J Bus Ethics (2013) 117:467475
DOI 10.1007/s10551-012-1530-0
Islamic Perspectives on Profit Maximization
Abbas J. Ali Abdulrahman Al-Aali
Abdullah Al-Owaihan
Received: 13 August 2011 / Accepted: 22 October 2012 / Published online: 2 November 2012
 Springer Science+Business Media Dordrecht 2012
Abstract Ethical considerations, especially those reli-
giously driven, play a significant role in shaping business
conduct and priorities. Profit levels and earnings constitute
an integral part of business considerations and are relevant
and closely linked to prevailing ethics. In this paper, Isla-
mic prescriptions on profit maximization are introduced.
Islamic business ethics are outlined as well. It is suggested
that while Islamic teaching treats profits as reward for
engaging in vital activities necessary for serving societal
interests, profit maximization is not sanctioned and there-
fore should not be the goal of ethically guided business
ventures.
Keywords Profit maximization
Islamic ethics

Islamic perspectives
Business ethics
Islamic logic

Stakeholder theory
Since Webers seminal work on Protestant ethics, studies on
religion and business have thrived. Indeed, Webers (1905)
work set the stage for researchers to closely examine the
impact of religion on economic development, work
involvement, and organizational activities. Among those
who look at the link between economic development and
A. J. Ali (&)
Indiana University of Pennsylvania, Indiana, PA, USA
e-mail: aaali@iup.edu
A. Al-Aali
King Saud University, Riyadh, Saudi Arabia
e-mail: alaali@KSU.EDU.SA
A. Al-Owaihan
Kuwait University, Safat, Kuwait
e-mail: alowaihan@kuc01.kuniv.edu.kw
religious beliefs are Tawney (1948) and Huntington (2004).
Both authors have studied societal evolution and develop-
ment and have attributed the growth of capitalism and eco-
nomic achievement to Protestant beliefs. Earlier contributors
to work involvement studies, in the context of religion
influence, have also underscored work ethics and the role of
Protestantism in facilitating hard work and work commit-
ment (e.g., Furnham 1984, 1991; Mirels and Garret 1971).
Organizations and management studies, on the other
hand, have examined organizational performance and how
religion shapes executive behavior (e.g., Graafland et al.
2006; Lee et al. 2003). These studies have in recent years
been strengthened due to the popularity of spirituality and
sustainability concepts and implications among practitio-
ners and researchers. In their studies on the importance of
religious beliefs to ethical attitudes in the marketplace,
Emerson and Mckinney (2010) have credited the reoccur-
rence of financial crises and marketplace misconduct to a
rising interest in spirituality, morality, and religion. The
authors have asserted that the importance of religion in
ones life is much more important than mere religious
affiliation in shaping ethical attitudes.
Like Ali (2005, 2008), Emerson and Mckinney (2010)
argue that in todays marketplace, it is impossible to reg-
ulate executive behavior and that ones morality and ethics
are instrumental in restraining the urge to engage in corrupt
or questionable acts. These authors along with Pava (1998)
suggest that religious-based and/or spiritually driven ethics
motivate individuals to incorporate the highest human and
spiritual ideals into their business conduct. The ideals can
be manifested in workplace environment, customer rela-
tions, pricing and profit margin, recruiting and promotion,
and competing in the marketplace.
One of the most vital issues related to marketplace
and business conduct is profit earnings. While almost all
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researchers and practitioners agree that business organiza-
tions cannot survive without profit, they disagree on the
level of profit. Should profit be moderate or excessive,
minimum or maximum, fair or exploitative? In contrast to
those that propose that profit maximization is a wrong
concept (Drucker 1974; Li 1964), there are those who
argue that executives and their corporations must seek
profit maximization (Koplin 1963; Milton 1970). On the
other hand, there are those who are either driven by secular
(e.g., Sibley 2009; Dierker and Grodal 1996) or religious
(e.g., Karns 2008) motives who postulate that excessive
profit is not only undesirable, but also inconsistent with
optimally serving a society.
Recently, the debate on profit maximization has been
linked to the subject of business ethics (e.g., Emerson and
Mckinney 2010; OBrien 2010). In fact, Primeaux and
Stieber (1994) made a powerful argument that not only is
ethics at the heart and center of business, but also that profit
and ethics are intrinsically related. This linkage helps to
focus attention on the role of corporations in society, the
objective of the firm, the nature of profit, and situates the
latter as a moral concern that is relevant to societal welfare
and prosperity. For this particular reason, some scholars
have attempted to address the subject of profit maximiza-
tion in terms of religious teaching and/or philosophy.
Of particular interest are studies which have moved
beyond economic efficiency and focused on the behavioral
aspects of profit maximization (see Primeaux 1997;
Primeaux and Stieber 1994). These studies, while high-
lighting the importance of profit maximization, assert that
it symbolizes the contribution of business to communal and
personal well-being. Furthermore, these studies have con-
tributed to understanding the role and objective of the firm
with an emphasis on moral responsibility and ethical con-
duct in the marketplace. This particular development has
situated the subject of profit maximization at the center of
the study of ethics and has subsequently framed decisions
regarding profit not only in terms of efficiency, but also in
the context of responsibility and contribution to society.
Due to the rising influence of the U.S. in the world
economy since late 1940s, American organizational con-
cepts and terminologies have been widely promoted and
taught across the globe. While the validity of these con-
cepts is not our concern in this paper, the fact of the matter
is that these concepts have found a receptive audience in
various cultures. The profit maximization is one of the
concepts which has been aggressively introduced to
developing countries and has been presented as an integral
part of capitalism and a necessary element for economic
growth (see Alaki 1979; Abusin and Hassan 2011; Bils-
borrow 1997). Consequently, the concept has become part
of the usual lexicon among researchers and practitioners in
these nations.
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A. J. Ali et al.
Almost all of the studies on profit maximization, secular
or religiously driven, have been conducted in the west,
especially in the US. Some of these studies have primarily
reflected on profit maximization in terms of Biblical
teaching (e.g., Emerson and Mckinney 2010; Karns 2008;
OBrien 2010). The globalization of the marketplace, the
increasing role of the emerging economies in the world
economy, and growing contributions of ethnic and reli-
gious groups to economic and industrial development have
accentuated the need to examine the perspectives of other
religions and civilizations on profit maximization and
business conduct. In fact, as Yanow (2005) argues, man-
agement philosophy and outlook, rather than being
culturally monochromatic, should take into account the
differences in values informing practices in todays socie-
ties beyond those of the Christian west.
In this study, we are guided by the following assump-
tions: Civilizations espouse various ethical principles
which are assumed to be prioritized differently depending
on cultural preferences and the importance attached to
each; the role of business in a society is influenced by many
factors including the stage of economic development,
religion, and openness; the interplay of these factors shapes
how people in certain civilizations/societies and time
periods deal with business issues and emerging or pressing
events; religion, however, remains a determining force in
ethics formation and application; and, indeed, each religion
has its own set of values and beliefs which in turn deter-
mines what is considered right and wrong and the standards
upon which a behavior/conduct is judged.
Islam, like other religions, has its own prescriptions and
business instructions. While some of these prescriptions are
general, others are specific and tackle issues that relate to
daily activities in the marketplace and to exchange func-
tions. This is because economic activities and participation
in business have spiritual dimensions in Islam. The Quran
states (4:29), Eat not up your property among yourselves
in vanities; but let there be amongst you trade by mutual
good-will and (2:275) God hath permitted trade and
forbidden usury.
Likewise, the Prophet Mohamed makes engaging in
business affairs an obligation, stating that Seeking earn-
ings is a duty for every Muslim (Quoted in Ali 2011b) and
Some sins can be abolished only by working hard to get
earnings (Quoted in al-Maki, died 996, p. 499). In fact,
the tenth-century jurist, al-Maki, suggested that the thriving
of religion is contingent upon good conduct in this world,
including integrity in trade and crafts. This elevation of
participation in business activities to ethical and economic
duties stems from the importance of such activities to
social stability, coherence, and development and growth,
while strengthening spirituality and the continuation of
civilization. Ibn Khaldun (1989), 13321406, a medieval
Islamic Perspectives on Profit Maximization
Muslim sociologist, highlighted this, stating that civili-
zation and its well-being, as well as business prosperity,
depends on productivity and peoples efforts in all aspects
for their own interest and profit. When people no longer do
business in order to make a living, and when they cease all
gainful activity, the business of civilization slumps and
everything decays.
Though in recent years there has been an interest in
Islamic perspectives on economic and business issues,
the greater part of these studies have focused on banking,
finance, and organization. Genuine studies pertaining to
profit maximization in the context of Islamic teachings
generally do not exist. This paper is designed to address
Islamic perspectives on the subject by relying on original
sources, the Quran, and the Hadith or the sayings of the
Prophet Mohamed, along with texts and sayings of earlier
scholarly Muslim authorities. The first source is regularly
read, and along with the latter, is often recited, studied, and
discussed and debated. In the first part of this paper, the
concept is discussed in the context of Islamic ethics. Then,
the paper goes on to reflect on profit maximization in the
context of Islamic teaching and practice. In particular, the
paper answers the following questions: What are the reli-
giously sanctioned boundaries for business conduct? Does
religion sanction profit drive? How does religion view
profit? Are profits viewed as ends of business activity or
means to a broader end?
Islamic Ethics and Business Conduct
In the market place, ethics plays a significant role in setting
the boundaries for accepted conduct and in preventing
fraud, corruption, and questionable behavior. Recent
business crises underscore the fact that in the absence of
moral restraints, legal instructions and guidelines are sus-
ceptive to violation (Business Summit 2008; Morris 2008).
Articulated and widely agreed on ethical principles are
more likely to serve as instruments for motivating indi-
viduals to avoid fraud and deception. More importantly,
articulated ethics reinforces trust in market exchange
functions and strengthens relations among actors in the
marketplace. Each civilization has its own philosophical
assumptions upon which ethics are based. These assump-
tions are shaped by religion and tradition, making them a
significant factor in understanding management and orga-
nizations, their conduct and evolution (Ali 2009; Hofstede
1999).
In Islamic thinking, ethics determines business conduct
and behavior and economic considerations should be sub-
ordinate to ethical priorities (Nagvi 1981). That is, the
value of any business action stems from its contribution
to the general welfare of the society. For this particular
469
reason, ethics not only determines the boundaries of con-
duct, but also dictates whether certain economic activities
are legitimate or not. Ethics, therefore, takes on a broader
domain of influence in the marketplace, including a wide
range of issues from interest to monopoly and from pricing
to profit margin. This broad governing of business affairs
accentuates the social dimension of organizational activi-
ties making it fruitful for business executives to factor
social consequences in their decision-making process.
For Islamic ethics, no business action is independent of
its social milieu. This explains why in the early days of the
Islamic state, in the seventh century, knowledge of reli-
gious-based ethics was set as an essential prerequisite for
market actors. The second Caliph, Omer (590644),
declared, Only he who is a religiously learned person can
sell in our market (Quoted in Asaf 1987, p. 224) and Al
Shaybani, an Islamic jurist (died 804 A.D., p. 42), argued
that If a person wishes to engage in commerce, he should
learn what is necessary to safeguard against usury and
fraud (Quoted in Ali 2011b). Possibly the reason for such
emphasis was that an ethically guided businessperson
would avoid blunders by aligning his/her act in the mar-
ketplace with societal benefit.
Islamic ethics refers to specified rules that govern indi-
viduals and organizational conduct and seek to insure gener-
osity, openness, and accountability in behavior and actions,
while safeguarding societal interests. In the workplace, Isla-
mic ethics is an orientation that shapes and influences the
involvement and participation of market actors to be trans-
parent, responsible, and committed to serving their interests
without jeopardizing the welfare of other actors or the society
(Ali 2011a). The core focus is on creating an environment
conducive to responsible business conduct in accordance with
religiously sanctioned instructions, from prevention of
deception and fraudulent behavior to strengthening transpar-
ent operation and munificent behavior.
Ali (2011a) identifies four foundations of Islamic ethics:
ihsan, relationship with others, equity, and accountability.
Ihsan implies goodness and generosity in interaction and
conduct, be it at a personal or an organizational level. As a
projection of goodness and generosity, ihsan encompasses
mercy, justice, forgiveness, tolerance, and attentiveness.
These aspects are related to the second element which is
succinctly articulated by the Prophet Mohameds saying:
Al-Din Al-maamala (Religion is found in the way of
dealing with other people). That is, judging whether any
action or conduct is right or wrong must stem primarily
from its benefit to people and society. Equity constitutes a
necessary element in the marketplace to insure that social
welfare is strengthened and fairness is not overlooked due
to any prejudice against market players. Irrespective of
their identity or background, players must have equal
access to market opportunities. The fourth foundation,
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responsibility, strengthens market trust and reinforces
commitment to business promises and contracts. Along
with the other foundation elements, it insures transparency
and minimizes fraud. Indeed, the ethos of let the buyer
beware is antithetical to Islamic ethics because this
amounts to deception and any deception is prohibited
(al-Maki 1995). Morally, responsibility goes beyond the
relationships among the immediate market actors to include
a commitment to community well-being and to ones faith,
thereby manifesting a natural linkage between economic and
spiritual factors.
This linkage provides a clue for understanding the nat-
ure and essence of Islamic ethics. In fact, as we show later,
it sheds light on why the issue of profit is situated at the
heart of Islamic ethics. In Islamic teaching, not just is the
universe created for the sake of mankind, but the worth of
any human being is determined by his/her relation and
service to others. The Holy Quran (1989, 49:13) states,
The noblest of you in the sight of God is the best of you in
conduct. Likewise, the Prophet declares, The best of Philosophically, the logic of Ihsan constitutes the principal
people are those who benefit others (Quoted in Al-Barai
and Abdeen 1987, p. 144). Furthermore, the aim of busi-
ness exchange and involvement is to create value to society
and serving ones interests, while serving the community
(al-Ghazali (2006), died 1111; al-Maki 1995).
In the context of ethics, there are two primary factors
that influence business responsibility and conduct. These
are fardh (duty) and multiplication factors. These are
briefly discussed in the following section.
The Fardh Factor
Muslim jurists identify two types of fardh: kifia and ayen.
The first refers to a general obligatory duty for the whole
community. However, the duty for the community is
absolved once an individual or sufficient numbers of the
community perform it. This concerns religious or worldly
affairs without which there would be no order. In the
context of business, this includes having a profession,
craft, engaging in buying and selling, etc. (Hamedan 2011).
That is, not every member of the community, for example,
should be a merchant; a few should be sufficient. On the
other hand, fardh ayen is an obligatory duty for each person
irrespective of others. That is, a person cannot turn his/her
back on meeting ethical expectations and duties. This can
be something like charity, quality work, using valid mea-
sures, avoiding cheating, hoarding, thievery, etc. Ethical
conduct is part of fardh ayen which has to be observed and
violation amounts to a defiance of religious prescriptions.
Irrespective of being fardh kifia or ayen, the ultimate
criterion for judging any act is whether or not the act has
resulted in benefit to the public.
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A. J. Ali et al.
The logic of fardh is community well-being. Whether
the fardh is kifia or ayen, performing them is essential for
insuring normalcy and stability in the society. By uphold-
ing the tenets of fardh, individuals know not only their
duties, but also the boundaries of their responsibilities.
These duties, when performed in line with the Ihsan
outlook, are more likely to improve the welfare of the
community. Indeed, fardh, guided by Ihsan, suggests that
avoidance of any harm to a community is a priority. It is
within this understanding that economic objectives and
activities, including the issue of profit maximization,
become an integral part of ethical concern. Market actors,
therefore, are obliged by ethical guidelines and projections
to align their activities with sanctioned practice to be
legitimate and rewarded.
The Multiplication Factor
factor that shapes and reinforces ones disposition to
engage in what is good and beneficial to society. However,
there is a reward for engaging in Ihsan. The Quran (6:160)
instructs, He that doeth good shall have ten times as much
to his credit. He that doeth evil shall only be recompensed
according to his vice. This reward induces believers to go
beyond what is required legally or what constitutes a just
act. The reasoning behind this is articulated by the tenth-
century jurist al-Maki who argued that Ihsan is much
broader than justice. The latter implies that you acquire
your right share and give what is their right share to others.
In contrast, Ihsan always implies that a person may forsake
some of his/her rights for the sake of societal welfare,
while acting generously by giving more than what he/she is
required to do. The reasoning is based on a narrative
attributed to Prophet Mohamed who stated that God for-
gives an individuals sins if that person is engaged in
giving respite to the one in easy circumstances and for-
gives one who was in straitened circumstances (Quoted in
Muhammad Ali 1977, p. 295).
It is binding for believers to act according to Ihsan. This
implies they have to act generously and ethically as this will
lead to reward. The Quran (42:23) underscores this, stating,
And if anyone earns any good, we shall give him an increase
of good in respect thereof. The Prophet reiterated respon-
sible behavior, stating that God has mercy on the man who
is generous when he buys and when he sells and when he
demands (Quoted in Muhammad Ali 1977, p. 294).
Therefore, the multiplication factor in reward is charac-
teristically linked to involving and participating according
to the logic of Ihsan. However, in a business environment
and in relation to profit, the multiplication of reward
encompasses four significant issues.
Islamic Perspectives on Profit Maximization
a. Investing of capital is critical for economic growth and
the creation of wealth: God will bless your wealth
though you engage in trade and commerce even without
making a profit Abu Talib al-Maki (died 996).
b. Engaging in business is critical for the continuity and
thriving of a community. However, economic endea-
vor must generate income to market actors and enable
and motivate them to serve their community: When
people no longer do business in order to make a living
and when they cease all gainful activity, the business
of civilization slumps and everything decays (Ibn
Khaldun, 13321406).
c. Business activities must be guided by the purpose of
easing burden and avoidance of harmful activities.
The Prophet stated, a person should help the distressed
one who is in need. [and] should do good deeds and
refrain from doing evil (quoted in Muhammad Ali
1977, p. 209). The intention of the business and
conduct, therefore, takes precedence in Islamic ethics.
This was articulated by the Prophet Mohamed who
declared, The value of work is derived from the
accompanying intention, rather than its results.
d. Profit is an outcome, but its amount should not be the
overriding factor in business affairs (al-Maki 1995;
Raghib 1995).
The above four issues demonstrate that while economic
activities are sanctioned in Islamic ethics, the scope of
these activities and their purpose have to further the
welfare of the community. While ethical duties emphasize
responsibility for engaging in business activities, exploi-
tation is prohibited. Therefore, how one conducts his/her
business and the means of acquiring it are important con-
siderations in understanding business ethics. This, along
with an emphasis on investing and market engagement,
highlights three important aspects in the context of busi-
ness ethics. First, involving in business is a blessed activity
and while profit is a reason in any venture, it is a pre-
dictable outcome for having a business and should never be
viewed as the overriding factor. Second, even though the
profit margin might be low, it is much better than nothing.
Over the years, through dedication, discipline, and crea-
tivity, the business thrives and grows. Third, the value of
any business venture stems from its contribution to the
society. Thus, the ultimate measure of the worth of a
business is the value it creates to society.
Profit Earning Level in Islamic Teaching
In their debates on profit and economic systems, Muslim
scholars have argued that when the purpose of a business
does not serve society, the business loses its legitimacy
471
(Al-Sadr 1982; Chapra 2001). The latter asserts that the
goal of profit maximization leads to unfair business
practices and therefore will not serve the society at large.
It is more likely that this justification is derived from two
Quranic prescriptions: (16:90) God commands justice
and (2:143) we have made you a middle way nation.
While the first underscores fairness, the second instruction
calls for moderation and avoidance of extreme stance or
behavior. Both are assumed to further societal interests and
ease the burden on market actors, especially those who are
in urgent need. Though Islamic instructions sanction mar-
ket competition, property rights and ownership in general,
and limited government interference in the marketplace,
they nevertheless seek to prevent market abuses, be they
deception, manipulation, or monopolistic attempts. Indeed,
during the early years of the Islamic state, scholars, jurists,
and government gave considerable attention to market
function and delineated unethical business practices guided
by the Quranic instruction: (2: 279) Deal not unjustly, and
you shall not be dealt unjustly.
However, because many countries with Muslim major-
ities have been integrated into the global capitalism system
and since many Muslim business scholars have been
exposed during their college studies to concepts, termi-
nologies, and models developed in the West, especially the
U.S., they tend to accept uncritically the premise of profit
maximization (e.g., Rizk 2008; Samad 2008). Indeed, in
Saudi Arabia, for example, Kayed and Hassan (2011a, b)
have found that the private sector in the Kingdom is driven
by profit maximization rather than Islamic prescriptions.
The question that should be raised is does Islamic
teaching sanction the concept and practice of profit maxi-
mization? Most contemporary economists and jurists
agree that the concept of profit maximization may not be
consistent with the overriding objective of optimally
serving society and avoiding exploitation (Chapra 2001;
Hassan 2002; Metwally 1980). Their argument postulates
that maximization may be the result of monopolistic
behaviour and hoarding in the market place which lead to
manipulation in the market. Glaachi (2000, p. 62) stated,
If we say that the purpose of production is to achieve
material benefits and maximize profit, ignoring the goal
and cherished values of the society, the economy will be a
captive to this concept. Thus all compassionate meanings
will be erased from the spiritual ideal, cultivation of the
soul, altruism, friendship, kindness, for the sake of wealth
worshiping.
In addition, profit maximization, as a motive and drive,
may contradict the logic of ihsan and generosity in busi-
ness dealing. Businesspeople who are guided by ihsan,
according to Muslim experts, tend to lower prices when
they sell to the poor and in distress customers and may pay
higher prices for their purchase from poor suppliers to
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enable them to survive market competition. Al-Ghazali,
a twelve-century imam, in his reasoning for passing this
judgment, relied on the Prophet Mohameds saying, God
bless a person who is benevolent at selling and buying
(quoted in al-Qurni 1987, p. 120).
This promotion of fair and just transaction was sub-
stantiated by a narrative recorded by the tenth-century
jurist, al-Maki (p. 509). He reported that there was a textile
merchant who had two different grades of clothone was
sold for 400 dirham and another for half of that amount.
The merchant left his nephew in the store when he went to
pray. A customer came and asked for the one of the 400
dirham. The boy showed him, by mistake, the one which
was sold for 200 dirham. The customer approved it and
paid for it, thinking it was the one which cost 400. On his
way back from the mosque, the merchant saw the customer
outside the market looking at what he had bought. He
asked the customer, How much did you pay for this?
The customer replied 400. The merchant told him that it
was not worth that much, only 200. The customer indicated
that in his city, the cloth was sold for 500. The merchant
replied, telling the truth is much better than material
gain and paid him back 200 dirham. After that, the mer-
chant asked his nephew Do you fear God; are you not
ashamed of yourself gaining such high profit disregarding
the public interest? The boy replied, He bought it with
full consent. The merchant replied, Even if he agreed
and approved, you should do for others what you wish for
yourself.
In another narrative, Abu Talib al-Maki (1995, p. 508)
also recorded that a merchant bought a container of
almonds for 60 dinars and wrote in his book that he would
sell it for 63 dinars. A few days later, the price for a
container of almonds increased. An auctioneer approached
him and offered him 70 instead of 63 dinars. The merchant
declined the offer, telling the auctioneer that this was not
acceptable because the profit margin would be high. But,
the auctioneer insisted on paying the prevailing market
price of 70 dinars. No transaction took place as both
thought that their respective offer was fair and both of them
thought that accepting his counterparts offer would be
unfair and unjust. This tenth-century narrative conveys that
both market actors were driven by moral and ethical
principles and both did not like to be perceived as
exploiters, despite the fact that they were transparent.
Furthermore, it appears that at that time, market actors
gave considerable attention to their market reputation and
their standing in the community.
The preceding discussion clarifies that in Islamic ethics,
profit maximization is not a goal and should never be. The
two narratives highlight the fact that in a traditional society
and in a community governed by ethical instructions, a
market reputation for being decent and generous is critical
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A. J. Ali et al.
for success. Indeed, the narratives demonstrate that both
actors viewed themselves as members of a broader com-
munity where their welfare and that of the community are
interrelated and harmoniously co-exist. Furthermore, it
reveals that action and decision making, in an Islamic
setting, are anchored in ethics. Businesspeople, therefore,
are concerned about their market reputation and their
standing in the community. Their integrity is a social
capital, and thus they seek to safeguard it while conducting
business and in dealing with customers. Their active
involvement in the market, business survivability, and
gains were a measure of their rightful contribution and
perceived as a reward for the good deeds. The Quran
(18:46) declares Wealth and sons are allurements of the
life of this world: but the things that endure, good deeds,
are best in the sight of thy Lord, as rewards, and best as (the
foundation for) hopes.
Among contemporary management scholars, Peter
Drucker (1974, p. 60) was a pioneer in advocating that
profit is not the purpose of business organizations, stating,
profitability is not the purpose of but a limiting factor
on business enterprise and business activity. Profit is not
the explanation, cause, or rationale of business behavior
and business decisions, but the test of their validity.
Similarly, Karns (2008) argued that profits are essential
means to the end of serving the flourishing of mankind, but
not the ultimate goal of business activity as set forth in the
shareholder wealth paradigm.
If profit is the test of the validity of a business and
evidence that the business is creating value to society, then
how do Muslim teaching and early Islamic scholars treat
and view profit? It is important to state that the primary
concern of Islamic teachings in the early years of the
Islamic state is that a just, transparent, and fair dealing in
the marketplace is secured and that no exploitation occurs.
The Quran (11:85) instructs believers, Nor withhold from
the people the things that are their due and (2:279) Deal
not unjustly, and ye shall not be dealt with unjustly. While
these are general guidelines, the Prophet Mohamed was
more specific, emphasizing that in the marketplace, justice
is an overriding motive for avoiding exploitation and pro-
tecting market actors. The Prophet identified three condi-
tions for market transactions to be just (Ali 2011b). These
are as follows: In marketing exchange, there should be No
harm or harm-doer; Those who declare things frankly
will not lead to each others destruction; and It is pro-
hibited for anyone to take over the property of another
without consent. These conditions, along with Quranic
instructions, set certain limitations on profit levels and the
need to engage in free exchange and stimulating economic
activities.
In reviewing the literature in early years of the Islamic
state on profit levels, the following perspectives and
Islamic Perspectives on Profit Maximization
judgments appear to offer a clear understanding that profit
maximization is neither sought nor is it desirable:
1. Business operations can thrive by focusing on invest-
ment and operation even when profit is low. Small
profits and commitment to operations will lead to
growth. Imam Ali (1989), the fourth Caliph (died 661)
stated, Do not discard the low profit margin, so you
will not be deprived of more profit (Quoted in Ibn Al
Josie (d. 1177, 1995). This was also reiterated by a
companion of the Prophet, Abdulrahman ibn Awf.
He was a merchant who, when he was asked about his
financial success, indicated that he never turned down
a transaction even with a very little profit (quoted in
al-Maki, p. 520). The Medieval sociologist, Ibn
Khaldun (p. 312), articulated the role of small profit
in business growth when he stated, many times a
little [profit] is much. He recognized, however, that
without profit (p. 311) Business slumps, no trading
is done, and the merchants lose their capital.
2. Capital to grow has to be invested and it is the business
transactions and investment that lead to prosperity.
A ninth-century Muslim scholar, Maruf Al Karkhi (d.
815), argued that Capital grows through transactions
(like pastures) (quoted in Jasim 1990, p. 83). That is,
market transactions are blessed activities which yield
gains and lead to capital growth.
3. Profit earning levels are linked to the quality and
availability of an item. Ibn Khaldun (p. 310) articu-
lated this when he stated, it is more advantageous and
more profitable for the merchants enterprise if he
brings goods from a country that is far away and there
is danger on the road. In such a case, the goods
transported will be few and rare When goods are
few and rare, their prices go up. Profit must be the
outcome of transactions which are carried out freely in
the marketplace and should not result from harming
others. Prophet Mohamed instructs, Pricing belongs
to Gods domain. He provides and withholds suste-
nance. Therefore, I shall not determine pricing for
fear that I would be questioned in the hereafter for
possible harm done to any actor in the market. Imam
al-Ghazali (p. 411) argued that it is the duty of the
market actor to show ihsan as his sales volume is
contingent upon his price; if he lowers his price, his
customers will increase and vice versa.
4. Profits, however, are influenced by the amount of risk
involved. If risk is great, the profit should increase
accordingly. That is, profit level should correspond to
the degree of risk involved (Glaachi 2000, p. 112).
5. The government is to protect actors in the marketplace
and prevent manipulation. The fourth caliph, Imam
Ali, stated that Buying and selling should be
473
conducted in mutual consent and fair prices for
both buyer and seller. If anyone engages in monopoly
after you have abolished it give him severe, but not
excessive, punishment. This is because in Islamic
teaching, hoarding and monopoly are prohibited as
both lead to higher prices and obstruct access to
needed goods. The Prophet states, He who hoards
commodities is a sinner. Government or rulers,
however, should not enter the market to compete with
private business as this could result in a market actor
who exhausts his capital and has to go out of
business (Ibn Khaldun, p. 233).
In the context of the current development in the field of
business and society, it is interesting to note that there is a
correspondence between stakeholder theory and the Isla-
mic view of societal interests or common good. In terms of
capital, for example, the emphasis on the investment and
growth of capital to benefit the individual and society is
generally shared by the Islamic view and the stakeholder
approach. Furthermore, both approaches underscore the
essence of value creation and trade and that business
activities and ethics must not be separated (see Al-Mawardi
(died 1058) 2002, p. 335; Freeman 2000, p. 174). Indeed,
Freemans four principles of stakeholder theory (stake-
holder cooperation, complexity of human being, business
as institution continuously seeks to create value to society,
and emergence of competition in the marketplace) are
integral elements in the discourse on societal interests in
the Islamic approach (see Glaachi 2000; Osman 1995;
Raghib 1995).
The Islamic view makes it mandatory that businesses
should be guided by a morally driven philosophy that does
not deliberately lead to the concentration of wealth in the
hands of a few. The Quran states (59:7), What God has
bestowed on His Messenger from the people of the
townships, - belongs to God, - to His Messenger and to
kindred and orphans, the needy and the wayfarer; in order
that it may not (merely) make a circuit between the wealthy
among you. This does not manifest a redistribution of
wealth; rather, it is an approach that seeks to insure optimal
access to opportunities and minimize inequality. Likewise,
the Islamic approach to common good treats the acquiring
of benefits and the avoidance of harm to society as an
obligatory rather than a voluntary goal (see Dusuki and
Abdullah 2008; Osman 1995).
It is clear that profit, in Islamic thinking, is not exclu-
sively an economic matter. Profit considerations are not
independent of an ethical system. Rather, they are part of
prevailing norms that govern conduct and exchange func-
tions. In fact, ethically sanctioned profit (modest) enables
business people to survive and grow without creating dif-
ficulties for others. Profit assumes a central place in Islamic
123
474
ethics and, therefore, Islamic prescriptions do not condone
profit that leads to exploitation and mischief in the mar-
ketplace. In this context, the Islamic view is similar, though
broader, to the stakeholder theory in advocating that the
concern for profits is the result rather than the driver in the
process of value creation (Freeman et al. 2004, p. 364).
The prohibition of the desire and practice of profit maxi-
mization seeks to insure just and fair transactions in the
marketplace and consequently safeguards the interest of the
broader community. Furthermore, the prohibition allows
market actors to avoid what is considered unethical
engagement, especially for those who resort to deception
and manipulation.
Conclusion
In this paper, the concept and practice of profit maximi-
zation are examined in terms of Islamic teaching and
ethics. Since Islamic business ethics and prescriptions
place considerable emphasis on the continuity and the
welfare of the community, profit maximization is not
condoned for fear of exploitation, obstruction of market
function, and mischief. Islamic teaching generally approves
lawful earnings and profit levels which do not lead to
exploitation. Therefore, excessive pricing and/or harm to the
community are not looked upon positively. In fact, the
evidence provided in the paper demonstrates that profit is a
positive outcome for fostering economic prosperity and
enhancing the welfare of the society. Nevertheless, profit
maximization is clearly perceived as antithetical to Islamic
concerns with societal welfare and ethical conduct.
Acknowledgments The authors would like to thank Professor Helen
Bailie and two anonymous reviewers for their comments on an earlier
version of this paper. The authors extend their appreciation to the
Deanship of Scientific Research at the King Saud University for funding
the work through the Research Group Project No. RGP-VPP-011.
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