the business owner and in good
condition – sale of unseen item puts customers at disadvantage.
 Full disclosure is compulsory to let customers know the details of
a product – caveat emptor does not apply in Islamic trading.
 Pricing must be determined by natural market forces – for
example, price fixing and price manipulation through hoarding of
goods is prohibited.
 Marketing cannot be deceptive and misleading – interferes with
free will of individuals.

Relationship with suppliers

 Suppliers operate a business and aim to be profitable.
 They expect to be treated fairly and paid promptly.
 Supply of raw materials and goods must be made on clear
contract – specifies terms and conditions clearly to prevent
disputes.
 Business owners must not work in cohort with supplier to
create a monopoly business.
 Business owners must also observe the guidelines and
prohibitions as applied to the relationship with their
customers.

Relationship with the natural environment

 Allah created nature and it belongs to Him. Humans are free to
utilize natural resources to support their life but must not cause
harm and destruction to nature.
 Protection of the natural environment is everyone's sacred duty
including business owners. They are expected to take corrective
actions if their business activities cause damage to the natural
environment.
 Business activities that cause harm and damage to the natural
environment are not consistent with the principle of Khalifah and
responsibility to the society. Irresponsible and harmful business
activities disrupt the equilibrium (balance and harmony) created
in this world.
Prohibited Earnings and
Business Transactions
 Dealing in illegitimate items (haram items)

 Legitimacy of goods is based on Shari’ah.
 Examples of such items include intoxicants, swine, cigarettes,
marijuana, drugs, tobacco, idols, crosses, statues.
 Reason for prohibition: harmful to health and wellbeing; crosses and
statues are against the principle of unity of Allah.
 Prohibition of interest (riba)
 In Islam, trading is permitted but riba is prohibited without
compromise. Riba means increase, excess, growth or expansion.
 In lending, riba refers to exorbitant profit without the need for lender to
put any effort to earn the profit.
 Loan interest involves exchange of money but the exchange is
deferred in future and the amount exchanged is in excess of the
principal amount.
Prohibited Earnings and Business
Transactions
 Speculation, Risk and Uncertainty (gharar)

 Implies unnecessary risk, uncertainty, ambiguity and hazard in a
business transaction.
 Quantity, quality and pricing of goods must be ascertainable to avoid
gharar.
 Reason for prohibition: easily lead to disputes and unfair advantage to
one party.
 Gambling (masyir)
 Related to gharar in which gharar transaction involves masyir too.
 Masyir is a game of pure chance where one party gains at the
expense of other parties, e.g. lottery.
 Reason for prohibition: accumulation of wealth by chance is prohibited
because it encourages people to be lazy by depending on luck or
chance to advance in life.
 https://www.youtube.com/watch?v=CXnvLy1-h50


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Chapter

At the end of this chapter, you should be able to:

 Define ethics from the Islamic perspective

Business Ethics All Rights Reserved

 In life, Muslims should strive to:

Business Ethics All Rights Reserved

 Islamic ethics refer to two interrelated terms – akhlaq and

Business Ethics All Rights Reserved

 Islamic ethics can be defined as:

Business Ethics All Rights Reserved

A divine book of revelation that comprises verbatim and

Hadiths or reports about the recorded sayings, personal

 They provide complete guidance for Muslims to live their life.

Business Ethics All Rights Reserved

 Worldview is defined as a ‘set of implicit and explicit

It is derived from the Al-Quran and founded on

Business Ethics All Rights Reserved

Business Ethics All Rights Reserved

 The Islamic worldview sets the foundation for four vital

Business Ethics All Rights Reserved

 Belief in the unity of Allah.  All-inclusive, inner consciousness

Business Ethics All Rights Reserved

 Someone who carries out his  This means servants of Allah.

 Responsibility to Allah – unwavering faith on the unity of Allah

 Responsibility to Himself – have a good life by making the right

 Responsibility to Society – to foster brotherhood, peace and

 Responsibility to the Environment – to use natural resources in

Business Ethics All Rights Reserved

Allah is one and only Creator of the earth and universe.

Man must strive to show act of kindness toward other

Business Ethics All Rights Reserved

 Islam encourages its believers to engage in trade to sustain their

Business Ethics All Rights Reserved

Relationship with shareholders

Business Ethics All Rights Reserved

Relationship with employees

Relationship with customers

Business Ethics All Rights Reserved

Relationship with suppliers

Business Ethics All Rights Reserved

Relationship with the natural environment

 Dealing in illegitimate items (haram items)

 Speculation, Risk and Uncertainty (gharar)

Business Ethics All Rights Reserved

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