Corporate Ethics In Islamic World View

Shari'ah Directions to Corporate Ethics......

What is disapproved business conduct? It is the absence of any or all f the aforementioned constituents in one’s business conduct. Generally speaking, Islam prohibits all such transactions which results in litigations; which depend just on chance and speculation; those in which the rights of the contracting parties are not clearly defined; and which enables some to amass wealth at the expense of others.

No matter what the form, the essence of disapproved business conduct comprises unjustified consumption or appropriation of other’s wealth and right. This is exactly what Al Qur’an has strictly forbidden by calling it either akl bi al-batil (unjustified consumption) or zulm (injustice). Since injustice lies at the root of all undesirable business conduct, therefore all the Qur’anic injunctions focus on the elimination of this basic evil. In some cases the injustice may not be apparent, yet it is always there. In order to nip the evil in the bud, Islam seeks to block all those channels that eventually lead to injustice. For the purpose of elaboration, it is proposed to divide the subject into three main categories; namely , (a) riba, (b) fraud, and (c) other disapproved practices.

RIBA

Riba literally means increase or addition. Technically, it refers to the addition in the amount of a loan in consideration of the time for which it is advanced or of the time for which the payment of loan is deferred. Juristically, however, riba signifies the additional money that is given or taken in a dollar-for-dollar exchange and uncompensated increase on one side when a commodity of the same kind is bartered.

The jurists have divided riba into two categories, which are riba al nasi’ah and riba al fadl. Riba al nasi’ah also known as riba al-jahiliyyah is the one expressly prohibited in the Qur’an while riba al fadl was prohibited by the Prophet (p.b.u.h) in order to block all channels of riba’.

It is the additional amount sought on loan, usually on the basis of time. This addition, irrespective of its rate or percentage, is the riba prohibited by Al Qur’an. It makes no difference whether such a loan was sought for the purpose of consumption or that of investment. Riba al fadl occurs in bartering commodities of the same kind without equality in their quantities.

Basically, the process of riba enters when someone adds or demands an addition from the same quantity. In order to get clear understanding of the meaning of riba, let us consider the following ahadith and the opinion of the great authorities of Islam.

Any loan that brings profit is riba. (Hadith) Anyone who recommends a person and then accepts a gift from him has committed riba. (Hadith) Acceptance of a gift from one’s debtor is riba (Ibn Mas’ud) 1.Eating in the house of one’s debtor is haram ( Hasan Al Basri)

Danger in Riba

Riba is definitely involves unlawful consumption of other’s wealth. It is, therefore, abhorrent and evil. According to Sayyid Qutb, riba is evil because the lender receives an additional amount over and above his capital, “extorted from the labor or flesh of the debtor”. Riba is directly opposed to the cooperative spirit of Islam. A wealthy person is required to pay off the right of the poor attaching to his wealth by paying the zakat due thereon and the supererogatory sadaqat in addition. Mawdudi has enumerated the following vices of riba:

(i) It gives rise to greed, excessive parsimony, selfishness, hard-heartedness, tyranny and money worship.

(ii) It promotes hatred and enmity instead of sympathy and cooperation.

(iii) It encourages hoarding and accumulation of wealth and discourages its direct investment in productive enterprise. Investment, if ever made, is invariably focused on personal gains and in total disregard for the needs of the society.

(iv) It prevents the circulation of wealth by concentrating it into the coffers of the capitalists. Riba is danger because it contradicts the vital principle of al-ghurm bi al-ghunm (i.e liability must go hand in hand with advantage). Even from a purely economic standpoint, riba is plagued by several disadvantages.

According to Anwar Iqbal Qureshi, interest is the fountainhead of all economic evils and is responsible, by and large, for the concentration of wealth.

FRAUD

al-Qur’an disapproves of fraud and cheating in whatever form they might be. Cheating is described as the predominant characteristics of the hypocrites for whom the Islam requires its adherents to be honest and trustworthy. One who is intent on resorting to frau and cheating does not deserve to be counted a genuine member of the Muslims ummah despite one’s verbal assertion of being a Muslim. Some specific forms of fraud expressly prohibited by Al Qur’an and the Hadith are discussed below.

Tatfif (Engaging In Fraud)

Tatfif literally means stinting, scrimping and niggardliness. A mutaffif is he who diminishes from the due share of others for whom he measures while paying to them or receiving from them.

The term is used in Al Qur’an with special reference to the practice of diminution in weights and measures, thereby depriving others of their due rights. Al Qur’an warns and condemned those who give short weight and measure to others and receive from them in full and promised a severe punishment.

Some scholars, like Yusuf Musa maintains that a worker who does not do his work sincerely and efficiently is a defrauder, cheater and dishonest person. In other words, the worker who receives his wages in full but does not perform his duties honestly and efficiently is also denoted as mutaffif.

Dishonesty

Dishonesty is one of the worst forms of fraud. A dishonest person is always prone to defraud others whenever and wherever possible. Islam forbids any misuse or misappropriation of an employer’s property by his employee, who is entitled to the mutually agreed wages only.

Appropriation of anything beyond the stipulated wages is either dishonesty or stealing, both of which are expressly prohibited.

Falsehood and Breach of Pacts or Promises

al-Qur’an is strongly opposed to falsehood. False assertion, unfounded accusations, concoctions and false testimonies are severely condemned and strictly prohibited.

al-Qur’an curses the liars and the Prophet (p.b.u.h) describes lying as one of the three signs of a munafiq. Falsehood is harmful in everywhere and in every case. In the realm of business, its damaging effects are enormous and can never be overemphasized.

Misstatement about merchandise not only harms the customers but the producers and traders as well. Dependability of the product and reliability of its trader play a key role in the establishment and enhancement of any business concern. Prophet (p.b.u.h) also prohibits al-najsh, the practice of offering a higher price with intention of persuading others to raise their price offers.

Clearly, falsehood and deception are condemned in all their various forms. Breach of one’s pacts and promises is another evil practice strongly opposed by Islam.