The Role of Ethics in Business

 

Syed Adam Alhabshi examines the role of ethics from the Islamic perspective

 

 

Everything in this world happens for a reason. Such reasoning may be obvious or hidden. In most cases, men would always try to articulate what could be the closest reason for any given circumstances. It is easier to extrapolate the closest rationale when the actions leading towards it are guided by some form of standards.

 

 

CORPORATE GOVERNANCE

Corporate governance is a standard which can be used to determine how the expected behavior of an organization can be guided in order to achieve the expected goals.

 

Corporate governance relates to the style and discipline structure on how business is to be managed. It revolves around oversight, direction, shared values and rights of an organization. Having good corporate governance means having a good set of vision and mission, strategies, management and a wholesome oversight or supervision. Good corporate governance will improve operational performance as well as efficiency and enhances stability within the organization.

 

Setting an organization’s corporate governance is therefore very important. It must be clear, practical and must contain the fundamental values which are relevant to the organization.

 

 

THE ROLE OF ETHICS IN ISLAM

Ethics in general, encompasses the moral values of a society. It is learning to see and set a standard through reflection. Understanding ethics is like taking oneself out to reflect what is right and what is wrong. Unfortunately, moral values change with the development of civilization. What may be morally right before may not be so in the present day.

 

Ethics in Islam on the other hand, is a mirror of good values that is enshrined in the Shariah. Shariah, which is often described as Islamic law, includes a set of norms, values and laws that governs all aspects of Islam, including the Islamic way of life. It covers not only the outward acts but also includes that which is spiritual in nature. In some circumstances, it is also the omission of doing evil, the ability to abstain from bad deeds and most importantly, to do so with wisdom and good manners.

 

Islamic ethics govern the relationship that man has with man and man’s relationship with God. These include the ethics of individual, society, legal creatures (like companies, corporations, organizations etc.) and most importantly, the relationship between them.

 

 

CORPORATE GOVERNANCE IN ISLAM

Numerous Muslim scholars have expanded and explained in minute detail about Islamic ethics. This has provided us with comprehensive corporate governance guidelines in line with Islamic ethics which are ready to be adopted and utilized. For example, Imam Ghazali, one of the great thinkers and reformers in the history of Islam, had identified in his compilation of Revival of the Religious Science, the seven qualities which a businessman should have in order that he continues to love his religion in his daily business conducts, that is:

 

(1) To have good intention and faith at the beginning of a business;

(2) That business is to fulfill a Fardhu Kifayah (community obligation);

(3) It is legal and does not stop one from performing his Islamic obligations;

(4) That he continuously remembers God in the conduct of his business;

(5) There should not be any undue haste in completing a business;

(6) To avoid the Shubhah (doubtful) and the Haram (illegal) businesses; and

(7) To prepare proper accounting and to be responsible.

 

In studying each of the seven qualities, one can see how Imam Ghazali stresses the importance of constantly maintaining a close relation between business ethics and religion. Each quality is related and the way it is arranged allows it to be relevant even in the present circumstances.

 

The synthesizing of Islamic ethics and governance into an organization enables its business to be regulated according to the concepts of justice, fairness, integrity, sincerity and other virtuous values expounded by the Shariah. This creates a healthy and open environment within as well as around an organization.

 

The value of Islamic ethics does not lie only in the formulation of a policy or a mere regulation. Rather, it must be developed into a strong culture within the organization itself. This means that such ethical values must be practiced from the top management all the way down to the lowest hierarchy of the company. An organization that cultivates its symbolic system of values breathes life into its corporate governance. In so doing, the corporate governance of an organization will not be just a dead letter.

 

An organization’s corporate governance must be instilled so that it becomes like a custom to its members. Applying it must be like a normal habit and second nature. It must be practiced to the effect that if one was to omit from doing it, other members would sense that something is wrong somewhere. Just like a complete human body, when one part is not well, other parts would feel pain as well. This sense of trouble will allow the management or the board of the organization to initiate investigations into the matter before it gets out of hand. There will be less damage to the organization if a problem is discovered at an early stage.

 

History has shown that having a good corporate governance structure by itself is not good enough. Enron could be said to have one of the best corporate governance structures but the failure of its employees to adhere to the principles led to its demise.

 

 

CONCLUSION

Applying Islamic ethics with its dual consistency role within an organization’s corporate governance would ensure the expected behavior of an organization to be well established and properly regulated.

 

An organization should adopt the values which are relevant to its business and strenuously inculcate the same into its management and workforce. It would then be easier for the organization to plan its future development as the expected behavior would be highly probable. Articulating the closest rationale for the organization’s success would no longer be a difficult task.

 

 

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