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article 7

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ABSTRACT. As global business operations expand, managers need more knowledge of foreign cultures, in particular, information on the ethics of doing business across borders. The purpose of this paper is twofold: (1) to share the Islamic perspective on business ethics, little known in the west, which may stimulate further thinking and debate on the relationships between ethics and business, and (2) to provide some knowledge of Islamic philosophy in order to help managers do business in Muslim cultures. The case of Egypt illustrates some divergence between Islamic philosophy and practice in economic life. The paper concludes with managerial implica- tions and suggestions for further research.

KEYWORDS: business ethics, Egypt, Islamic business
ethics, Muslim culture
Introduction

Over the centuries, as state and church separated, particularly in western societies, religion became a private matter. The so-called \u201cvalue-free society\u201d developed and economists focused exclusively on the mechanics of economics. There is a growing realization that value-free economics is a misnomer. Post-modern thinkers

have advocated changes over the past few decades and there has been a reintroduction of a moral dimension in business.

An important task for many managers is how to integrate this moral dimension into business conducted across borders. Managers need an appreciation of the ethical norms of different groups and cultures in order to gain complete understanding of the cultural environment in which the firm must operate (Al-Khatib et al., 1995). Relatively few empirical studies have addressed culturally-related ethical issues (see for example, Becker and Fritzsche, 1987; Akaah, 1990; Vitell et al., 1993; Nyaw and Ng, 1994). Based upon the results of a study that found some surprising significant differences between the values of American and Thai marketers, Singhapakdi et al. (1995) suggest that multina- tional corporations should train their marketing professionals differently in different parts of the world. Amine (1996) goes further and urges that the role of global managers should be one of \u201cmoral champions,\u201d committed to pursuing the best in ethical and moral decision-making and behavior. The definition of \u201cbest\u201d is not an easy task, however, when one takes into account the many different moral philosophies that exist.

In recent years there have been a number of articles published in the Journal of Business Ethics which have discussed the positions of various faiths regarding the relevance of religious ethical principles to business decision-making (see for example, Williams, 1993; Green, 1993; Rossauw, 1994; Gould, 1995). The Pope\u2019sC e n t e s i mu s

Annusargues that what is lacking in our time is

a moral culture capable of transforming economic life so that it has a context in a humane community (Williams, 1993).

Islamic Ethics and the
Implications for Business
Gillian Rice
Journal of Business Ethics18: 345\u2013358, 1999.
\u00a9 1999 Kluwer Academic Publishers. Printed in the Netherlands.

Gillian Rice is Associate Professor of Marketing at Thunderbird, The American Graduate School of Inter- national Management. Her research includes study of economic development, environmental concerns and marketing practices in developing countries. She is a founding member of the International Management Development Association. Her publications include articles inInternational Marketing Review,

International Journal of Forecasting, Information and Management, The International Executivea n d Journal of the Academy of Marketing Science.

My focus in this paper is on the ethical principles which relate to business and which are contained in the religion of Islam. Islam is gen- erally misunderstood and it is often surprising to some that it contains an entire socio-economic system. In Islam, it is ethics that dominates eco- nomics and not the other way around (Naqvi, 1981). My purpose is twofold: (1) to share a per- spective on business ethics, little known in the west, which may stimulate further thinking and debate on the relationships between ethics and business, and (2) to provide some knowledge of Islamic philosophy in order to help managers doing business in Muslim cultures deal with cultural differences. The paper is organized as follows. First is a description of the Islamic ethical system. Next is a discussion of the dif- ferences between philosophy and practice in Islamic business ethics. This discussion forms the basis for guidelines on doing business with people in Muslim cultures. Egypt is used as an illustra- tive case.

The Islamic ethical system

Muslims derive their ethical system from the teachings of the Qur\u2019an (which Muslims believe is a book revealed by God to Muhammad in seventh century Arabia), and from the sunnah (the recorded sayings and behavior of Muhammad). The goals of Islam are not pri- marily materialist. They are based on Islamic concepts of human well being and good life which stress brotherhood/sisterhood and socio- economic justice and require a balanced satisfac- tion of both the material and spiritual needs of all humans (Chapra, 1992).

A \u201cmoral filter\u201d

There exists in most societies a relative scarcity of resources with unlimited claims upon them. A free-market capitalist economy uses market- determined prices as a filtering mechanism to distribute resources. The use of the price system alone, however, can frustrate the realization of socio-economic goals. Under a system of state

control, the allocation of resources is in the hands of a bureaucracy, which is cumbersome and inef- ficient. According to Chapra (1992), the Islamic worldview implies that the market system should be maintained, but that the price mechanism be complemented with a device that minimizes unnecessary claims on resources. This device is the \u201cmoral filter.\u201d This means that people would pass their potential claims on resources through the \u201cfilter of Islamic values\u201d so that many claims would be eliminated before being expressed in the marketplace. Resources would not be allowed to be diverted to the production of luxuries until the production of necessities was ensured in suf- ficient quantities (Siddiqi, 1981). The definition of luxurious or extravagant is related to the average standards of consumption in a society, the idea being that large departure from the standards would not be permissible.

Keynes\u2019 (1972) observations on this subject may be useful. He stated that even though \u201cthe needs of human beings may seem to be insa- tiable,\u201d . . . \u201cthey fall into two classes \u2013 those needs which are absolute in the sense that we feel them whatever the situation of our fellow human beings may be, and those which are relative ones in the sense that their satisfaction lifts us above or makes us feel superior to others. Needs of the second class, which satisfy the desire for superi- ority, may indeed be insatiable; for the higher the general level, the higher still are they. But this is not so true of the absolute needs.\u201d Islamic jurists\u2019 categories of necessities (daruriyyat), conveniences (hayiyyat) and refinements (tahsiniyyat) would fall into Keynes\u2019 first class of needs. These are any goods and services which fulfill a need or reduce a hardship and make a real difference in human well-being. Thus \u201ccomforts\u201d are included here (Chapra, 1992). Luxuries (the second class of needs), however, are goods and services derived for their snob appeal and make no difference to a person\u2019s well-being. Galbraith (1958) refers to this second class of needs as \u201cwants.\u201d

Consumer advocates in the U.S. have long been critical of business practices that increase the desire for \u201cwants\u201d and subsequently have adverse cultural and social effects (Williams, 1993). For example, in pursuit of profit maxi- mization, businesses often subject the consumer

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to advertising and sales promotion campaigns that appeal to the consumer\u2019s vanity, sex appetite and envy, either overtly or covertly. Consumers are encouraged to believe that their actualization and social esteem are dependent on the frequency and value of their purchases. This leads in turn to a tremendous amount of wasteful production, with adverse environmental as well as social implications. According to the United Nations Development Program (UNDP) Human Devel- opment Report (1994), the lifestyles of the rich nations must change; the north has a fifth of the world\u2019s population and four-fifths of its income and it consumes seventy percent of the world\u2019s energy, seventy-five percent of its metals and eighty-five percent of its wood. Even in these rich countries, some of the essential needs of the poor remain unfulfilled, and high pollution and rapid depletion of non-renewable resources occur.

The question, of course, is how to implement the \u201cmoral filter\u201d without coercion or despotism. The filter mechanism of values must be socially- agreed upon and some way has to be devised to motivate consumers and businesspeople to abide by these values. From an Islamic point of view, social change must be gradual and cannot be achieved through force. The Qur\u2019anic injunction \u201cThere is no compulsion in religion\u201d (Qur\u2019an 2:256) is relevant here. Change can occur by inviting people to alter their ways or by setting an example. Historically this is how Islam rapidly spread through a large part of the world in the seventh and eighth centuries (Eaton, 1994). For example, when Muslim merchants traveled to distant lands, the inhabitants of those lands were impressed by the traders\u2019 social and business conduct and so became curious about their beliefs. Many of these inhabitants subsequently became Muslims. A parallel exists today with respect to the \u201cgreen\u201d movement which con- tinues to spread around the globe. The adoption of environmentally conscious behavior is occur- ring through example, encouragement and edu- cation, as well as by legislation. Indeed, in the environmental context, legislation is insufficient. Only when the political will and support of the populace are strong enough, are environmental laws adequately enforced.

The Islamic ethical system contains specific guidelines for achieving the moral filter and for conducting business. These guidelines derive from the interrelated concepts of unity, justice and trusteeship which I explain below.

Unity( t aw h i d )

The key to the business philosophy of Islam lies in a person\u2019s relationship with God, His universe and His people. In common with other revealed religions is the moral appeal to humans to sur- render themselves to the will of God. Islam goes beyond this exhortation and teaches that all life is essentially a unity because it also provides the practical way to pattern all facets of human life in accordance with God\u2019s will. There should be unity of ideas and actions in a person\u2019s existence and consciousness (Asad, 1993). Muslims believe that because people are accountable to God, and their success in the hereafter depends on their performance in this life on earth, this adds a new dimension to the valuation of things and deeds in this life (Siddiqi, 1981). Islam is simply a program of life in accord with the \u201claws of nature\u201d decreed by God. A definite relationship between fellow humans is thus prescribed. This is the relationship of brotherhood or sisterhood and equality (Abu-Sulayman, 1976). In this sense, unity is a coin with two faces: one implies that God is the sole creator of the universe and the other implies that people are equal partners or that each person is a brother or sister to the other. As far as business is concerned, this means cooperation and equality of effort and opportunity.

Justice( a d a l a h )

Islam is absolutely unambiguous in its objective of eradicating from society all traces of inequity, injustice, exploitation and oppression. The Qur\u2019an also condemns vicarious guilt or merit and teaches the greatest possible individualism \u201c. . . no bearer of burdens can bear the burdens of another; . . . man can have nothing but what he strives for . . .\u201d (Qur\u2019an 53:38\u20139). This indi-

Islamic Ethics
347

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