THE NATURE OF ETHICS IN MODERN BUSINESS

Managerial problems are ethical problems, because:

They represent a conflict between an organisations economic performance and its social performance Managerial dilemma is to achieve a right or proper balance between economic and social performance

1. Extended Consequences
Results of managerial decisions do not stop at first-level consequences, but extend throughout society Impact on those within and outside the organisation, beyond the control of managers Examples bribery, pollution, unsafe products

2. Multiple Alternatives
Ethical issues in management are not dichotomous, but has several alternatives Examples

Should a manager pay bribes or not? Should a factory pollute the air or not?

Should a firm make unsafe products or not?

3. Mixed Outcomes
Ethical issues in management are not antithetical, but has associated social benefits and costs, as well as revenues and expenses Examples

Pay indirect bribe, maintain sales with prompt

delivery Pollute the air, save costs of equipment Make unsafe product, reduce production costs
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4. Uncertain Consequences
Ethical issues in management are not deterministic, not free of risk/doubt, and outcomes are not known Examples

Pay bribe, receive imported goods promptly Invest in pollution-control equipment, reduce

emissions Produce absolutely safe product, gain sales and profit

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5. Personal Implications
Ethical issues in management are not impersonal, but involves individual/social benefits and costs Examples

Maintain expected sales to achieve favourable performance evaluation, despite paying higher

bribes Delay the installation of pollution-control equipment, and achieve planned ROI
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Economic Analysis Legal Analysis Ethical Analysis

Market economy has limited resources, which must be used as efficiently and effectively as possible

People/organisations in a democratic society must obey laws established to maintain justice

People in society must follow principles of beneficiency/ consistency to be treated fairly
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2 methods to explain ethics in Islam

Historical (or horizontal) method following chronological development Analytical/schematic (or vertical) method of major ethical themes in Islam

THE HOLISTIC APPROACH:

Unity of Humankind

Unity of Religion
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A comprehensive legal system based on the Al-Quran regulating every aspect of relationships between the Creator and humankind, and inter- personal relations Overall guiding concept to act in a decent and benevolent way, and to refrain from wrongdoing No one of you is a believer until he desires for his brother that which he desires for himself.
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Spread of Islam throughout the world by way of individual proselytisation, as a result of trade and commerce by the Arabs Ancient trade routes from the Mediterranean, the Arabian Gulf, East Africa, the Indian subcontinent and China Practiced Islamic ethics in the conduct of their business
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Free-enterprise, private-sector market economy approach, and right of society to impose limitations for its greater benefit

Right to private property, and societys right to eminent domain

Halal (permissible) and haram (prohibited) guidelines Legitimacy of profits, and the prohibition of riba (usury)
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Al-Quran, Chapter 2, Verse 177 says: It is not righteousness that you turn your faces towards East or West; but it is righteousness to believe in God and the last day, and the angels and the Book, and the messengers; to spend of your substance, out of love for Him, for your kin, for orphans, for the needy, for the wayfarer, for those who ask, and for the ransom of slaves; to be steadfast in prayer, and practise regular charity; to fulfil the contracts which you have made.

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A contract is the most important bond that exists between Muslims, as well as between Muslims and non-Muslims as shown in the following Hadith: The buyer and the seller have the option (of cancelling the contract), as long as they have not separated; then, if they both speak the truth and make it manifest*, their transaction shall be blessed, but if they conceal and tell lies, the blessing of their transaction shall be obliterated. (*Any defect in an item sold must be made obvious. In case
of defects being hidden, the contract or agreement made will be void)
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The Prophet goes on to say, The truthfullest, honest merchant is with the prophet and the truthful ones and the martyrs. Obligations in good faith in line with the principles of business ethics is required and is inseparable from the general obligation of piety Fulfillment of obligations carries the notion of rectitude, including not taking undue advantage of another. Fairness is deemed both a means and an end Honesty is a virtue and an expected trait for every Muslim.
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