ModuleTOPIC 1

TOPIC 1 INTRODUCTION 1.1 Islam, Commerce and Business Ethics – An Overview In every single thing, man face ethical issues at work such as stealing, lying, fraud, and deceiti. For instance, a recent survey of 2,000 major US corporations revealed that the following ethical problems (arranged in order of importance) concerned managers: (1) drug and alcohol abuse, (2) employee theft, (3) conflicts of interest, (4) quality control issues, (5) discrimination in hiring and promotion, (6) misuse of proprietary information, (7) abuse of company expense accounts, (8) plant closings and lay-offs, (9) misuse of company assets, and (10) environmental pollutionii. Business means anything that keeps you busy, and commerce originally meant social interaction or intercourse between two individualsiii. Basically, business and commerce should be in “free” market and deal with some limitations on unclear business ethics. Trade and industry are also part of the business, but not the whole of it. Banks, insurance companies, transport, education and health are also among the most thriving businesses. Banks and insurance companies are the ultimate repositories of all the earnings and expenditures of society. In doing business and commerce, trading, and industry, most people generally think of ethics are flexible and most probably known as “dirty” due to unethical practices; for example, cheating, bribery, oppression, and etcetera. As critically as they deserve, banking business, is well-known as a centre of misappropriation and exploitation of its owners — the depositors — insurance companies which inherit a

propensity for trickery and fraud, health and education, which trade on the life and intellectual growth of generations, are also easily exposed by any immoral or unethical behaviour. For instance, stock markets, a hotbed of organised swindling, confederacy and complicity, are also facing serious problems of misconduct activities. Other current ethical nowadays is dealing with public health, individual and business interests such as the Covid-19 pandemic that create considerable tensions for all three groups. Public health officers and healthcare providers are on the frontlines of this ever-changing situation, where they have to adapt daily to allocate resources, mobilise the workforce, and coordinate services. Another threatening case of Sungai Kim-Kim, three directors of different companies is accused of failing to conduct air quality monitoring, and failing to notify the authorities about the production of scheduled wastes, which caused bad pollution towards the nearby residents. Some new cases keep on repeating and continuously happened with no such the feeling of guilty towards humans and environment. The mentioned cases are only some of the problems that causes because of unethical manners due to intolerance towards the relationship between ethics and business. Other issues of bribery also become a big challenge towards the modernity of life and being ethical, or recently heard about integrity; for example, bribery, and pollution, mistreatment of human, animals, and plants. Table 1.1 shows the top ten ranking in the world that scored the highest in business corruption activities. Many question why the global economy appears so unjust, with huge income and wealth disparities and exploitation all too apparent. Rewards in business are too often unrelated to effort.

In certain countries regardless of religion majority, ethics might be neglected in daily life, and to business activity, ethics are only a moral code for business without endorsement. It might be thoughtfully related to income and status of living in one country as supported by the above Table. This is apparently a paradoxical situation. The secularist intellectual orientation in the West had pushed ethical values to a secondary position and divorced economic activity from its fold. According to Solomoniv, “the way we think about business all too often tends to downgrade ethics, to see morals as a set of side constraints, necessary but diverged to the real business of business”. The multifarious problems that the secular orientation created triggered a reaction first among religious leaders and philosophers and then among intellectuals. The reaction against business malpractices was so strong that some thinkers tried to divest business of its primary object — earning a livelihood. Those who fail to distinguish between business ethics and ethical business do not seem to be clear headed on the issue.

Table 1. 1 The 10 Most Corrupt Countries, Ranked By Perception They have mixed up myth and reality and attempted to suppress the symptoms rather than to cure those problems. The question of can one do business and still be an ethical person with no interfering all about self-interest, greed and making illegal or haram profits? As human in nature is very passionate towards two main characteristics; greed and anger, ethical issue is facing serious challenges that cannot be resolved without effective systems that could change morality internally. Therefore, ethics in Islam is about what humans should do, or in other words: what is right and what is wrong? What are the best rules to guide ethical judgment? In business, ethics is not only a written code of conduct that only used to be

displayed but rather need to be applied practically. The business ethicists also have to develop ways of applying their ideas in concrete practices. With all those problems highlighted here, one might think of what will be the way out of all of these problems? Then, all concepts of regarding moral and ethical, ethics and psychology have been thought as the best way to resolve from the inner part of every human. Good dimension of soul spiritually that consists of mind and conscience which have the potential of controlling the elements of greed and anger. One whose spiritual powers control the physical powers is indeed an ethical person; and one who lives life only by the elements of anger and greed has not actualized the potential of soaring from the worldly level to the heavenly level. Yusof Al- Qardhawiv has identified a cumbersome crisis of spiritual, moral, faith, and deeds are indirectly contemplated in economics, politics, management, and sciences and technology. In business and commerce, factors that contribute to cumbersome social issues are due to inappropriate lifestyle practice. For example, business operators offer products or services without taking any negative effects into consideration. In a real daily life, in most cases particularly with respect to consumption, it contradicts with the lifestyle as demanded by Islamic fundamentalismvi. \"Islamic business ethics\" (IBE) is a philosophy that acquired understanding as Islam itself is more than just a religion in the spiritual sense of the word; it is a way of life. It covers all aspects of life that influenced by spiritual values or called as good deeds. There is no difference between the sphere of worship and the sphere of business; Islamic laws govern the family life of Muslims well as their social conduct. As Islamic is a way of life with a unique approach to life and a peculiar concept of man’s place in the universe, IBE as part of

Islam governs all aspects of life in conducting business. Muslim’s way of life is predetermined by Allah Taala, which should endure in the righteous way. All humans have no choice but to follow what has been assigned as a way to achieve eternal happiness. As Allah commands:

“If any do deeds of righteousness, be they male or female and have faith, they will enter paradise, and not the least injustice will be done to them.” (An-Nisa’, 4:124) Furthermore, the conditions for success or falah in Islam are the same for all Muslims–whether in conducting their business affairs or in carrying out their daily activities. Without specifying any situational context, Allah describes people who attain success as those who are “inviting to all that is good (khayr), enjoining what is right (ma‘ruf) and forbidding what is wrong (munkar).” In other command: “And let there be [arising] from you a nation inviting to [all that is] good, enjoining what is right and forbidding what is wrong, and those will be the successful”. (Al-Imraan, 3:104) However, changes in modes of production and trade, development in information technology, globalization of the market, the role of international financing agencies, and the role and impact of multinational corporations, have given rise to new challenges, problems and dilemmas. There is now a genuine need to meet these challenges and discover which set of Islamic principles can be applied to these problems, and how. Islamic business ethics will be discussed further in the next chapter. 1.2 Identification of Moral Climate in Society For Muslim, the most important aspects in life is to have the best manners and personal characteristics. It is because of morality or in Islam, Akhlaq is automatically linked to daily activities. For today’s modern business, each Muslim who ties up with business and commerce is subjected to the Islamic ethical perspective of the business language. However, the

modern social changes towards urbanization and western lifestyle (Jahiliyyah) have led to a cruelity in social culture especially in doing business transactions. It is likely synonyms to say that no business activity can be best managed and organized without all those negative phenomenas. Hence, the societal climate issues of morality of human regardless of types of religion over the past decade remain unprecedented. These rapid changes affect social life negatively either cognitive or emotion processvii, and even long-term nation- buildingviii. Regardless of any beliefs and ideology, the desire for wealth is normal for a better life. Every man who involves in any business transactions may strive for maximum efforts for the highest profit and spending those profits extravagantly; but not to disregard all values of justice, honesty and benevolence. Markets are seen as a legitimate institution for economic transactions, but regulation and ethical guidelines are needed to monitoring and managing business transactions. Knowing sound Islamic business ethics for Muslims are a vital requirement in doing or involving in any kind of transactionsix. The discussion of moral climate in society closely relates with the concept of the just price and the Islamic law on contracts and the shari’ah position on options. Social issues relate with business; for example, marketing issues which regularly unveil to misleading, inappropriate advertising and publicity material, and pressurised selling that neglects the interests of the client. Some other issues on insider trading, practices those are illegal in most jurisdictions, and unfairness towards shareholders or stakeholders interests.x If a person knows about the wide range of issues which are related with all the function of marketing so then he/she can best manage the overall business with splendid ways. If we talk about ethics a clear picture comes to our mind

about the behavioral aspect of the business person or managers that how he is going to deal customer in best and suitable manner. If the sentiment of ethics is prevail in the mind of entrepreneur then surely he can never deceive the customer at all. Imprudent behaviour in this regard may damage or collapse the overall business goodwill and reputation. All of these concepts have been emphasized on Islamic teaching. The concept of man as a khilafah or responsibility to God for the management of resources, the concept of corporate governance that is aware of the concept of shura that implies consultation on policy formulation rather than simply the introduction of new initiatives by management dictate. Because Allah Taala commanded: “Allah has made business legitimate for you” (Al-Baqarah, 2:275) 1.3 Islamic Ethics in Business Business is an important activity in the economic and social life of the people, extending to individual, societal, regional, national and international levels. The involvement of Muslims in business is not new. Islam greatly encourages business because it directly contributes to improving the standard of living and providing worldly comforts to mankind. The Prophet himself was involved in business and trade for a considerable period of time. He considered business as the only activity that generates most income to the peoples. In one of the Hadith, Prophet Muhammad, says: \"Nine out of ten sources of livelihood are in business\". A Muslim who is involved in business activity must be aware of two basic tenets in Islam, which are as follows:

1. Allah the creator owns and controls all his creations on this earth. A Muslim who deals in business is allowed to utilize all these creations for their business activities as long as they obey His commands. 2. All man’s actions are accountable to Allah who has promised that even the smallest good deed will be recognized and rewarded. i Cherrington, J. O. and Cherrington, D. J. 1993. “A Menu of Moral Issues: One Week in the Life of the Wall Street Journal.” Journal of Business Ethics, 11, pp. 255-265. ii America’s Most Pressing Ethical Problems. 1990. Washington, DC: The Ethics Resource Center, p. 1 iii Dr. Mohammad Shafi (2000). Business and Commerce in the Qur’an. Dar al Islam Teachers’ Institute Alumni News Letter, Spring 2000. Retrieved from http://www.daralislam.org/portals/0/Publications/BusinessandComm erceintheQuran.pdf iv Solomon, R. C. (2003). A better way to think about business: How personal integrity leads to corporate success. Oxford University Press, USA. v Yusuf Al-Qardawi. (1999). Umat Islam Menangani Cabaran dan Tentangan Zaman. Kuala Lumpur: Al-Hidayah Publisher. vi Turner, P. (1994). Orientalism, Postmodernism and Globalism. London: Routledge. vii Aswati, H (2007). A Study of akhlak Reasoning Schemes among Malay Students [BJ1291. A862 2007 f rb] (Doctoral dissertation, Universiti Sains Malaysia). viii Nuriman, N., & Fauzan, F. (2017). The Influence of Islamic Moral Values on the Students’ Behavior in Aceh. Dinamika Ilmu, 17(2), 275-290. ix Hashim, M. (2012). Islamic perception of business ethics and the impact of secular thoughts on Islamic business ethics. International journal of academic research in business and social sciences, 2(3), 98.

x Hasanuzzaman, S. M. (2003). Islam and business ethics. Institute of Islamic Banking and Insurance.