ETHICS CHAPTER 4

At the end of this chapter, you should be able to:

Define ethics from the Islamic perspective.
Explain the origin of the Islamic ethical system.
Describe the concept of Islamic worldview.
Explain the five axioms of Islamic ethical philosophy and their importance to a Muslim’s life.
Explain the Islamic perspective of the relationship between firms and their stakeholders.
Explain some prohibited matters in business transactions.

Shari’ah Guidance: In Islam, the rules and principles laid down in Shari'ah guide ethics, providing holistic guidance that covers faith in Allah SWT, social behavior, politics, and commercial practices.
Ethics of Action: From the Islamic perspective, ethics also known as the ethics of action, necessitates that Muslims not only believe in the teachings of the Quran and Sunnah, but also demonstrate this belief through their actions.

Akhlaq: This is the foundation that establishes the standards of right or wrong conduct for humans, signifying the Islamic disposition and practice of virtue and morality.

Adab: Refers to the manners, etiquette, or behavior of an individual; Muslims must observe adab with Allah, His attributes, and His signs.

Khaluq: In an Islamic business context, the term closely related to ethics while doing business, based on the Quran, is khuluq.
Term Variations: The Quran employs various terms such as:
- Khay (goodness)
- Birr (righteousness)
- Qist (equity)
- Adl (equilibrium and justice)
- Haqq (truth and right)
- Maaruf (known)
- Taqwa (pity)

Muslims with good akhlaq and who observe adab are considered to possess true faith in Islam. Islamic ethics derive from both the Quran and Sunnah, prescribing acceptable and unacceptable behaviors across all aspects of human life.

Unlike secular views, Islam does not separate religious pursuits from worldly actions; every action consistent with Islamic teachings is considered ibadah – acts of worship towards Allah.
Ethical responsibilities encompass:
- Ethics towards Allah.
- Ethics towards other human beings, motivated by ukhuwwah (brotherhood).

Islam is not only a religion but comprehensively a way of life. The two primary sources of Islamic ethics are:
- The Quran: The foremost reference for evaluating ethical behavior, outlining what is permissible and forbidden.
- The Sunnah: Comprises the reported sayings, teachings, practices, behaviors, character, and deeds of the Prophet Muhammad (PBUH).

Definition: A worldview is the collection of an individual's beliefs, values, and ideas about God, the universe, and human existence.
Dual Perspectives: The Islamic worldview contains concerns for both worldly pursuits and the afterlife, with particular emphasis on the Day of Judgement.
Temporal Nature: Life is viewed as temporary; hence, one should aspire for eternal life after death.
Four Vital Principles:
- Tawhid: The oneness of Allah.
- Taqwa: Awareness and consciousness of Allah.
- Khalifah: The role of humans as stewards of Earth.
- ‘Abd: Humankind's servanthood to Allah.

Definition: Axioms represent core values accepted as true, guiding day-to-day conduct for Muslims.
Key Axioms:
- Unity: Tawhid refers to Allah's creation being an integrated totality.
- Equilibrium: Adl signifies a sense of fairness and balance among humans.
- Free Will: Capacity to act without external constraints.
- Responsibility: Accountability for all actions taken.
- Benevolence: Ihsan, acting kindly without expectation of return.

Core Islamic principle emphasizing oneness of Allah and that all ethical principles originate from this concept.
Impact on Business:
- Business dealings should reflect honesty and submission to Allah's rules, ensuring just distribution of resources.

Maintains balance, fairness, and social harmony.
Impact on Business:
- Ensures fairness in transactions and prohibits exploitation.

The freedom to make decisions within Shari’ah boundaries, carrying responsibility.
Impact on Business:
- Encourages responsible choices that benefit the community and align with Islamic values.

Accountability for one's actions, linked to unity and free will.
Impact on Business:
- Business owners are accountable to Allah and must honor obligations to stakeholders.

Promotes acts of goodness and kindness toward others without seeking rewards.
Impact on Business:
- Encourages charitable contributions and ethical dealings with customers and employees.

Entrepreneurial Encouragement: Islam advocates for entrepreneurship that aligns with maqasid al-Shari’ah and extends the notion of business beyond mere profit.
Brotherhood and Wellbeing: Emphasis on brotherhood leads firms to prioritize stakeholder welfare, ensuring environmental responsibility.
Relationship with Shareholders: Muslim investors should ensure business practices align with Shari'ah principles, maximizing value for stakeholders.
Employee Relations: Fair principles govern employee treatment; discrimination, including gender discrimination, is prohibited.
Customer Relations: Sale practices must guarantee fairness, transparency, and must avoid deceptive tactics.
Supplier Relations: Firms must make timely payments and clear agreements, avoiding monopolistic practices.
Environmental Responsibility: Businesses must protect natural resources for future generations, reflecting the Khalifah role.

Haram Business Activities: Engaging in business that goes against Shari’ah such as trading intoxicants, pork, or other haram goods is prohibited.
Riba: Refers to excessive, unwarranted increases in loans and exchange contracts not compliant with Shari’ah.
Maysir: Involves gambling and speculative behavior considered harmful.

Ethical challenges vary based on personal, organizational, and legal interpretations, influenced by different societal norms and cultures.

Common ethical issues include conflicts of interest, quality control concerns, discrimination, and environmental pollution.

Islamic ethics provide an extensive framework for ethical conduct in business, emphasizing justice, fairness, accountability, and community welfare.

Thank you for engaging with the material presented. This study guide is crafted to enhance understanding of the Islamic ethical principles relevant to business ethics.