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Islamic Ethics and the Implications for Business

Gillian Rice

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 implications 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 “value-free society” 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
Gillian Rice is Associate Professor of Marketing at Thunderbird, The American Graduate School of International 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 in International Marketing Review, International Journal of Forecasting, Information and Management, The International Executive and Journal of the Academy of Marketing Science.

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 multinational 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 “moral champions,” committed to pursuing the best in ethical and moral decision-making and behavior. The definition of “best” 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’s Centesimus Annus argues 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).

Journal of Business Ethics 18: 345–358, 1999. © 1999 Kluwer Academic Publishers. Printed in the Netherlands.


Gillian Rice control, the allocation of resources is in the hands of a bureaucracy, which is cumbersome and inefficient. 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 “moral filter.” This means that people would pass their potential claims on resources through the “filter of Islamic values” 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 sufficient 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’ (1972) observations on this subject may be useful. He stated that even though “the needs of human beings may seem to be insatiable,” . . . “they fall into two classes – 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 superiority, 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.” Islamic jurists’ categories of necessities (daruriyyat), conveniences (hayiyyat) and refinements (tahsiniyyat) would fall into Keynes’ 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 “comforts” 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’s well-being. Galbraith (1958) refers to this second class of needs as “wants.” Consumer advocates in the U.S. have long been critical of business practices that increase the desire for “wants” and subsequently have adverse cultural and social effects (Williams, 1993). For example, in pursuit of profit maximization, businesses often subject the consumer

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 generally misunderstood and it is often surprising to some that it contains an entire socio-economic system. In Islam, it is ethics that dominates economics and not the other way around (Naqvi, 1981). My purpose is twofold: (1) to share a 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 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 differences 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 illustrative case.

The Islamic ethical system Muslims derive their ethical system from the teachings of the Qur’an (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 primarily materialist. They are based on Islamic concepts of human well being and good life which stress brotherhood/sisterhood and socioeconomic justice and require a balanced satisfaction of both the material and spiritual needs of all humans (Chapra, 1992).

A “moral filter” There exists in most societies a relative scarcity of resources with unlimited claims upon them. A free-market capitalist economy uses marketdetermined 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

Islamic Ethics to advertising and sales promotion campaigns that appeal to the consumer’s 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 Development Report (1994), the lifestyles of the rich nations must change; the north has a fifth of the world’s population and four-fifths of its income and it consumes seventy percent of the world’s 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 “moral filter” without coercion or despotism. The filter mechanism of values must be sociallyagreed 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’anic injunction “There is no compulsion in religion” (Qur’an 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’ 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 “green” movement which continues to spread around the globe. The adoption of environmentally conscious behavior is occurring through example, encouragement and education, 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 (tawhid) The key to the business philosophy of Islam lies in a person’s relationship with God, His universe and His people. In common with other revealed religions is the moral appeal to humans to surrender 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’s will. There should be unity of ideas and actions in a person’s 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 “laws of nature” 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 (adalah) Islam is absolutely unambiguous in its objective of eradicating from society all traces of inequity, injustice, exploitation and oppression. The Qur’an also condemns vicarious guilt or merit and teaches the greatest possible individualism “. . . no bearer of burdens can bear the burdens of another; . . . man can have nothing but what he strives for . . .” (Qur’an 53:38–9). This indi-


Gillian Rice material prosperity is desirable, it is not a goal in itself. What is crucial is the motivation, the “ends” of economic activity. Given the right motivation, all economic activity assumes the character of worship (Siddiqi, 1982). Indulgence in luxurious living and the desire to show-off is condemned. Islam does not tolerate conspicuous consumption (Chapra, 1992). Resources must also be disposed of in such a way as to protect everyone’s well-being (AlFaruqi, 1976). No one is authorized to destroy or waste God-given resources. This is very relevant to ethics concerning business and the environment: when Abu Bakr, the first ruler of the Islamic state after Muhammad, sent someone on a war assignment, he exhorted him not to kill indiscriminately or to destroy vegetation or animal life, even in war and on enemy territory. Thus there was no question of this being allowed in peacetime or on home territory. Trusteeship is akin to the concept of sustainable development. Models of sustainable development do not regard natural resources as a free good, to be plundered at the free will of any nation, any generation or any individual (UNDP, 1994). The notion of trusteeship is also common to the Jewish and Christian faiths; Green (1993) refers to Psalms 24:1, “The earth is the Lord’s and the fullness thereof.”

vidualistic outlook on the spiritual destiny of humanity is counterbalanced by a rigorous conception of society and social collaboration. In their acquisition of wealth, however, people should not lie or cheat; they must uphold promises and fulfill contracts. Usurious dealings are prohibited. Islam teaches that all wealth should be productive and people may not stop the circulation of wealth after they have acquired it, nor reduce the momentum of circulation (Chapra, 1992). The intense commitment of Islam to justice and brotherhood demands that Muslim society take care of the basic needs of the poor. Individuals are obliged to earn a living and only when this is impossible does the state intervene. The Islamic institution of zakah, that is, a wealth tax comprising compulsory charitable-giving for specially designated groups in society, facilitates the care of all members of society. The rich are not the real owners of their wealth; they are only trustees. They must spend it in accordance with the terms of the trust, one of the most important of which is fulfilling the needs of the poor. The word “zakah” means purification and as such, income redistribution is not only an economic necessity but also a means to spiritual salvation (“. . . of their wealth take alms so that you might purify and sanctify.” Qur’an 9:103). Thus, economics is effectively integrated with ethics (Naqvi, 1981).

The need for balance Trusteeship (khilafah) People are viewed as trustees of the earth on behalf of God. This does not mean a negation of private property but does have some important implications. No inhibitions attach to economic enterprise and people are encouraged to avail themselves of all opportunities available. There is no conflict between the moral and socio-economic requirements of life. There is a very wide margin in a person’s personal and social existence. People may be ascetics or, after paying the wealth tax, may enjoy fully their remaining wealth. Yet, resources are for the benefit of all and not just a few and everyone must acquire resources rightfully. Although Muhammad advised Muslims to be moderate in all their affairs; he described Islam as the “middle way.” A balance in human endeavors is necessary to ensure social well-being and continued development of human potential. Chapra (1992) notes that Islam recognizes what Marxism sought to deny: the contribution of individual selfinterest through profit and private property to individual initiative, drive, efficiency and enterprise. At the same time, Islam condemns the evils of greed, unscrupulousness and disregard for the rights and needs of others, which the secularist, short-term, this-worldly perspective of capitalism sometimes encourages. The individual profit motive is not the chief propelling force in Islam (Siddiqi, 1981). Social good should guide entre-

Islamic Ethics preneurs in their decisions, besides profit. A relevant saying of Muhammad is “work for your worldly life as if you were going to live forever, but work for the life to come as if you were going to die tomorrow.” Islam, like some other religions, places a greater emphasis on duties than on rights. The wisdom behind this is that if duties (relating to justice and trusteeship, for example) are fulfilled by everyone, then self-interest is automatically held within bounds and the rights of all are undoubtedly safeguarded. Society is the primary institution in Islam, not the state (Cantori and Lowrie, 1992). Chapra (1992) argues that in order to create an equilibrium between scarce resources and the claims on them in a way that realizes both efficiency and equity, it is necessary to focus on human beings themselves, rather than on the market or the state. As emphasized by Cantori and Lowrie (1992), the Islamic jurists and the Islamic law or “shari’ah” (literally, “road”) limit governmental power. The shari’ah is so all encompassing that there is less need for legislation regarding issues of ethics, social responsibility and human interaction. In particular, Muslims believe that the Qur’an contains a final and unambiguous statement of the truth, added to what had gone before (for example, the messages delivered to Moses and Jesus). The duty of the Muslim community is to preserve this message. Thus, Muslims have a profound horror of anything regarded as innovation in matters of religion, including what modern Christians interpret as necessary adaptations of religion to changing times (Eaton, 1994). The emphasis is therefore on the human being rather than on state power. The real wealth of societies is with their people. An excessive obsession with the creation of material wealth can obscure the ultimate objective of enriching human lives. Humans are thus the ends as well as the means. Unless humans are motivated to pursue their self-interest within the constraints of economic well-being (the application of the “moral filter”), neither the “invisible hand” of the market nor the “visible hand” of central planning can succeed in achieving socioeconomic goals (Chapra, 1992). Summary


It should be emphasized that in Islam, business activity is considered to be a socially useful function; Muhammad was involved in trading for much of his life. Great importance is attached to views relating to consumption, ownership, goals of a business enterprise and the code of conduct of various business agents. A summary of the key ethical principles in Islam which relate to business practices is presented in Table I. Because Judaism, Christianity and Islam are closely related, many ethical principles such as honesty, trustworthiness and taking care of the less fortunate, are universal among the three religions, and indeed, among most moral codes. For example, as pointed out by Rossauw (1994), someone with a Christian understanding of the unconditional value of life cannot be careless in the workplace about product and quality standards that pose a threat to the lives of consumers or employees. However, Rossauw suggests that it is not the role of the church to approve or condemn economic systems. As economic systems are morally ambiguous, he encourages Christians to “keep a critical distance from the economic system in which they are working.” In contrast, because Islam supplies a practical life-program, it is important to note that the Islamic socio-economic system includes detailed coverage of specific economic variables such as interest, taxation, circulation of wealth, fair trading, and consumption. Islamic law (shari’ah) derived from the Qur’an and sunnah also covers business relationships between buyers and sellers, employers and employees and lenders and borrowers (for full details, see for example, Keller, 1994). Note that there is no difference between Muslims and non-Muslims in legal rulings concerning commercial dealings. For example, it is unlawful to undercut another’s price (whether that person be Muslim or nonMuslim) during a stipulated option to cancel period. A seller is not permitted to tell the buyer “cancel the deal and I’ll sell you one cheaper.” Also, whoever knows of a defect in an article he/she is selling is obliged to disclose it, to any buyer, Muslim or non-Muslim. Both Islamic and non-Islamic employees must be


Gillian Rice
TABLE I Examples of ethical principles in Islam relating to business practices

Ethical principle Unity “No Arab has superiority over any non-Arab and no nonArab has any superiority over an Arab; no dark person has superiority over a white person and no white person has any superiority over a dark person. The criterion of honor in the sight of God is righteousness and honest living.” Saying of Muhammad (Sallam and Hanafy, 1988). “O mankind! We created from you from a single (pair) of a male and a female, and made you into nations and tribes, that you may know each other . . .” (Qur’an 49:13). “. . . man can have nothing but what he strives for . . .” (Qur’an 53:39). “God likes that when someone does anything, it must be done perfectly well.” Saying of Muhammad (Sallam and Hanafy, 1988). “. . . say, ‘O my Lord! increase me in knowledge.’ ” (Qur’an 20:114). “The acquisition of knowledge is a duty incumbent on every Muslim, male and female.” Saying of Muhammad (Sallam and Hanafy, 1988). Trusteeship “God does command you to render back your trusts to those to whom they are due . . .” (Qur’an 4:58) “. . . wear your beautiful apparel at every time and place of prayer: eat and drink: but waste not by excess . . .” (Qur’an 7:31). “. . . to God belongs all that is in the heavens and on earth . . .” (Qur’an 3:129). Justice “. . . God loves not the arrogant, the vainglorious (nor) those who are niggardly, enjoin niggardliness on others . . .” (Qur’an 4:36–7). “. . . and spend of your substance in the cause of God, and make not your own hands contribute to your destruction; but do good . . .” (Qur’an 2:195).

Relevant business practice(s)

Equal opportunity and non-discriminatory behavior in hiring, buying and selling.

Teamwork. International business.

Rewards should be received only after expending efforts. Excellence and quality of work.

Importance of knowledge-seeking, research and development, scientific activity, training programs, executive training, technology transfer.

Fulfilling obligations and trust in business relationships and the workplace. It is acceptable to have wealth and to consume but not to waste resources. Care for the environment. There is no unlimited right to private property.

Prohibition of hoarding. Encouragement of spending, investment in business enterprise and circulation of wealth. Condemnation of ostentatious consumption.

Islamic Ethics
Table I (continued) Ethical principle Justice continued. . . . “. . . wealth and children are allurements of the life of this world . . .” (Qur’an 18:46). Relevant business practice(s)


Acquisition of wealth is given reduced consideration in the scale of human values.

“. . . He has raised you in ranks, some above others: that He Income inequality is permitted. may try you in the gifts that He has given you” (Qur’an 6:165). “. . . it is We (God) who portion out between them their livelihood in the life of this world: and We raise some of them in ranks so that some may command work of others. But the Mercy of your Lord is better than the (wealth) which they amass.” (Qur’an 43:32). “. . . of their wealth take alms, so that you might purify and sanctify . . .” (Qur’an 9:103). “God permits trade but forbids usurious gain*.” (Qur’an 2:275). “. . . give just measure and weight, nor withhold from the people the things that are their due . . .” (Qur’an 11:85). “He who cheats is not one of us.” Saying of Muhammad (Keller, 1994). “. . . don’t outbid one another in order to raise the price, . . . don’t enter into a transaction when others have already entered into that transaction and be as brothers one to another.” Saying of Muhammad (Hanafy and Sallam, 1988). “. . . make your utterance straightforward . . .” (Qur’an 33:70). “On the day of judgment, the honest Muslim merchant will stand side by side with the martyrs.” Saying of Muhammad (Ali, 1992). “. . . stand out firmly for justice, as witnesses to God, even against yourselves, or your parents, or your kin, and whether it be (against) rich and poor.” Non-discriminatory workplace practices. Protection for “whistle-blowers.” No special privileges for those with wealth or status. Importance of individual responsibility. Distinction between managers, workers, professionals, etc. is acceptable.

Income redistribution: wealth should be shared with those less fortunate. Unlawfulness of loans by which lender obtains benefit. Give full measure and weight.

Whoever knows of a defect in something is obliged to disclose it. Fairness in contract negotiation.

Truthfulness and directness in negotiation.

“. . . nor shall We (God) deprive them (of the fruit) of aught of their works: (yet) is each individual in pledge for his deeds.” (Qur’an 52:21).

* In the Qur’an, the Arabic word used is “riba” which lexically means “increment” (Keller, 1994).


Gillian Rice cultural system (Moore and Delener, 1986). Egyptians are a religious people closely attached to their religious culture and identity. There is a growing awareness among them that many Islamic cultural traits are being superseded by western values, institutions and practices (Najjar, 1992; Asad, 1993). Joy and Ross (1989) observe how, today, societal success in the third world is measured and evaluated in terms of proximity to the institutions and values of the west. Nevertheless, new techniques, ideas and values will be accepted only if they meet the real needs of people more effectively than existing ones. Had such institutions such as liberal democracy, capitalism or socialism succeeded in solving the pressing problems of Egyptian society, they probably would not have generated such hostility (Najjar, 1992). Instead, they have been seen as the cause of rapid deterioration of the quality of Islamic life and the decline of the Muslim world. The emphasis on conspicuous consumption and changes in lifestyles which followed Sadat’s “infitah” (open-door) economic policy and move to a free market economy in the seventies and eighties aggravated inflation and unemployment in Egypt, sharpened social disparities and enlarged the class of dispossessed and disaffected. The economic liberalization policy concentrated on trade, the importance of consumer items and expansion of services such as tourism and hotel management (Tuma, 1988), rather than on industrial projects. Privatization efforts continue, although rather slowly because of the government’s philosophy of control. A “new class” has arisen as a result of the open-door policy. Although it is relatively small, it accumulated much economic and political power during the eighties ( Jabber, 1986). This class consists mainly of entrepreneurs, professional and high salaried employees of the private economy.

treated with the same just, equitable and honest approach. Note that Islam is not an ascetic religion. Islam allows people to satisfy all their needs and to go beyond. The objective should not be to create a monotonous uniformity in Muslim society. Simplicity in consumption can be attained in lifestyles alongside creativity and diversity. Neither does Islam mean an absence of economic liberalization. There is a different kind of liberalization: one in which all private and public sector economic decisions are first passed through the filter of moral values before they are made subject to the discipline of the market. Undoubtedly, to implement the “moral filter” in practice requires the dedication of a large number of market participants. There is therefore frequently a wide gap between the philosophy and practice of Islamic ethics in countries with predominantly Muslim populations. The next section examines this issue with reference to Egypt.

Philosophy and practice: the example of Egypt The reality of present-day Muslim life is far from the ideal possibilities given in the religious teachings of Islam (Asad, 1993). Because of a number of historical factors, the dominant ideology in Muslim countries is not Islam but rather secularism along with a mixture of feudalism, capitalism and socialism (Chapra, 1992). Islam is conspicuous by its absence, particularly in the political and economic fields. In the Muslim countries, unjust and oppressive political and socio-economic systems have been the cause of the Islamic resurgence. The socio-economic restructuring that Islam represents threatens the governments’ short-term (but not necessarily long-term) interests.

Cultural dualism Impact of economic liberalization For one dimension of life such as business, it is difficult to differentiate between the impact of the religious context of the behavior and the total The artificial symbiosis of Islamic ethical beliefs and “alien” socio-economic philosophies and systems has led to the emergence of bifurcated societies promoting schizophrenic behavior both at the individual and collective level (Naqvi,

Islamic Ethics 1981). Ali (1992) discusses the Arab dual identity in detail, attributing it to two main factors: (1) colonialism which instilled feelings of inferiority in Arab thought and (2) the artificial division of lands into nation-states. The influx of multinational corporations into the region also contributed to cultural and social alienation. Because of social and political instability in countries like Egypt, people tend to believe everything in life is temporary and they make their way on doubt. Previous studies (for example, Rawwas et al., 1994; Al-Khatib et al., 1994) suggest that social and political instability or economic hardship may cause tense, pessimistic and struggling individuals to sacrifice ethicality for basic survival needs. In particular, Tuma (1988) identifies three main features of Egyptian culture which Egyptians have internalized in their behavior to enable them to deal with the difficulties of life in Egyptian society. These three features are indecision, procrastination and indifference. People will not firmly answer yes or no to a request, but will say “insha’Allah (God willing). They will not do today what they can do tomorrow, but will say “bukra” (tomorrow), as if time had no cost. They accept indecision and procrastination and their effects with apparent indifference, and say “ma’alesh” (it doesn’t matter), even though the costs may be substantial. If God’s name is invoked in every situation and if every action depends on the will of a higher authority, Tuma (1988) asks, what role does the individual play? What responsibility must he or she carry? It is important to note that Muslims are exhorted in the Qur’an never to say that they will do something the next day without also saying “insha’Allah.” This does not absolve the individual of responsibility; people should make strong effort and work hard to achieve their business plans. If these go awry, in hindsight, a Muslim would consider this to be the will of God. This may be viewed as “predestination in reverse.” Yet there is no concept of predestination in terms of the future as humans have free will and must make their own conscious life (and business) decisions. As Eaton (1994) explains, the concept of the divine omniscience would be empty if humans did not acknowledge that God knows not only all that has ever happened but


also all that will ever happen, and that “the ‘future’ is therefore in a certain sense, already ‘past.’ ” In the words of the Bible, “That which hath been is now; and that which is to be hath already been” (Ecclesiastes, 3:15). Since humans are subject to time and cannot see the future, they have an experience of free choice. They make their choices and act accordingly; only when the act is past can they say “it was written” or “it was decreed for us from the beginning of time” (Eaton, 1994). The Qur’an states that a person achieves only that for which he makes an effort: “. . . And that man can have nothing but what he does (good or bad) . . .” (Qur’an 53:39). With respect to “insha’Allah,” there appears to be a tension between the Qur’an’s teaching and what sometimes occurs in practice. Tuma (1988) suggests that, in practice, the deference to a higher authority may be understood to mean “if the boss wills it.” If no-one will make decisions, then no-one will bear responsibility. Individual initiative is therefore reduced, as all decisions are centralized, as a way of avoiding responsibility and blame. Based on this author’s experiences in Egyptian society, the term “insha’Allah” is also often used as a way of meaning “no” without actually saying “no.” It is difficult to obtain firm commitment from business partners and to plan accordingly. Al-Khatib et al. (1995) provide the following explanation for this type of behavior: one ethical standard is used to handle daily decisions while the other, influenced by religious teachings, is not implementable because of the economic hardship faced by the people.

Informality in business relationships Social relations, the traditional extended family structure and nepotism have a strong influence on business behavior. Egyptians prefer to do business with people they know and like and who they consider as friends. They are extremely hospitable and generous and exchange gifts often. As business relationships are often with friends or family, these relationships are characterized by informality which is subsequently reflected in the treatment of time, weights and measures, and


Gillian Rice ernment-funded cooperative set up to make needy Egyptian families self-sufficient (Thomas, 1996a). A non-profit U.S.-based cooperative, “Women’s Organization Middle East Network” (WOMEN), unites women from Egypt, Israel, Jordan and Palestine. Its goals include training women in management, technology, finance and marketing techniques, as well as promoting social services. Products are to be marketed regionally and internationally, with the ultimate aim of developing a franchise system (Thomas, 1995). Niclas, a German clothing retailer is opening a large number of outlets in the Middle East, with plans to locate production as well as retail outlets in Egypt. It can be argued that Niclas is promoting fashion and “luxurious” clothing items. Nevertheless, the company’s plans to promote brand loyalty also include starting a children’s club led by eco-friendly character “Niclas” who will give talks about nature and ecology. Niclas has a regional partner to assure regional adaptation of business approaches (Thomas, 1996b). There is undoubtedly a need for genuine understanding of the ethics of foreigners with whom an international manager seeks to do business, whether these are other businesspeople, consumers or government representatives. In each particular culture, this understanding should extend to people’s aspirational ethics as well as to their everyday practices. Managers should not look merely at the practices of the most corrupt level of society (Tuma, 1988; Al-Khatib et al., 1995). The foregoing discussion of Islamic philosophy and practice in Egypt suggests a number of implications for international executives. These are detailed in Table II. The Egyptian culture, based in the Islamic tradition, focuses on social issues such as family, health and training for young people. Marketing and public relations efforts must therefore emphasize these issues (Wilkinson, 1996). For example, Egyptian House is planning to sponsor Egyptian students on annual placements to learn marketing techniques. In the telephone switching market, European firms have strengthened their position in Egypt by visiting agents more frequently and educating their agents regarding new technology. Such efforts have led to closer, more successful business relationships

quality control of goods and services (Tuma, 1988). Table I includes several Islamic ethical principles which counter this informality. For example, there should be no discrimination between human beings, whether they are family members or not, full measure and full weight should always be given to buyers, along with explanation of any deficiencies in products to be sold, and hard work and excellence or quality in work is urged.

Implications for doing business with people in Muslim cultures: the case of Egypt The bifurcated nature of the Egyptian culture creates some interesting problems for foreign executives doing business in Egypt. On the one hand, it might be useful for a foreign executive to understand and show appreciation for the Islamic concepts of unity (unity of faith and action, equality of humans), trusteeship and justice. On the other hand, managers must consider the difficult realities of everyday living which lead people to forgo the ethical principles of the Islamic tradition. Can managers of multinationals play the role of “moral champions” as Amine (1996) suggests? About sixty percent of multinationals have codes of ethics in place (The Economist, 1995). Many managers ignore ethical diversity, however, and implement the same code of ethics around the world. Vasquez-Parraga and Kara (1995) argue that codes of ethics have not worked. Some contend that ethics cannot be taught to managers because their values are already formed. There are, however, numerous documented cases that show ethics can be influenced by organizational pressures (Smith and Quelch, 1992). Rogers et al. (1995) state that, especially in developing countries like Egypt, managers should develop and implement a balanced business philosophy which integrates the profitability requirements of multinationals with the social, economic and ecological needs of developing countries and those who live in them. For example, the U.K.-based retail outlet “Egyptian House” is a joint venture with Egypt’s Foundation for the Productive Families, a gov-

Islamic Ethics
TABLE II Illustrations of the business implications of Islamic philosophy and practice in Egypt Islamic philosophy Unity Non-discrimination in the workplace Egyptian practice


Implications for the foreign executive

Nepotism, importance of social relationships in business

Trust and friendship must be developed, often slowly, before business is possible. Hiring of family members/friends by Egyptian partner may result in less than qualified individuals for certain positions. Provide training as part of contracts; technology transfer; visits to foreign company’s home facilities much appreciated.

Importance of knowledge-seeking

Egyptians place great emphasis on education, wherever possible, given the country’s level of economic development.

Trusteeship Care of the environment

Egyptians have neglected this, in part because of more pressing economic problems, but also because of attitude. Changes are occurring. Environmental laws being implemented. The “new” class which benefited from liberalization tends to engage in conspicuous consumption. Yet, there are also efforts on the part of some Islamists to develop social welfare programs.

Business opportunities in environmental technology field. Marketing appeals could be made using the Islamic perspective on the environment. International managers have the opportunity to be “moral champions.” E.g. success of Egyptian House in UK, a joint venture with Egypt’s Foundation for the Productive Families (Thomas, 1996a). Also, possibilities for cause-related marketing in Egypt.

Use of wealth for social causes, to aid less fortunate people.

Justice Precision in business dealings, honesty, full information to the buyer, etc. Individual responsibility.

Informality in treatment of time, weights and measures, business on a “handshake.” Indecision, procrastination. Lack of trust. Efforts to gain benefits from the state. Some Egyptian businesspeople observe this ruling; others do not.

Foreign executives need to be extremely patient and cautious. Showing strong commitment, however, will likely increase the commitment of the Egyptian partner. Need for local agent/ partner. Need to find out the views of the Egyptian partner. Foreign executives would be wise to avoid expressing opinions, but should follow desires of Egyptian partner. Opportunity for innovative financing methods. Islamic financing institutions and instruments growing worldwide with many major western banks involved.

Prohibition of usurious transactions e.g. payment and receipt of interest.


Gillian Rice managers and how these managers deal with issues of social responsibility in their countries. The results would be salient in the development and implementation of multinational companies’ codes of ethics. In addition, organizations seeking to be “good corporate citizens” in Muslim countries could benefit from this kind of research. Because much international business is conducted using agents and various types of joint ventures, it is important to understand the ethical ideals and practices of Muslim business partners. Also, how do they resolve conflicts with non-Muslim partners? Research should include comparisons of different Muslim countries, such as those from North Africa, the Gulf region, and Southeast Asia. Furthermore, what is the impact of Islamic thinking on different business functions such as finance and marketing? For example, what kind of advertising is not only acceptable in Islamic cultures, but is preferred and more effective? The most appropriate way to research these issues is by conducting surveys to ascertain the attitudes and practices of managers and consumers in Muslim countries. In some contexts, such as advertising research, laboratory and field experiments may also be feasible. The Islamic ideal is part of a universal Islamic culture, common to all Muslims around the world. Hence, a deeper appreciation of Islam can be advantageous to executives conducting business with any Muslims, from Indonesia to Morocco, and from the former Soviet Central Asian republics to South Africa.

(Middle East Executive Reports, 1995). Innovative financing methods based on Islamic practice are growing worldwide and are accessible to western business executives. For example, Citibank’s Islamic investment bank is headquartered in Bahrain. The Islamic Development Bank has an export credit agency, The Islamic Corporation for the Insurance of Investment and Export Credit (Middle East Economic Digest, 1995). While there are some differences between philosophy and practice, it should be remembered that the Islamic worldview has an enduring and strong influence on Egyptian culture. In common with most peoples of the world, Egyptians are very favorably impressed and honored by a foreigner’s genuine desire to learn about the ideal to which they aspire. An understanding of Egyptians’ inner conflicts in business ethics will be appreciated. At all times, foreign executives should demonstrate respect for Islam and they will find that, in turn, the Egyptians will truly respect the foreigners’ religious beliefs and ethical ideals.

Conclusion In response to the need for further research and discussion about business ethics in different cultures, I have described Islamic philosophy regarding business practices. It is important not merely to understand the philosophy or ideal, however. Knowledge of ethics in practice is vital to the international manager. The illustration of Egypt shows considerable diversities between philosophy and practice; diversities which if understood, can provide a foreign executive with ideas on how to negotiate with Egyptians and even what kinds of products or services might be appreciated. The specific Egyptian case, of course, has limited generalizability, as all cultures have unique traits. Nevertheless, the analytical framework I use is applicable in any culture. Managers should examine first a culture’s ideal set of ethics, and second, the actual ethical practice. They should also attempt to investigate reasons for differences between these two. Future empirical research could focus on what are the ethical issues of most concern to Muslim

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