Issues and Controversies in Mudaraba

Definition

            Mudarabah, or the so-called silent partnership in Western finance is characterized with the giving of the capital by a partner who is called "rabb-ul-mal" to another person who is called the mudarib (Omar, et.al, 2013). Simply, the investment comes from the rabb-ul-mal, who is oftentimes referred to as the first partner, while the management of the investment is the sole responsibility of the mudarib or the working partner.   In today's business concept, rabb-ul-mal are commonly banks, financing companies, and other intermediaries that provide necessary capital to businesses. In concept, mudarabah is an Islamic financing system that enables people to acquire capital for business ideas without direct violation on the prohibition of interest.

            Here are some of the basic components of the mudarabah, as a distinct Islamic kind of partnership:

            * In mudarabah, investment is the sole responsibility of the first partner or the rabb-ul-mal (Islamic Banker, 2011). The contract restricts the mudarib in sharing investment into the business. The mudarib shares only his talent and his time, just like the convention being used for the working partner of the Western partnership system (although, the working partner can still invest specific amount of money in the venture).

            * Karim & Archer (2013) noted that the rabb-ul-mal has no specific, either direct or indirect, rights or responsibility to meddle with the affairs of the business; the decision making and the management of the business must be delegated in full monopoly to the mudarib,

            * Mudarabah provides that in case of losses, the mudarib cannot be forced or required to share with the said loss (Islamic Banker, 2011). Rather, the loss is solely the burden of the rabb-ul-mal who provided the necessary investment or capital for the business.

            * In mudarabah, the ownership of all the assets of the company is retained by the rabb-ul-mal, and the mudarib has no right over them, exempt the due usage for the creation of wealth. This means that even if the value of assets increase over the past years due to appreciation or good management, the mudarib cannot claim share over them.

            Strictly, the concept of mudarabah is consistent with the ideas of partnership, but it is not consistent with the demand of partnership for equal rights to intervene in the decision making process on where their money will be invested. Yet, it must also be noted that in this concept of Islamic partnership, the mudarib serves as the financial manager and executor of the investment, but he is also entitled to profit sharing aside from the basic compensation.

            Mudarabah can be executed in two approaches and ways. First, the unrestricted mudarabah partnership provides that the rabb-ul-mal can only specify the profit-sharing scheme that will be used, but the rabb-ul-mal does not specify the manner, time, work, and other conditions necessary for the business establishment and operation (Omar, et.al, 2013). Secondly, the restricted mudarabah allows the rabb-ul-mal not only to specify the profit-sharing rules, but also the conditions of the business work, place, and such other concerns. However, this does not allow the rabb-ul-mal to meddle with the affairs of the business when it is also operating and after the terms are met.

Liability Issue

            In mudarabah, it is important to note the sharing of loss. Of course, the rabb-ul-mal has the right to create rules and agreements on how profit should be shared with the mudarib. However, this inherent right does not cover any demand for rules and terms on how losses are to be shared between parties (ʻUs̲mānī, 2004). By convention and definition of mudarabah, there is no actual sharing of loss, but losses are the liability of the investor or the rabb-ul-mal. The mudarib or the working partner is already considered losing in the sense that his time and effort were invested into the business that failed. And provided that loses are incurred due to the negligence and mismanagement of the mudarib, loss sharing can be applied (Timm, 2007). Yet, the principle is only applied within the definition or statement of losses categorized under the mudarib’s misconduct and negligence; all others will be carried for the rabb-ul-mal’s responsibility.

            According to Karim (2010), the focus of the mudarabah is to eliminate the concept of the traditional lender/borrower relationship and to put a new concept of entrepreneur/investor relationship, in the perspective of Islamic banking system. As noted earlier, mudarabah ensures that there will be no violation on riba prohibition or the interest-bearing investment which is inadmissible in Islamic finance. In mudarabah, interest is not anymore a concern, but this special kind of partnership works for the sense of profit sharing between two parties, thereby forming a relationship between them.

            However, if we look closely at the liability we find some issues that must be addressed properly. Of course, the liability of the rabb-ul-mal is only up to the amount of capital or finance being invested or entrusted to the mudarib. Comparing it with the Western idea of partnership, rabb-ul-mal, in this instance, can be considered as a limited-liability partner. For losses that are incurred by the business, provided that these losses are not due to the negligence and misconduct, or fraud and dishonesty of the mudarib, that are beyond the investment of the rabb-ul-mal, creditors cannot run after the assets of the first partner – and even to the working partner’s assets.

            Karim & Archer (2013) noted that mudarabah is a profit-sharing and loss-bearing investments. Of course, when the business is making profit, rabb-ul-mal is entitled to receive the share of profits, as provided by the terms and conditions made prior to the entrustment of the money or capital to the mudarib. Yet, during losses, no term and condition is applied. The simple convention is that if the business needs to wind up due to large loss over its operations and the impossibility of making profit or even in coping up with the losses, the amount of loss will be credited wholly to the investment of the rabb-ul-mal, and the remaining assets will be returned to rabb-ul-mal. This concept is consistent to the mudarabah character which states that all assets are owned by the rabb-ul-mal.

            On the side of the rabb-ul-mal, we find that mudarabah concept in negative effect because losses are made, even in good faith and without fraud and misconduct, without the direct discretionary supervision of the financier. This means that the financier has no other choice, but to accept the reality that the invested capital won’t be recovered anymore. Yet, if we look at the side of the mudarib, we also find the concept of mudarabah in the same negative notion. When losses are incurred and the business winds up, all assets will be returned to the rabb-ul-mal after all creditors are satisfied, but the mudarib receives nothing even if he has helped to acquire or grow those assets.

            Moreover, the mudarabah concept becomes more of gambling investment, the same was the Western speculation investment. On the side of the rabb-ul-mal, it is a form of gambling over the outcome of something that he does not have control over with. While for the mudarib, it is betting time and effort with the hope and desire that one day the efforts will pay off and even if he hasn’t invested on the venture, he gets a sizable share. Simply, mudarabah has a problem with extent of liability, the form of liability shared between parties, and the equal sharing of risks taken with the business is engaged.              

Mismanagement, Corruption, Etc.

According to Dabashi (1989), the pre-Islamic Arab culture was a normal society that looked for ways to survive, and one of the indigenous Arab enterprise which enabled Arabs to exploit SyrianYemenite commercial potentials. He further noted that the survival of the Arab culture and the striking prosperity during the early Islamic period can be traced to the pre-Islamic institutions that had been adopted and improvised by Islamic leaders. Mudarabah is one of these pre-Islamic institutions adopted for Islamic values. The Prophet had been a mudarib to his wife even prior to the establishment of Islam (Karim, 2010). This simply means that mudarabah was adopted by Islam as a tool for the survival of culture and as a potential to exploit the potential of other neighbors.

     Based on this history, we see a massive problem and question. As much Shari’ah forbids the exploitation of others or even the defrauding of others for the selfish benefits, mudarabah’s context can be traced to the exploitation of others for the sake of gaining for one’s self. As discussed in earlier section, there is a problem of riba in mudarabah concept. It is gaining interest and profit for money that is not actually yours, in the perspective of the mudarib, while in the perspective of the rabb-ul-mal, it is gaining profit from the effort and strength of other people.

     However, Dabashi (1989) noted that mudarabah also provided a way for merchants to come into a single commercial force. This resulted to closer ties between them and for the initiation of culture of helping each other. This even progressed Mecca into one of the leading international trade markets. Mudarabah was instrumental in the creation of commercial culture that can be still be found in today’s Islamic society – brotherhood and trust on each other. Rabb-ul-mal must trust that the mudarib will protect his investment and will manage them properly as to avoid bankruptcy. Moreover, it also creates a better relationship between as they see a mutual bond between them, rather than just a commercial context that can be found common in Western business perspective.

By convention, the mudarib or the seller must declare the cost and profit of the enterprise to the buyer or the first partner (Ismal, 2013). As outlined in the characteristics of the mudarabah, honesty is a very important value of the partnership. This is done to ensure that the interest or investment of the rabb-ul-mal is protected from unscrupulous handling by the mudarib. In fact, when proven that the mudarib conducts that business in fraud and dishonesty resulting to losses, the losses due to this extent must be covered by the mudarib. However, in this simplistic contract between partners wherein the rabb-ul-mal can only designate the terms and conditions of the profit sharing and does not have discretionary rights in decision-making and operations, the mudarib has high tendency of corruption by overstating the cost of the business and thereby underdeclaring profit to be shared with the rabb-ul-mal. When this happens, the rabb-ul-mal is robbed off his opportunity to gain from the investment in the right way and the mudarib gains too much from his effort. Yet, when losses happen, the gains of the mudarib will not be affected, but the investment of the rabb-ul-mal will be lost.

            According to Saleem (2012), the mudarib does not need or does not guarantee the rabb-ul-mal that the capital will be returned or will gain profit. Although, the mudarib must take all the necessary steps to avoid incurring losses for the business, he is held responsible when these things happen. Unlike in the Western business environment wherein the CEO can be fired if the expectations of stockholders are not met, in mudarabah, there is no such thing as firing of the mudarib because of slow growth or incremental losses during operations. In fact, the rabb-ul-mal does not have rights to look at the records and books of the business because that would invalidate the value of trust being superior in the mudarabah context.

As a result of the laxity of accountability, mismanagement usually occurs, either intentionally and unconsciously. And the worst thing is that it would be hard for the rabb-ul-mal that mismanagement and extreme negligence really happen as the cause of the business loss. This difficulty leads to the direct judgment that losses will be covered by the investment of the rabb-ul-mal on the business. Thus, creating a clean slate for the mudairb while causing financial strain on the part of the rabb-ul-mal.

Principal-Agent Conflict/Inequality

            By form, mudarabah is a principal-agent relationship in a relaxed manner (Ahmed, 2011). The principal-agent context of the Western business environment provides that the financier or the principal knows the ins and outs of the business and can directly influence the decision of the business operations or projects. However, in the mudarabah context, this is eliminated to emphasize the importance of trust. The allowance to the mudarib in managing the business is deeply embedded on the reality that trust won’t be real if there is too much friction between two parties. It is only through the value of trust that mudarabah can be real. Although the rabb-ul-mal is not guaranteed by the mudarib that the capital will be returned and profit will be made, the rabb-ul-mal must trust that the mudarib will manage the investment properly as much as he trusts him the capital as well. There is asymmetrical trust between two parties, which built the relationship of brotherhood between them as the primary goal of the Islamic finance system, even in insurance.

            In fact, the rabb-ul-mal cannot specify the amount of money he is expecting to gain from his investment. There is no such thing as capital-profit ratio of expectation, which is common in Western business environment. The rabb-ul-mal must not estimate the profit that will be earned in the process. Instead, the rabb-ul-mal must provide a big allowance of trust on the potential of the mudarib in managing the business.

            But in this concept of business contract, the value of accountability and information sharing becomes a fundamental issue that sometimes strain the relationship of two parties, especially during times of crisis. Of course, in today’s Islamic finance, mudarabah becomes a two-tier system wherein the investors of the bank become the rabb-ul-mal and the bank becomes the mudarib; and in the second level, the bank becomes the rabb-ul-mal and the partner is the mudarib. In this system, we see that the bank has no right to ask for accountability and information sharing from the mudarib. Yet, if they won’t be doing this, as the mudarib of small investors, they are also put into question. Herein the value of trust is transformed in the value of accountability and knowledge.

            There is a conflict of inequality that arises in the context of trust. Is it really distrust to ask someone over the affairs of concerns that he has interest on? It is beyond trust when a party asks for simple information on how things are going? Yet, we see that accountability is always the motivation of going after discretion and power on how to run a business. For instance, accountability won’t become a reason for a bank to meddle with the affairs of the business, rather the expertise of the people in the bank can be a reliable and valuable resource for suggestions in decision-making.

            If we look closely, mudarabah as an issue of taking things to the extreme. Just because the rabb-ul-mal must trust that the mudarib will manage the capital properly becomes a fundamental reason why accountability and suggestions from rabb-ul-mal must be eliminated and reduced even if it could have helped the business to prosper. It must be understood that the goal of the mudarib is to ensure profit for the business so he may be able to get his share. This means that the mudarib must get the necessary help he can to ensure profit, but by eliminating the help of the rabb-ul-mal, it would be hypocritical for the mudarib to ask help from other people or consultants. In essence, the question on practicing another and keep another principle becomes an inflammatory factor to the failure of mudarabah.

Conclusion & Recommendations

Ahmed (2010) noted that in mudarabah, investment account holders (IAHs) of banks maintain quasi-liability because they absorb the losses in the two-tier system of mudarabah. In order to fight this system of liability, it is necessary for the bank as the mudarib of IAH to create a credit risk for these investments. Of course, it should be noted that risk is not part of the Islamic financial system and should be discarderd, but the capital should be mediated with banking risks. This would ensure that capital goes to the right investment without endangering the rights of IAH to gain profit.

            In the same class, the question of moral hazard and full liability becomes an issue of high concern. Commercial banks that are acting as mudarib of IHA shares with the profit if the investment makes money, but they don’t share with losses when their partners or mudaribs (in banks perspective) failed to manage the capital well. Instead the entire liability is transferred to the rabb-ul-mal or the IAH. To reduce the commercial risk and attract more investors, Ahmed (2010) provided the necessity of creating moral hazard. This means that banks increase the profit share of IAH who agrees to place their capital on areas that involve high risks. By providing commercial risks, the quasi-liability of IAH is equaled with the share of profit in positive light. The knowledge of commercial banks on high risks areas of investment becomes a fundamental strategy to ensure risks being treated as they are, rather than just assuming and depending on trusts.

            Mudarabah is a very essential Islamic finance approach. It provides the best possible ways to ensure that commercial and financial activities are supported in a better way. However, when too much is involved due to the complexity of today’s business environment, it is always important to keep things balance. The balancing act would ensure that investments of IAH or rabb-ul-mal is protected from mismanagement and direct corruption. And the other way around, it ensures that the interest of the mudarib is also protected to ensure that they make profits and gain from their effort.

            I believe that mudarabah is a very effective method of building business relationship without the expense of brotherhood. If practiced the right way, mudarabah provides the best means to conduct financial values and ensure that commercial progress happens. And of course, mudarabah can be mixed with other Islamic financing values to create more potent business tools.

References:

Ahmed, A. (2010). Islamic Banking: How to Manage Risk and Improve Profitability. John Wiley &

Sons,

Ahmed, H. (2011). Product Development in Islamic Banks. Edinburgh University Press.

Dabashi, H. (1989). Authority in Islam. Transaction Publishers.

Islamic Banker. (2011). Mudarabah – Introduction. Retrieved from

http://www.islamicbanker.com/mudarabah–introduction

Ismal, R. (2013). Islamic Banking in Indonesia: New Perspectives on Monetary and Financial Issues.

John Wiley & Sons.

Karim, R. & Archer, S. Islamic Finance: The New Regulatory Challenge. John Wiley & Sons.

Karim, S. (2010). The Islamic Moral Economy: A Study of Islamic Money and Financial Instruments.

Universal-Publishers.

Omar, A., et.al. (2013). Fundamentals of Islamic Money and Capital Markets. John Wiley & Sons.

Saleem, M. (2012). Islamic Commercial Law. John Wiley & Sons.

Timm, H. (2007). The Cultural and Demographic Aspects of the Islamic Financial System and the

Potential for Islamic Financial Products in the German Market. GRIN Verlag.

Usmani, M. (2004). An Introduction to Islamic Finance. Arham Shamsi.

The Concept of Corporate Social Responsibility

Introduction

            Corporate social responsibility (CSR) is a concept that has become part of the business culture and reporting. Almost all established corporation maintains a CSR policy as part being socially responsible. According to Crowther & Aras (2008), CSR is defined, in broad terms, as the "relationship between global corporations, governments of countries and individual citizens." Narrowly, it is the relationship and interaction between the business and the local society or environment wherein the business resides or operations. In another broader definition, CSR is the relationship of the business and its stakeholders, including internal and external members. This definition stretches the CSR not just to the society, but to all components that are affected or can be affected by the operations and day-to-day activities of the business.

             On the other hand, the World Business Council for Sustainable Development defines CSR as the "continuing commitment by business to contribute to economic development while improving quality of life of the workforce and their families as well as of the community and society at large." This sums up the goal of the business which is to generate wealth, create profit, and ensure growth. But the goal of the business must not be singled on that alone, it is necessary for the business to include the welfare of the people within the organization, and the community or society. It must be noted that the definition uses the word “continuing” because CSR does not stop on a single program alone, but this is an on-going process to improve life and ensure sustainability.

            Looking closely, CSR must be deeply anchored and rooted on three pillars or dimensions, according to the World Business Council for Sustainable Development, which are: economic growth, ecological balance, and social progress. These three must come together to achieve the goals of the business and its stakeholders. By working together side by side, it would be easier for the business to reach its potential of growth without damaging the environment and while ensuring that society benefits from the growth of the business.

Facts on CSR

            According to Vogl (2003), corporate citizenship is characterized by the adoption of a triple bottom line that considers all aspects of the society, especially environmental, economic, and social sectors. This means that the business is not just there to create profits, but it also has some other roles that should be properly met and accomplished. Rather than following merits, rules, and regulations, CSR works on more than what is required of the organization for the common good of the people, and not just the benefit of the organization.

            Vogl (2003) further explains that most of the times those companies that adopted a CSR policy are also the ones being questioned and even vilified by the public sector. There is always a room of doubt on the intents and motivations behind the mindset of the company's CSR. Vogl (2003) cites the case of Philip Morris Cos that advertises against teenage smoking. For critics, it was hypocritical for Philip Morris to be against teenage smoking when it is producing and selling cigarettes; for critics, Philip Morris works on an opposite reaction from teenagers to increase sales of the company. Even McDonald is not immune to the criticism of their CSR's on environment sustainability. The rationale of critics is that how can McDonald promote life when it encourages obesity and death from the sickness thereby.

            The value of CSR comes to the point wherein employees don't believe their senior leaders are met of integrity who can manage the organization. The distrust between employees on the actions of the organization's management can be traced to the way organization's use their employees' satisfaction as a way to cover-up the mistakes and other wrongful acts committed by the organization just for the sake of profit. CSR should be about making honest profit and the protection of employees as the main stakeholder of the company.

            However, Vogl (2003) also noted that CSR is always a business tool for the corporation to benefit from. This means that corporations don't need to be wary in creating CSR policies such as training for employees in form of continuing education because these CSR policies will also yield fruits and results in the future. For those who are skeptical in adopting CSR policies, the lack of cost-benefit analysis of most corporations with regards to day-to-day operation becomes a burden and obstacle that stops the organization from moving forward with an effective CSR policy that benefits stakeholders and the company.

            Yet it must be noted that investors are already of understanding that CSR is the only direction organizations can take. Investors don't have to object on the demand of the CSR creation and the necessity of spending for CSR policies. With the increase of CSR funding from investors, it is easy to say that business interest holders are already mature to understand the impact of CSR, both internally and externally. That it is necessary for the organization to adopt a CSR policy that will benefit the triple bottom line of the society.

Ethical Issues

            As much as corporate social responsibility and corporate citizenship involves people, there are still ethical issues that may creep in during the implementation and adoption of the CSR. There is always a need for organizations to address these important issues. According to Cavalieri (2007), transparency provides a way for both the organization and other stakeholders to check for abuse of any.  Through transparency the public's outrage on the way corporate bodies are covering up their mistakes with CSR policies to poster a good public image would be toned down and reviewed accordingly (Vogl, 2003). The lack of transparency of the way CSR is adopted and implemented becomes a focal point for the failure of the corporate world to explain their side to the public. For instance, with the situation of Philip Morris Cos, the lack of transparent on how the organization conceived the CSR and implements, the cost and benefit of the organization, and its motives and intents is a fundamental root why the public is convinced that CSR of Philip Morris has a negative impact on teenagers and positive impact for the organization as it increases sales.

            Transparency helps dispel the question of the bribery, corruption, and massive espionage within corporations. It would stop people from thinking on how the organization gets fund for its CSR and how it affects the taxation of the company and its financial status in the market. With the aid of transparency a dialogue can be made between the organization and its stakeholders.

            Another ethical issue is the way CSR affects the organization. Robins (2011) noted that CSR may not have a great positive impact on the profitability of the corporation, and only in seldom cases that CSR has negative effect. This means that it is necessary to see how the organization deals with its employees, quality, and other consideration of the day-to-day operation of the business. It is important for the organization to look at its purpose of implementing the CSR. Rather than looking forward in making profit, CSR should look at the common good and profit is just second in priority.

Conclusion

            In making a decision on whether the organization should adopt a CSR, it is always important to look at the way people view CSR. There are areas that provide shadow to the CSR. By crafting CSR policies that are within the guideline of transparency and intents and motives, organization would be able to create and implement a CSR that encompasses social, economic, and environmental aspects. This means that the CSR becomes a CSR that really has an impact on its stakeholders, rather than just being a statement of the organization to poster a good public image. With the aid of the right CSR perspective, ethical issues will be eliminated during decision making.

References:

Cavalieri, E. (2007). "Ethics and Corporate Social Responsibility." Emerging Issues in Management.             Symphonya.

Crowther, D. & Aras, G. (2008). Corporate Social Responsibility. Bookboon.

Vogl, A.J. (2003). "Does it Pay to be Good?" Across the Board Vol. 40 Issue 1. Trade Publication.

World Business Council for Sustainable Development. (2013). Corporate Social    Responsibility.             Retrieved from http://www.wbcsd.org/work-program/business-role/previous-work/corporate- social-responsibility.aspx

International Monetary System: The Euro Conditions

Britain – In and Out of Euro

            The discussion on whether the United Kingdom should join the European Monetary Union has a long history dating back to the Thatcher government. In a special report run, BBC News (1997) pointed out the adopt of Euro as the single currency of the EU region would ensure currency stability within the participating countries and even outside the EU. This view of stability is deeply incorporated to the "reduction in transaction costs, elimination of exchange-rate uncertainty, and enhanced credibility for the monetary authority (Tsoukis, et.al., 2004, p. 185)." However, there are concerns that UK wants to consider as described in its five economic tests that should be met prior to joining the EMU (Schadler, 2005). In 1997, BBC News cited that UK was wary in joining the EMU because of the differences of the economic performances of the participating countries. And UK has been weighing the disadvantage of losing national sovereignty over their financial situations as affected by currency policy adopted by the EMU. Schadler (2005) described this as the question on sustainable convergence and the flexibility of the nation to create reactions and actions that will ensure the upward direction of the UK economy.

            It must be noted that after Thatcher reforms, the UK has moved toward attainment of greater labor market flexibility at par with the United States (Smith, 2003). Although several member countries of the EU have started to move toward flexible forms of the labor market such as Germany and Spain, several others remained reluctant to adopt these changes but rather implemented strict labor market regulation (Blossfeld, 2008).  This means the UK is concerned of the interest rates of the economic cycle as characterized by its variable mortgage interest rates, which is duly affected by the foreign exchange policy and rate regulations of the Bank of England (Brooks, 2012). If UK would move to joining the EMU, it is necessary to remove the policy lever of the Bank of England in managing mortgage rates, thereby eliminating the foreign exchange policy also.

            Internally, this means devaluing of the domestic economy of the country to provide far better international competitiveness. In essence, this direct changes would dislocate big parts of the UK economy, and would directly increase the cost of labor, which would then escalate to substantial cost to businesses and high unemployment rate due to the strict regulation of the labor market and the creation of labor positions (See diagram for unemployment rate overview).

            Should the UK enter the European Monetary Union, the Sterling or Pound would be a massive factor in setting up the rate of Euro. This means that UK manufacturing industries would benefit from the first introduction of UK to EMU due to the advantage of competitive rate, but this would put manufacturing company from other countries in a direct market disadvantage (The Treasury, 1998). UK manufacturing companies would be able to set the market atmosphere across the European Union zone.  Nonetheless, although it is good to acknowledge that the UK tourism would be in great advantage when UK enters EMU, this would also increase the cost for Britons to visit places outside UK (The Treasury, 1998). In the same manner, The Treasury (1998) also noted that agricultural industries and companies would benefit from Euro as it cuts the freezing of the green zone and thereby decrease the CAP payments. As a whole, this introduction to the EMU would increase the interaction of UK with other EU members, thereby increasing the foreign direct investments. This would largely benefit several industries as cash inflows from FDI can be used to increase engagement of other industries that lay unattended due to the weariness of the foreign (Euro industries) to invest in the sterling economy.

            According to Langhammer (2011), there are already 15 multinational companies that have lobbied the UK government to join the euro. Companies from Asian and US markets such as Caterpillar, Nissan, and Toyota have invested in Britain to serve their European markets (Langhammer, 2011). If UK would join the euro, these investments in Britain as headquarters for their operations throughout Europe would eventually get a regional advantage. This will ensure that their headquarter in Britain has stability across the region without being dependent or relative to the fluctuations of exchange of Euro and Sterling or pound. Across the board, this would decrease the cost of export from Britain to other parts of the continent, which would increase the profit potential of multinational companies that have Britain as their European market headquarter. Given the same principle, UK companies that gone international would also benefit from a stable currency that holds a great economic-geographical advantage. This means that UK multinational companies can easily complete with US and Japan companies that are backed by stable Yen and US dollars with market trust and advantage.

References:

BBC News. (1997). Special Reports: Pros and Cons, EMU. Retrieved from             http://news.bbc.co.uk/2/hi/special_report/single_currency/25081.stm

Blossfeld, H. (2008). Young Workers, Globalization and the Labour Market: Comparing Early Working    Life in Eleven Countries. Edward Elgar Publishing.

Brooks, A. (2012). Mortgage Stressbusters. John Wiley & Sons.

Langhammer, F. (2011). The Euro - Should Britain Join the European Monetary Union? GRIN Verlag.

Schadler, S. (2005). Adopting the Euro in Central Europe: Challenges Ofthe Next Step in European           Integration. International Monetary Fund.

Smith, S. (2006). Labour Economics. Routledge.

The Treasury. (1998). A Review of European Economic and Monetary Union and its Implications.

Tsoukis, C. et. al. (2004). Aspects of Globalisation: Macroeconomic and Capital Market Linkages in          the Integrated World Economy. Springer.

Business Ethics: Do you favor such surveys exposing unethical and illegal business practices going on at the place of employment?

Business Ethics

1. What is the ethical dilemma in this case?

            According to Collins (2009), rating other employees or providing feedback on others may cause negative impact on employees who may "anxious about giving or receiving critical information (p. 197)" about each other. Although, it must be realized that it is better to rate employees than to rank, as this case is doing (rating the honesty level of employees rather than ranking employees with regards to their honesty level); however, it is necessary to realize that the opinion of the union president has some serious basis.

            Mainly, we got into a dilemma of employees not rating or providing reliable and truthful feedback. It could be that someone may have gotten trouble or quarrel with another employee and this could be a motivation to give a poor feedback. Even if the survey is warning employees that giving false appraisal is a serious one, it is impossible to separate the emotion or past experiences of employees from their responses to the survey. As a result, the survey becomes more “ratting” on each other, as the union president puts it.

            Second, it must be noted that the case is not fair in its perspective. It is giving employees the options to sign their name or remain anonymous. It could have been that the case generally asked employees to provide names. This will help the study to verify the truthfulness of the results. If employees remain anonymous, it could lead to false claims because they won't be subjected to questions regarding what they have written in the survey.

2. What is the conflict in values that causes the dilemma?

            Trevino & Nelson (2010) noted that conflict in values happen within the ethical dilemma principle when two or more values are in direct or indirect conflict with each other. In this case, the ethical dilemma is the fruition of the problem of loyalty to friends or co-employees and being honest to the survey, or it could be being honest and trustworthy to the survey and taking revenge against other employees through the survey responses. If an employee has a close friend who does have a poor honesty level, the employee could either choose being loyal to his friend and responding good to the survey, but the other way around says that the employee breaks the loyalty with his friend to become honest and truthful with the survey. The second situation is the same in principle of values conflict. The employee could remain truthful to the survey by responding honestly even if this means saying good things about an employee he has conflict with.

            Either way, we see the problem of the reliability and trustworthiness of the survey. There are always problems with the system because it deals with human beings who have emotions. And worst, the survey deals with a subject that is very touche with people. It could be that the survey is to evaluate the honesty level of employees, but employees who responded to the survey are not being honest with their feedback with each other due to the conflict of values that play primary role in this situation.

3. What steps would you take to the solve the conflict between county officials and the union president?

            As per the conflict of opinions and perspectives of county officials and the union president, it is necessary to address the root. The root of the problem is the way these two parties see the case or the survey. Mainly, rather than just using 180 employees for the survey, the county officials can include all 4, 000 workers. The size of the population is not too big and the county has the authority to distribute the survey questionnaires to its workers without the ethical problem of permission from authority. By including every worker of the county, the fear of the union president that those who are included in the survey will just “rat” on other employees will be eliminated and addressed properly.

            Second, rather than asking to provide honesty level on employees, the survey should take a different turn of addressing the situation. It should keep questions general, rather than specific. Rather than asking for the honesty level of a particular person, the survey should ask for the honesty level of an entire team, department, or the entire organization. This way employees will be hindered from making negative feedback on the honesty level of particular individuals of the organization. And this will resolve the fear of the union president that the survey will just build a negative atmosphere within the organization.

4. Do you favor such surveys exposing unethical and illegal business practices going on at the place of employment? Give reasons in support of your answers.

            Exposing unethical and illegal business practices is a good thing because it helps to create a business environment of truthfulness. However, doing surveys that try to evaluate these unethical and illegal practices may not really be trustworthy. We need to realize that surveys or other evaluations are subject to the emotions of the respondents. The reprisal of the management or anybody of the organization becomes an obstacle that stops surveys from being truthful. And as a result, the evaluation of unethical and illegal business practices within the organization may not really be truthful and reliable. And when individuals use these surveys to check on these practices, the unreliability of the survey is translated to another set of unreliable actions of the management or anybody.

            Second, in making surveys with regards to unethical and illegal business practices, the question is how people will work on it. This will build distrust between management and employees, or between employees. Instead of building a good organizational culture, the organization is struck down with the survey's impact. Instead of crafting a better organization free of unethical and illegal practices, the organization becomes detached from each other and this builds a series of problem. The organization may find employees exposing each other to the management to protect each other. And this is not a good start to really address the problem of unethical and illegal issues.

References:

Collins, D. (2009). Essentials of Business Ethics: Creating an Organization of High Integrity and Superior Performance. John Wiley & Sons.

Trevino, N. & Nelson, K. (2010). Managing Business Ethics. John Wiley & Sons. 

Importance of Qur'an in the Literary History of Arab-Islamic Civilization

Arabic literature is a testament and a monument of the Arab-Islamic civilization and society. According to Holt, et.al. (1977), "the inimitability of the Qu'ran, ensured interest in Arabic literature and literary criticism as the key to the understanding of that doctrine, but it was indirectly that the religion institution made its permanent institution (p. 657)." Through the jealous guardianship and scholarship of those who study the Qu'ran, the expressions and common idioms of the Arabic literature are crafted and enriched. This means that deep within the Arabic literature, traces of Qur'an can be found as the fundamental source of everything and explanation. Foremost of all, Qur'an's literary importance can be traced to its being the first book composed in the Arabic language, which was a breakthrough from the oral traditions of the region (Omrna, 1988).

            Fundamentally, Holt, et. al. (1977) noted that the institution itself is the basis of the society. Deep within the Arab-Islamic civilization is the definition and embodiment of Qur'an as the societal law and religious foundation. This means that scholarship has to anchor on Qur'an as they expound doctrines from it. As a result, literature abound regarding the doctrines of Qur'an and the explanation on some religious expressions and issues. As the society depends on Qur'an, we can likened the literary depthness of the Arab-Islamic civilization to the volumes of judicial papers of this day. The religious function of Qur'an and its judicial premises within the society makes it the fundamental book that is studied, expounded, and analyzed by scholars from the old period until now. As noted by Omran (1988), the Holy Book has been the focus of several studies on the theological and legislative aspects of the society.

            Haddad (1982) also noted that Qur'anic texts are not just simply for historical purposes, which had been question by several Western scholars. Haddad explained that Khalaf Allah explained that Qur'an is a narrative of literary documents which uses "means of attraction, intimidation, exhortation, admonition, guidance, and direction (p. 47)." Qur'an promotes a very different literary narrative that is often misinterpreted and translated by Western scholars. Simply, Qur'an in itself is a literary masterpiece that has become part of the literature of the Arab-Islamic civilization. It exposes and promotes a new set of narrative approach and pattern that has become distinct to the Arab-Islamic literature.

            Moreover, Haddad (1982) suggested that Qur'anic texts narratives can be categorized as history, parable, and allegory. Essa & Ali (2010) noted that most Arab-Islamic writers work on the insight of the sophisticated sense of religion, culture and knowledge, which can be traced to the Qur'an and the Sunnah. This means that the narratives of Qur'an are used by writers to create literary masterpieces with subjects of religion, culture, and knowledge. As much as religion is a very important aspect of the society, it is not surprising to note that literature also works within this aspect of people's lives. Even the culture and knowledge of the region must be deeply anchored on Qur'an because of its importance in daily lives of people, as noted above.

            Omran (1988) noted that the importance of Qur'an in the literature history of Arab-Islamic civilization is on its reciprocity. The Arab-Islamic civilization has been expanded with the aid of Qur'an's impact. In fact, the Arabic language got its world prominence from the ages due to the importance of Qur'an. Yet, it must be also be noted that the richness of the oral Arabic language has become the tool for the Holy Book to be written in just precise, beautiful, and attractive narrative. As a result, any person who embraces Islam would be immersed in the study of Arabic literature, which ensures the golden era for the language, gaining official status in the region and throughout the world.

            The importance of Qur'an in the Arab region becomes also a fundamental motivation for the spread and enrichment of the Arabic language literary. When Islam spread to other regions, Arabic language immersed into the terms of Persian and Byzantine (Al-Hewar Center, Inc., 1999). With this achievement, the Arabic literature become more and more inclusive. In essence, Qur'an is not just importance as a literary motivator drawing influence on how Arabic literature narrates, writes, and analyzes, but it is also importance because of its religious and societal rule. As the subject of several literary studies and works, Qur'an draws up vast number of Arabic literature within and outside its borders, which also helped to create betterment of the language itself.

References:

Al-Hewar Center, Inc. (1999).  ARAB CIVILIZATION. Retrieved from             http://www.alhewar.org/ArabCivilization.htm

Essa, A. & Ali, O. (2010). Studies in Islamic Civilization: The Muslim Contribution to the Renaissance.     IIIT.

Haddad, Y. (1982). Contemporary Islam and the Challenge of History. SUNY Press.

Holt, P. M., et.al. (1977). The Cambridge History of Islam:, Volume 2. Cambridge University Press.

Omran, E. (1988). Islam, the Qur'an and the Arabic Literature. Retrieved from http://www.al-       islam.org/al-serat/arabic.htm