Essay on "Corporate Social Responsibility From an Islamic Law"

Essay 5 pages (1660 words) Sources: 10

[EXCERPT] . . . .

Corporate Social Responsibility from an Islamic Law Perspective

The concept of Corporate Social Responsibility (CSR) is at its very basis an exercise in Utilitarian ethics (Lynch-Wood, Williamson, Jenkins. 2009, 53, 54), egalitarianism (Stephenson, 2009, et.al), and concept of inculcating high ethical standards of reciprocity at the highest levels of an organization (McDonald, Pak, 1996, 973) which have been proven to influence ethicacy throughout the organization itself. CSR programs are more than attempts to generate the benefits of altruism and ethicacy however; they are the basis of defining how organizations can be the catalyst of positive change within their communities (Sirsly, 2009, 90-94). It is not so much the investment in the community to gain financial rewards, but to enrich ones' community for the mutual benefit of all, with many of these benefits not realized for years or decades. There is a consistency of research showing that the value from any CSR program concentrates on measuring and evaluating the long-tern value gained by those the program is meant to serve (Berens, van Riel, Rekom, 2007, 245-252). When taken from an Islamic law perspective the religious requirements as defined by the precepts of Qur'an bring an added dimension that encompasses reciprocity as a moral and religious duty (Mirfazli, 2008, 275-278). There is also concepts of mudarabah, which exemplifies the egalitarian approach to sharing in profits and losses as defined by the Qur'an, which is unique to Islam, as it in essence defines the terms of contract management with an agreed ratio in the profit/loss outcome of the project in which they have invested (Presley, Sessions, 1994, 584). As the Qur'an prohibits the charging of interest (riba) (Presley, Sessions, 1994, 584) there is also the need for defining in each transaction the specific terms of pay-back period for the buyer and the rate of return for the seller. By Islamic accounting there is the need for specifically defining profitability by transaction as well. In the case of CSR-based initiatives, Islamic accounting defines these investments as enriching the global good above furthering one firms' specific interest (Katsioloudes, Brodtkorb, 2007, 9, 10). In this respect, Islamic accounting aligns with Utilitarianism (Nathan, Ribiere, 2007, 480-483).

Variations in Philanthropy between Islamic and Neoclassical Economics

At the most basic and fundamental level, Islamic economics is based on the explicit and willing cooperation between individuals to contribute to the common good, specifically to support those less fortunate through the practice of contributing typically 2.5% of their earnings for the poor. Called Zak-h "alms for the poor" (Presley, Sessions, 1994, 584) is critical to account for in any management of funds. In this sense philanthropy is a critical aspect of the Islamic economics. Contrasting this is the high level of competitiveness, individuality and accumulation of wealth specifically for personal gain in classical and neoclassical economic theory. Keynesian economics specifically states that there is relationship between interest rates and investment, including the development of new ventures. Ultimately it is in the seeking of maximizing of one's net worth which is the most critical motivating factor and serves as the foundation of fundamental classical and neoclassical theories. These theories also state the innate value in providing service to others or in inherently creating value for the greater good through altruism and the decision to invest in projects are not governed necessarily by the greater good by default, but rather for maximizing financial gain. Only when CSR programs have been defined as critical for the development of reciprocal relationships, essential to the development of new markets, or the need for redefining a company's reputation does CSR become a priority in many organizations (Stephenson, 2009, 251-262). Conversely for organizations that either by their location in Islamic-based nations or the decision to adhere to Islamic economics, the impetus for creating CSR programs is more dictated by the need for fulfilling the Islamic requirement of being a steward of the wealth Allah has entrusted to them (Katsioloudes, Brodtkorb, 2007, et.al).

CSR initiatives and programs then become a religious responsibility vs. An altruistically driven one. For Islamic practices related to investing in CSR programs and strategies the focus is on ensuring first the investment itself is entirely consistent with the requirements as set for by the Qur'an. A major difference in this regard relative to neoclassical economists is that CSR investments are strategically defined for their combined good for those underprivileged and in need areas of a society. There is no specific stipulation as to what can be invested in or not, but trending in these areas have shown CSR programs are most focused on education, nutrition and Internet access specifically in the U.S. And western nations.

Contrast this approach of CSR program definition and execution based on neoclassical economics with the approaches taken by CSR programs based on Islamic economics. First, there is the requirement within the Islamic religion of saving specifically for purposes of funding philanthropy programs for the less fortunate. Islamic economics also states that those who are suffering from debts will be forgiven, given funding to overcome their financial hardship, yet expected to work and create as much value as they are capable of. The creation of value, in terms of Islamic economics, is not for the accumulation of wealth but rather for the ability to share with others less fortune. The Islamic approach to philanthropy therefore is much more focused on the duty and responsibility of everyone to assist with the funding of programs aimed at assisting those in need. This focus on egalitarianism that pervades Islamic economics also makes it completely different than neoclassical approaches to philanthropy as well.

In summary, Islamic economics seeks to quantify and make more efficient the precepts of the Qur'an and the beliefs that serve as the foundation of the Islamic religion. The accountability to the fulfillment of these tasks, and the adherence to specific instructions as defined by the Islamic faith in general and the Qur'an specifically state which areas an organization governed by these principles can invest in and support with CSR programs. Contrary to this, the field of focus for organizations governed by neoclassical economies is much broader, left to the individual definitions of ethical guidelines and standards as defined by each organization's leaders. The defining of CSR guidelines out of altruism, while commendable, carries with it the weight of changing ethical behaviors in the process to ensure the goals of supporting the less fortunate or strengthening those in need are achieved. Islamic economics states that it is a religious duty to fulfill the goals of any CSR programs are met. Literally Islamic economics concentrates on aligning the service to Allah with the operations of CSR programs to a much tighter and more aligned nature than in organizations not governed by Islamic economics..

Comparing CSR Initiatives in Islamic and Common Law-based Nations

Predominately based on the concepts of altruism, perceived benefit to firms of creating a higher level of ethicacy by setting an example and then working to propagate the values of transparency, ethicacy and altruism by example through the organization (McDonald, Pak, 1996, 973) dominates Common Law nations. This is in fact the highest level of attainment in these nations, as the challenge is to change the attitudes, beliefs, perceptions and ultimately, behavior of employees in common-law-based nations is not governed by moral or religious duty as it is in Islamic-based cultures that base ethicacy on the Qur'an. For common law organizations the greatest challenge is to change the behavior of employees who must have a high degree of ownership in the change recommended for it to be successful. The entire aspect of how organizations change in common law-based nations is left to the individual decisions and individual choice of employees while in Islamic-based nations and their organizations, the Qur'an defines the expected levels of ethical, moral and religious conduct… READ MORE

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