These 4 ethical principles in business frequently ignored by the mainstream business textbooks.
DISCLAIMER : This is an essay written as part of my university coursework. Referencing this blog is NOT recommended. If you are writing for an academic purpose please refer to the original authors in the reference list.
These concepts were proposed in 12th Century by a philosopher, jurist, theologian, and Sufi; Imam Abu Hamid Al-Ghazali (known as Algazel in western world) in his book Balance of Action (Mizan al-amal).
The 4 ethical principles in business.
1- Knowledge Before Action
Someone should not do business without prior knowledge on how to enter into contracts, how to sell according to the law, how to avoid usury or how to enter into lawful partnerships. People involved in business transactions need to know what is “right” before they embark on business activities.
2- Maximization of Profits is not a virtue
The objective of doing business is gaining just enough money for sustenance and a good livelihood without extravagance or unneeded savings. By doing business, one should always have the intention of not being dependent on others for one’s livelihood. (contrasting the maximization of profit strongly emphasized in modern economic theory).
3- Justice and care for stakeholders
Mere adherence to law does not ensure justice. Each party must give enough consideration to other parties in order to avoid wrongdoings in business.
First, seller should not exaggerate in praising the commodity being sold (sharp contrast to modern sales technique that rely on excessive advertising).
Second, seller has a moral duty to show the buyer all defects of the commodity being sold, deceit is unlawful.
Third, seller should be truthful in terms of meeting the specifications required, especially in terms of weight. Products should faithfully meet the customers’ expectations.
Fourth, seller should ask a fair price and not a higher one when approached by a buyer who is not aware of the standard price of the commodity (creating a hypothetical second buyer is unacceptable!). Practice transparent pricing!
4- Benevolence or doing good
Business transaction require something beyond mere adherence to legal and market requirements. Being charitable to others, businesses have responsibility towards others who are facing hardship. It is not enough to restrict oneself to follow the law and avoid transgression. Do what is good for other party beyond what is required by rules or law.
First, avoiding excessive profit, even if buyer is willing to pay a higher price (due to lack of knowledge).
Second, willingness to tolerate receiving a lower-than-usual price if the potential buyer is facing hardship, but don’t accept lower price from an able buyer (don’t waste money).
Third, if debtor cannot pay in full or on time, the creditor should tolerate such delays (Note: no interest charged in the complete process of loan).
Fourth, a debtor is encouraged to quickly settle debts, even before maturity.
Fifth, be willing to lift the binding constraint on other party if the other party wants to opt out (something that is not possible under contract law, but ethical person would make it possible!).
Sixth, business people are encouraged to proactively direct some of their sales to people who are in need (doing charity), choose a business that is needed in society.
Personally, I think these concepts should be in business textbooks.
Sidani, Y., & Akram, A. A. (2015). New Conceptual Foundations for Islamic Business Ethics: The
Contribution of Abu Hamid Al-Ghazali. Journal Business Ethics, 847-857.