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Spiritual capital


The co-evolution of an ethical framework

based on Abrahamic religious values in
the Islamic tradition
Ouarda Dsouli, Nadeem Khan and Nada K. Kakabadse
Northampton Business School, The University of Northampton,
Northampton, UK
Purpose The aim of this paper is to investigate how values from within Abrahamic religions could
be adopted to improve liberal market economies (LMEs) corporate governance business practices.
Design/methodology/approach The concept of spiritual capitalism is explained from an Islamic
perspective by adopting three universal Abrahamic values to critically analyse LMEs and offer an
ethical alternative to current capitalism concerns.
Findings It is found that LMEs can be improved by considering all stakeholders, putting ethics
before economics, and introducing shared risk/reward plus lower debt.
Originality/value The paper compares LMEs/Co-ordinated market economies (CMEs)/Islamic
countries economies (ICEs) within an ethical framework for LMEs.
Keywords Islam, Religion, Values, Corporate governance, Market economy, Spiritual capitalism,
Stakeholders, Abrahamic values
Paper type Research paper

Journal of Management Development

Vol. 31 No. 10, 2012
pp. 1058-1076
r Emerald Group Publishing Limited
DOI 10.1108/02621711211281843

In recent history, the Anglo-American Corporate Governance (AACG) system,
practiced in liberal market economies (LMEs) such as America, UK, Canada and
Australia, has increasingly dominated global business practice demanding
convergence as it extends its reach and further erodes co-ordinated market economies
(CMEs) such as Scandinavia, Rhineland Europe and Japan (Dore, 2000; Hall and Soskice,
2001b). However, this LME manifestation of capitalism has been the focus of criticism as
local and regional economies have been adversely impacted by its characteristics
and nature (Lane, 2003; Clarke, 2009).
The AACG system has evolved subject to a series of boom and bust cycles
(Schularick and Taylor, 2009) over the last 80 years. During these cycles, failures and
concerns which include the Great Depression (1920s), Enron, WorldCom, Tyco,
Adelphia, Global Crossing and the sub-prime mortgage crisis that imploded into the
Global Financial Crisis (GFC), have served as catalysts for legislative change (in
the form of Sarbanes-Oxley Act of 2002) and regulatory change (including new
governance guidelines for NYSE and NASDAQ) in America. Similarly, in the UK,
scandals in the form of Maxwell, and Poly Peck, have resulted in the revision of
British Corporate Governance (UK CG) Codes (2010); Higgs, 2003). As such, these
cycles can be attributed to the philosophical underpinning of Anglo-American
capitalism (Garca et al., 2008), namely that of shareholder value. Deficiencies within
this model appear to be linked to unethical behaviour, driven by profit maximisation
for shareholders at the expense of other stakeholders. Therefore, the need to review the
current AACG system so as to include all stakeholders interests and align business
with ethics is pressing.

In this respect, Aguilera and Cuervo-Cazurra (2004) and Cicon et al. (2010) propose
non-convergence to the Anglo-American system, whereas Godfrey and Hatch (2006)
highlight a lack of consideration for non-western philosophical perspectives within
business ethics. In addition, Forsyths et al. (2008) Ethics Position Theory (EPT)
indicates that the LME manifestation of AACG is relativistic and may benefit from
idealistic, Abrahamic values (Cornwell et al., 2005).
While the AACG has had systematic reviews as it has evolved, scandals and
concerns attributable to ethical conduct continue to adversely impact firm survival.
Further, religion is central to human experience (Giddens, 1998) and has become less
central in modernity (Anderson et al., 2000). Therefore, the case made is that a greater
benefit may be realised through a combination of business ethics, stakeholder value
(Kreikebaum, 1996) and firm performance (Donaldson, 2003; Hasan, 2009; Saeidi et al.,
2011). Within this line of thinking, the aim is to investigate how values from within
Abrahamic religions could be adopted to improve LME corporate governance business
practices. In this regard, for the purpose of investigation, the conceptual attributes of
Abrahamic values are interpreted and aligned to global sources of data as putative
measures (Low, 2006) of the broad business understanding and critical analysis of
the term Abrahamic values.
An Islamic approach to business practices
History establishes the crystallisation of Islam around 622 AD, whereas the wider lens
recognises Islam as the last of the Abrahamic religions (Judaism, Christianity, Islam),
which as such, brought the same message to mankind (Tehranian, 2007). Scholars have
attempted to explain managerial behaviour (Cyert and March, 1963/1992; Nelson and
Winter, 1982) and linked business ethics to Christianity (Jones, 1995) and Judaism
(Baron, 1999). However, it appears that the last of the monotheistic Abrahamic
religions has received little attention in management literature (Beekun and Badawi,
2005) or has been misunderstood (Rice, 1999). Islam offers an entire socio-economic
system, in which ethics dominate economics (Naqvi, 1981). In this regard, a
broader framework of understanding must incorporate an Islamic approach to
business practices where human ethics are linked to firm interactions and business
environments in a co-evolving system (Cournot, 1838/1995).
Modern capitalism in contrast with Islamic business practices
In the modern business environment, different modes of capitalism (Hall and Soskice,
2001a) include Anglo-American (USA, UK), European (German, French) and Asian
( Japan). Each of these modes (Hall and Soskice, 2001a) has its own characteristics,
creating a continuum of LMEs and CMEs. In this respect, the Anglo-American is
the most liberal form of capitalism and emphasises shareholder maximisation in
free markets (Friedman, 1962). The Asian systems are family and institutionally
controlled (La Porta et al., 1999) whereas the European systems are more stakeholder
orientated (Streek and Yamamura, 2001). Indeed many large EU companies are family
controlled (Mallin, 2010) and draw on Christian religious traditions to promote
stronger social values and community welfare (Kersbergen, 1995). However,
opportunities remain to improve corporate governance systems (Clarkson, 1995;
Doh and Guay, 2006).
Freeman et al. (2007) highlight that all forms of capitalism privilege the rights of
one group in detriment of others and people are motivated by nave self-interest,
favouring value creation over morality. The historical development of liberalised

Spiritual capital




Anglo-American capitalism gave rise to the agency problem as ownership and control
became separated (Fama and Jensen, 1983) making shareholder maximisation
(Berle and Means, 1932; Jensen and Meckling, 1976) more of a priority. Further, during
the mid-nineteenth century, growth of limited liability firm structures and stock
market investment (Neal, 2005) intensified the problem. As a remedy to the agency
problem, Stewardship (Donaldson, 1990) was introduced to promote care and proper
utilisation of resources. However, rather than remedy, Stewardship only compounded
the problem (Davis et al., 1997; Albanese et al., 1997). The resulting outcome has driven
the system back towards the classical view of shareholder maximisation (Kakabadse
and Kakabadse, 2001) but in a more dynamic marketplace. Even today, the UK
Stewardship Code refers to shareholders (Friedman, 1962) rather than stakeholders
(Freeman et al., 2007). However, within this cyclical development, the ethics associated
with business have been lost, leaving the modern Anglo-American free market
a shareholder-driven system (Groenewegen, 1997; Mayo, 2011).
In response to the failing capitalistic systems, Freeman et al. (2007) propose to widen
the management and shareholder centric vision of profit maximisation, to include
value creation for non-stockholding groups. In this respect, the balance between
business and ethics may be restored. While a step in the right direction, it has to be
recognised that western scholarly contribution to stakeholder theory is relatively
recent (Dodd, 1932; Stanford Research Institute (SRI, 1963, quoted in Freeman, 1984,
p. 31). Comparatively, the combination of business to ethics can be traced back to the
Islamic Golden Age of Merchant Capitalism between the eighth and the thirteenth
centuries (Banaji, 2003). In fact value creation and business ethics received wide
attention in the Arabic Islamic business practices literature.
Value creation
The concept of profit, capital, and the accumulation of capital are cited in Arabic
sources between the ninth and fourteenth centuries. For instance; Shafi%
% (d. 820)
defines the function of partnership as the expansion of capital (nama
% al-mal)
% where
% refers to the capital not the money (Udovitch, 1970a). On the other hand, Kas
% an%
(d. 1191) distinguishes the creation of capital from its further expansion, arguing
The need for the creation of capital takes precedence over the need for its
augmentation (Udovitch, 1970b). In other words, Islamic business law favours wealth
creation over profit maximisation.
Business transactions in this era (Golden Age) were highly regularised. Udovitch
(1970a) asserts virtually all the features of partnership and commenda law are already
found fully developed in the earliest Hanafite legal compendium, Shayban%
% s Kitab
al-Asl 8th century. Islamic business practice knew five types of companies or
partnerships contracts[1] (An-Nabhani, 1997). Additionally, under prevailing laws of
partnership businesses can be dissolved at the desire of a single partner (An-Nabhani,
1997), thus consensus is important between partners, similar to UK partnership law
(Watson, 1807). The Islamic approach highlights the need for contracts in every
business transaction (Quran, 2:282), and considers the fulfilment of contracts as an
ethical requirement (Quran, 23:8). Further, Sharia stipulates transparency among
trading parties (Beekun and Badawi, 2005) and strictly prohibits bribery (Quran,
2:188) which will unfairly affect competition and the marketplace.
With respect to the firm itself, the separation of ownership and management
(Beekun, 1997) has been addressed in Arabic business law under Commenda
agreements (Udovitch, 1970b). As Sarakhs% (d 1090) states, The investors aim in

handing over the capital to him [the agent] is the achievement of profit (Udovitch,
1970b). Sarakhs% (d 1090) further emphasises the need for a contract that regulates
business between owner and managers (agency problem), he states that the owner of
capital may not find his way to profitable trading activity, and the person who can find
his way to such activity may not have the capital (Udovitch, 1970b). In addition Islam
forbids self-interest conflict, classifying this as Haram (forbidden), Do not devour one
anothers property by false and illegal means (Quran, 2:188).
Beyond the firm boundary, the Islamic concept of competition is based on cooperation and alliances (Ariff, 1405/1985). While competitive behaviour is encouraged
in Islam, it is an honest activity in the pursuit of excellence, good relations, betterment
of society and ultimately seeking the pleasure of God (Kahf, 2003). This appears to be
in contrast to the type of competition that can be observed within modern day LMEs.
Addressing the notion of capitalisation, financing in Islam is based on the concept of
sharing risk and reward where the responsibilities of ownership are divided
proportionately based on investment and valuable commodities (gold, silver) are the
mechanism of trade, rather than paper money (Islahi, 1988). In this regard, exploitation
without risk or fair effort is unacceptable in Islam. As such, Islam prohibits Riba
(usury; interest) in all transactions (Gerrard and Cunningham, 1997; Quran, 2:275) as
shareholders are able to trade other stakeholders money or borrowings on their
behalf and receive an income with no risk (exploitation). In this respect, Trade is like
usury, but God has permitted trade and forbidden usury (Quran 2:275). Usury or
ribbit (Hebrew) is also forbidden in Judaism and Christianity. Torah for example, states
Thou shalt not lend upon interest to thy brother: interest of money, interest of victuals,
and interest of anything that is lent upon interest (Davarim, 23:19). In 1311, Pope
Clement V abolished all secular legislation which allowed usury, whilst Pope Sixtus V
condemned the practice of charging interest as detestable to God and man, damned by
the sacred canons and contrary to Christian charity (Moehlman, 1934, p. 6). Usury
(interest) was also denounced by Plato and Aristotle (Barker, 1959).
Finally, sustainable value creation is also addressed in Islamic business as the
responsibility of business is to bring reward to all stakeholders (Al-Qaradawi, 1995;
Quran, 2:177, 92:18). However, with the growth of wealth comes additional
responsibility, as in Islam the individual will be held accountable for the wealth
they had and used. Therefore, value creation is driven by purpose, and that purpose is
derived from ethics.
Business ethics
Islam does not separate religious life from business life (Nicholas, 1994) Islam is a way
of life. The principles of business transaction in Islam are derived from Islamic canon
law (Sharia), which originates from the Quran (word of Allah), Sunnah or Hadith
meaning the sayings and practices of Prophet (P), consensus of scholars (Ijmaa)
and analogical deduction (Qiyaas[2])[3]. Sharia regulates every aspect of life, including
the way of generating profit and business ethics. Therefore, Islam goes beyond the
maximisation of profit for shareholders and stakeholders to that of serving God (Asad,
1993; Kasri, 2009; Quran, 23-60; Asami, 2005c; Al-Bukhari[4], No. 853).
In Abrahamic religions, the origins of humanity can be traced back to Adam
(Quran, 2:34-36; 7:19-22) who ate an apple from the forbidden tree (Quran, 20: 121-122).
This demonstrates that ethics are inherently linked to human behaviour, as the choice
to eat the apple was taken even though it had consequences. In Islam, the human race
is considered to be the trustee (Khalifah) of God on Earth, and human work (Amal) is

Spiritual capital




considered an act of God worship for which there is accountability in this life and the
hereafter i.e. life is a test (Quran, 67:2). This is why human ethical behaviour (khuluq
or Akhlaak[5]) is very important in Islam and in fact Prophet Mohammad (P) asserts I
was sent for no other reason, except to perfect the noble traits of character
(Al-Bukhari, No. 273) and the Quran states that In the messenger of Allah you have a
beautiful pattern of conduct (Quran, 33:21).
Justice and balance (Adil Qist), trust (Ammanah) and benevolence (Ihsan)
constitute pillars of Islamic business ethics (Beekun and Badawi, 2005). Justice and
balance refers to maintaining equilibrium while providing everyone and everything
their proper due; trust refers to man as trustee of God on earth (Quran, 18:30); and
benevolence[6] is linked to a higher stature of faith Iman and refers to excellence Itkan
in work Amal where one should work to the best of their ability with honest effort
(Azami, 2005b; Al-Bukhari, No. 1880). Similarly, Schwartz (2005) classifies Abrahamic
business values as: trustworthy, justice, respect, caring, responsibility and citizenship
while Buckley (2004) relates Abrahamic values to peace building which constitute
hospitality, repentance and ethical concern for others. Buckley (2004) explores ethics at
an individual level, whereas Schwartz (2005) and Beekun and Badawi (2005) analyse
business ethics at corporate business level. For this paper, Beekun and Badawis (2005)
Islamic perspective of Abrahamic values is adopted.
In view of the current capitalistic crisis (Ribera et al., 2011; Financial Times, 2012)
and call for responsible capitalism (Cameron, 2012), an ethically dominated value
creation-based framework in the form of spiritual capitalism is proposed as a solution.
What is spiritual capitalism?
Weber (2001) coined the term spiritual capitalism, initially linking it to business
practices from within the Christian (Calvinist) tradition and the ethics of pursuing
profit. Compared to Weber (2001), Smith (1759) offers a deeper understanding of human
morality as systems of approbation where the sentiment upon which justice or
approval is founded is most important. Further, Cornuel et al. (2010) assert personalism
is intimately linked to practical wisdom and Mallochs (2010) definition of spiritual
capital recognises humans as moral and spiritual beings. In this respect, an Islamic
perspective of personal virtues exists (Azami, 2005a, Al-Bukhari, No. 273; Quran,
33:21; Asad, 1993). Therefore, spiritual capitalism is defined as a framework, where
Abrahamic values underpin Islamic business ethics, which dominate economics
(Naqvi, 1981; Smith, 1759) and give purpose to value creation.
The Islamic perspective to business acknowledges that life is temporary. The
goals of Islam are not materialistic (Rice, 1999) but based on well-being, co-operation,
socio-economic justice and balance of spiritual and human needs (Chapra, 1992). While
the right to enjoy honestly earned wealth is granted, the motivation and use of wealth
becomes more critical to needs rather than wants (Siddiqi, 1981) as luxury and waste
are undesirable and redistribution of wealth has purpose.
Following this line of thinking, spiritual capitalism takes a stakeholder approach
(Beekun and Badawi, 2005) to business practice. Whereas Freeman et al. (2010)
recognises all stakeholders as primary and secondary, the Islamic perspective (Beekun
and Badawi, 2005) establishes multi-fiduciary duties to all stakeholders and introduces
a sub-layer in between primary and secondary. Claim is based on morality (Phillips,
2003) and seeks to protect the free market. Therefore in Spiritual Capitalism, even
when receiving reward or money, one needs to establish its authenticity and accept
responsibility of receipt. Further the three aspects of Donaldson and Prestons (1995)

model are incorporated. Spiritual Capitalism is descriptive of the corporation as certain

business is permitted Halal and harmful business is not allowed Haram; it is
instrumental in guiding value creation; and is normative in protecting stakeholders
rights and accountability in contracts.
In this regard, Spiritual Capitalism promotes business sustainability for all
stakeholders interests and discourages self-interest favouritism. As a result,
social-good guides the entrepreneur in decision making, with emphasis on earning
reward in the hereafter and seeking the pleasure of God. All these elements co-evolve
underpinned by Islamic business ethics (Beekun and Badawi, 2005) and align with
Smiths (1759) suggestion that the most useful parts of morality are ethics and
Critical investigation of Islamic systems
In this section a critical investigation of two Islamic nations, compared and contrasted
with two European and two Anglo-American nations follows. The propositions being
tested are:
P1. Liberalised national governance systems that are profit maximisation
motivated are most at risk of not maintaining sustainable growth.
P2. Liberalised national government systems that have high rates of business
misconduct are more exposed to cyclical corrections.
P3. Liberalised national government systems that have greater imbalances are
more at risk of cyclical corrections.
The different governance systems are benchmarked against Abrahamic values,
represented by standardised global indices. In this respect, Justice and Balance is
represented by general government gross debt (International Monetary Fund (IMF)
report) as the widest putative measure of debt, particularly as Islam is very strict on
debt. Trust is represented by corruption perceptions index (Transparency
International (TI), 2011) and Benevolence (excellence) is represented by the real
growth development product growth index (IMF report). This enables the LMEs to be
compared and contrasted with CMEs and Islamic countries economies (ICEs)
representative countries in testing of the propositions.
Small-sample comparatives
Small-sample comparisons have been sometimes dismissed as merely descriptive,
anecdotal, historical or journalistic, and therefore atheoretical (Lakatos, 1978). However,
the harshest critic of such studies would have to admit that they at least generate facts
or tentative hypothesis (Dion, 1998). These facts may seem to be atheoretical, however,
they are not in reality, as we cannot even observe facts until we have a conceptual
framework to help us make sense of what we perceive (Lakatos, 1978).
Further, Dion (1998) suggests that small-sample studies can be quite useful for
identifying or ruling out necessary conditions. Recognising that any method can be
applied poorly or well, hence this method is not a panacea. However, a competent
small-sample comparative study can be more useful than conclusions from large-scale
macro-comparisons that are inconsistent with their more solid understanding of issues
(Lakatos, 1978). Of course, we are cognisant that the obvious cost remains, that in

Spiritual capital



limiting the sample to three economic systems and six economies in this study, it is
impossible to draw inferences outside these counters. Therefore, any conclusions
drawn from our sample implicitly carrys the small print, this applies to these six
economies, relationships corresponding to other economic systems and economies in
the world are unknown!.


Selection of countries
The sample of selected countries for this study represents regimes with well-developed
financial markets within the three economic systems of LME, CME, ICE. The UK and
the USA have been selected to represent the most liberal form of AACG systems and
therefore LMEs (Hall and Soskice, 2001b). France and Germany have been selected to
represent CMEs as they retain social values (Hanke et al., 2007). These countries
are also established members of the G7 and thus leading promoters of LME-CME
The two Islamic countries chosen to represent ICEs are Turkey and Qatar. Turkey
dominates the DS100 top Muslim countries list (Todays Zaman, 2011), has private
sector companies and a large population (78,785,000 Central Intelligence Agency (CIA)
Factbook) while Qatar is the worlds fastest growing Muslim country (IMF, 2012). Both
countries differ in size, population and main wealth creating sectors[7], yet they lead
the Islamic countries economies with higher GDPs in 2010 (IMF, 2012). Turkey and
Qatar are progressive countries that offer a balance between east and west traditions
(Kabasakal and Bodur, 2002).
Testing of Abrahamic values
For the purpose of this paper, Beekun and Badawis (2005) definition is used. It is
important to qualify that balance and justice are considered as interrelated. The
Abrahamic values have been interpreted against global league tables and indexes for a
period of five years 2005-2010, to measure each element (Table I).
Results and discussion
The key performance indicators selected are engaged at global level for comparative
country analysis by global institutions including United Nations, World Bank and
International Monetary Fund. The CPI index (trust), ranks all countries by their
perceived levels of corruption based on a scale of 0-10. The real GDP index
(benevolence) reflects economic activity and GGGD index (justice and balance)
measures debt as a proportion of GDP. The limitations of GDP as an indicator of
wellbeing are noted (Martinez and Santacoloma, 2005; Fleurbaey, 2009) and therefore it
is specifically used as an economic indicator of debt in this paper.
In Figure 1, the Abrahamic value of trust is represented by corruption perception

Table I.
Abrahamic values


Measure (KPI)

Benevolence (excellence)
Balance and justice

Corruption perceptions index (CPI)

Real growth development product (GDP) growth index
General government gross debt (per cent of GDP) (GGDD)

Source: Compiled by the author

Table II shows the rank of each country by year.

Figure 1 illustrates that Germany, closely followed by Qatar, is the least corrupt
country but struggles to maintain its position (Table II). Turkey is identified as the
most corrupt country. Further, Table II distinguishes two groups: France, the UK and
the USA facing increasing corruption but Qatar, Turkey and Germany experiencing
decreasing corruption[8]. It appears that corruption is increasing in LMEs (confirming
P2) and decreasing in ICEs. Thus, LMEs have become more at risk through cyclical
correction. Finally, it is interesting to note that the impact of Americanisation on
France (Hancke, 2001) has resulted in increasing corruption.

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Germany, 7.9
Qatar, 7.7
UK, 7.6
USA, 7.1
France, 6.8






Turkey, 4.4


CPI in points

Benevolence (excellence)
In Figure 2, the Abrahamic value of benevolence (excellence) is represented by real
gross domestic product (GDP).

Note: Adapted or reprinted from Corruption Perceptions Index.

Copyright 2012 Transparency International: the global coalition
against corruption. Used with permission. For more information,
Source: Transparency International (TI, 2011). The data is only
indicative (not definite) as CPI is based on rankings of countries/
territories calculated using a changing set of source surveys


Figure 1.
Corruption perceptions
index (CPI) 2005-2010













Notes: Adapted or reprinted from Corruption Perceptions Index. Copyright 2012 Transparency
International: the global coalition against corruption. Used with permission. For more information,
Source: Transparency International (TI, 2011). The data are only indicative (not definite) as CPI is
based on rankings of countries/territories calculated using a changing set of source surveys

Table II.
CPI country rank



Figure 2 shows that ICEs have over-performed in comparison with LMEs and CMEs in
terms of real GDP growth (benevolence). In Table III, the change in GDP over the fiveyear period is represented as points (growth 7).
Table III shows that over the five-year period, Germany, Qatar and Turkey had
positive growth, while USA, UK and France had negative growth. The findings
confirm P1. The fact that Germany leads both GPD growth and CPI indices, is linked to
its ownership structure, which is dominated by banks blockholding large number of
shares in companies (Mallin, 2010). This further affirms P1 and P2 and it seems that
Germany has benefitted from maintaining traditional Christian values (Kersbergen,
1995; Lane, 2003).

Qatar, 16.6


Turkey, 8.9
Germany, 3.6
USA, 3
France, 1.4
UK, 1.4







Figure 2.
Real gross domestic
product (GDP) growth
index 2005-2010



GDP annual percent change

Justice and balance

In Figure 3, the Abrahamic value of justice and balance is represented by general
government gross debt (GGGD).
Figure 3, shows GGGD, which represents justice and balance within Abrahamic
values. The percentage of general government debt to GDP is higher in LMEs and
CMEs in contrast with ICEs. While, higher levels of borrowing enable increased
spending and investment, the associated risks imbalance debt to GDP ratio. This
confirms P3.

Source: Compiled from International Monetary Fund (2012)

Change in points 2005-2010

Table III.
Real GDP growth
change 2005-2010
in points

Source: Compiled from International Monetary Fund (IMF) data (2012)


GGGD percentage change


United states, 98.5


Germany, 83.2


France, 82.4
United kingdom,

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Turkey, 42.2
Qatar, 30.9







Source: Compiled from International Monetary Fund data (2012)

Discussion and recommendations

The results of this paper enhance the various contributions to the conduct of business
ethics, in the holistic religious context of Spiritual Capitalism.
Forsyth et al. (2008) EPT is further adapted to evaluate the ethical position of
countries. Idealism is equated with trust (CPI), while relativism is equated with
benevolence (GDP) and balance and justice (GGGD). The results illuminate that LMEs
are low on idealism (regression in CPI rank) and low on relativism (low GDP, high
GGGD). The LME governance systems are short-term profit orientated. In contrast,
ICEs are highly idealistic (CPI rank increase) and highly relativistic (high GDP, low
GGGD), resulting in long-term profit orientation and sustainable profit and growth
(QNV, 2030). These findings further confirm P1 and P2.
When Schumpeter (1934) argued that boom and bust cycles relate to creative
destruction, for him, profit maximisation was a long-term aim. Over time, the pace of
change has increased and what used to be long term has now become short term.
The impact of this has been that profit maximisation has also become short term.
In this respect, P1 is being confirmed. There is no long-term sustainability of profit.
Further, there is frustration with the financial establishment and an urged need for
responsible capitalism (Williams, 2011).
The consequence of this cyclical process was highlighted by Schumpeter, 1934, that
the creative destruction process has few winners and many losers. In modernity, this
could be translated as high unemployment and the European debt crisis (Krugman,
2011). From an ethical perspective this indicates scarcity of morality, as the self-interest
of few stakeholders has overtaken the interests of majority stakeholders. This further
confirms P2. Low morality is related to cyclical corrections.
The recent sub-prime mortgage crises which resulted in the GFC confirm P3.
The findings indicate that P1-P3 are valid. The learning from P1 is that in LMEs
the concept of profit maximisation needs to consider all stakeholders interests (Beekun
and Badawi, 2005). It is recommended that the concept of profit maximisation should
consider value creation, and longer term planning (UNDP Report, 2009).
The learning from P2 is that LMEs require better control mechanisms to prevent
misconduct. It is recommended that an ethical framework may offer LMEs a solution
that enables sustainable growth and reduced cyclical volatility.
The learning from P3 reveals that LMEs are prone to higher levels of debt which
cause imbalance and cyclical corrections. It is recommended that the introduction

Figure 3.
General government gross
debt (percent of GDP)



of a system of shared risks and rewards and limited levels of debt will reduce volatility
and cyclical corrections.
The learning from these tentative findings allows for reflection on and calls for
improvement of LME systems and governance that are currently in crisis (Knyght
et al., 2011). With this in mind, a holistic ethical framework based on Abrahamic values
informing Spiritual Capitalism is proposed.
An ethical framework based on Abrahamic values
The introduction of Abrahamic values Akhlaak should start at an individual
level to impact the whole system, as God will not change the condition of a
people until they change what is in themselves (Quran, 13-11). As McKelvey (1997)
relates firm to marketplace, the individual is thus part of society (Rice, 1999)
and the concept of unity (tawhid) links the individual to family, society,
environment and God (Asad, 1993) in an indivisible form. In this regard
The co-evolutionary dynamics (Lewin and Volberda, 2003) framework as
adapted below offers a holistic model to inject Abrahamic values at each level
within the LMEs structure to promote a free and fair Market (Sheikh Hosein, 2011)
(Figure 4).
Implications and limitations
In the twenty-first century, religious values are a cornerstone of the formative context
of many social groupings and give purpose to the founding ideals and principles
underlying many national states (Kakabadse et al., 2007). In this regard, the differences
in national formative contexts may often impact on the inter-relationship between
business strategy, environment and control system attributes, and strategic
management (Porter, 1990; Kouzmin and Korac-Kakabadse, 1997). Even if economic
agents themselves are agnostic, they act within specific cultural contexts (Hofstede
et al., 2010) and these contexts are never value free, but derived from the formative
context that is often emerging from a particular religious belief.
The idiosyncrasies of the formative context involves institutional arrangements,
historical and cultural values, ethnic and personal tastes, training, personal

Varieties of corporate goverance systems

Corporate goverance system (LMEs)

Figure 4.
The co-evolution
dynamics of corporate

Abrahamic values
balance and justice/trust/benevolence

Source: Compiled by the author

background cognitive frames and philos intensity which all shape our daily routines,
ideology, objectives and individual relational capacity (Unger, 1987; Pettigrew, 1992;
Kouzmin and Korac-Kakabadse, 1997) and in turn their artefacts and socials construct of
which organisation is an example. Hence management practitioners, students and critics
need to recognise that economic behaviour is never value free and that institution
of governance in markets reflects value preferences, which are deeply, embedded in the
formative context of the particular policy formation, social grouping, society or indeed
social phenomena.
This has been acknowledged by some institutional theorists (Williamson, 1975;
Hodgson, 1988; Eccleston, 1989; Hall and Soskice, 2001a). Hall and Soskice (2001a, b)
for example, argue that values-based institutional frameworks determine economic
outcomes in important ways. Hence, other models of capitalism employed around the
world offer lessons about the roles of business in society and the variety of ways
business activity can be organised. This is exemplified by the dynamic economy in
Germany, which has comparatively fewer publicly listed corporations (Frankfurt stock
exchange, 2012) and yet a higher market capitalisation (World Bank, 2012) than some
developing economies such as Romania (Bucharest Stock Exchange, 2012) and
Pakistan (Karachi Stock Exchange, 2012) which have an equal or higher number of
listed companies.
In this paper, illustrated by the six country studies, religion (in this case Islam)
might be an explicative factor in understanding institutional contexts of
economic behaviour and outcomes. This needs further comparative research.
In this respect, our proposed Abrahamic value-based approach to Spiritual
Capitalism, supported by our initial empirical exploration, is thus a first step
towards formulating hypotheses and propositions for further research in which we
want to engage.
Future research opportunities
Recognising that the representative sample size is small which implies tentative
results, a further study engaging a more extensive sample of national economies
is necessary in order to examine this papers findings. In this respect, further
consideration of the extent to which Abrahamic values are adopted will vary from one
country to the other. Moreover as Abrahamic values such trust, benevolence
(excellence) and balance and justice are thick (i.e. multi-dimensional) concepts that
require thick theory (i.e. involves many intertwined variables with effects that are
conditional on time and place), this calls for in-depth case studies within each of the
three economic systems.
Second, the effectiveness of global structures beyond the AACG level (such as
World Bank, United Nations, World Trade Organisation) may offer further insight into
addressing concerns highlighted by Maddison (2006) and Stiglitz (2010) into redistribution of wealth and fair competition.
In conclusion, despite continuing trends of globalisation and Friedmans (2007)
hypothesis, the world is not flat, this paper follows the thinking that cultural
differences are pervasive and explicative of economic outcomes, thus ethics dominate
economics (Naqvi, 1981; Ribera et al., 2011). In this regard, the cultural and institutional
context in which business takes place and within which managers act in remains
undervalued in most analysis and business courses. As such, there is a need for the
influence of religion on management praxis and theory to be better understood
(Kakabadse and Steane, 2010).

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1. Al-Inan (equal partnership), Al-Abdan (skills partnership), Al-Mudharaba (one partners
with funds and the other with silks), Al-Wujooh (similar to Al-Mudharaba, where the one
who partners by fund is highly reputable person) and Al-Mufawadha (is the combination of
the above).
2. Qiyaas; similar to the case law in the Anglo American system, the Qiyaas or analogical
deduction is derivation of a rule concerning in new situation based on analogy with similar
situation dealt with previously in Quran or Hadith (Beekun and Badawi, 2005).
3. The Ijmaa and Qiyaas derived from Quran and Hadith (Beekun and Badawi, 2005).
4. In Al-Bukhari, No. 853 the prophet claims that All of you are shepherds and each of you is
responsible for his flock.
5. Khuluq refers to inner character.
6. Benevolence (Ihsan) refers to kindness (Umar-ud-din, 1991). Ihsan is derived from h-s-n
meaning suitable, proper or fitting (Siddiqui, 1997). In addition, Ihsan refers to excellence
commensurate with effort (Quran, 3:136, 99:7, 48:19). This paper focuses on excellence
(business terminology).
7. Turkey is a industrial and services-oriented economy, whereas Qatar relies on oil and gas
industry (CIA Factbook).
8. CPI Ranking might be affected by the number of countries covered by the index, which can
vary each year.

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About the authors
Ouarda Dsouli is an Associate Lecturer within the Accounting and Finance division in the
University of Northampton, at the same time she is a PhD candidate and an active researcher in
the field of corporate governance. She combines an excellent international professional
experience within multinational business in Western and Arabic countries and high expertise in
the field of business administration for small to medium enterprises. Her areas of research
interest are capitalistic system, leadership, Islamic business studies, small to medium business

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governance issues, ethics and the impact of capitalism on business and society. Ouarda Dsouli is
the corresponding author and can be contacted at:
Nadeem Khan is a PhD research student and active researcher at the Business School,
University of Northampton, in the field of strategy and strategic behaviour of the firm. He has gained
professional experience in multinational and SME environments in the UK and internationally prior
to running his own business. His areas of research interest include capitalistic systems, corporate
governance, industrial management, Innovation, Islamic business ethics and philosophy.
Nada K. Kakabadse is Professor in Management and Business Research, University of
Northampton, Business School and Visiting Professor at US, Australian, French, Kazakhstani and
Chinese universities. She has co-authored 19 books and has published over 150 scholarly articles.

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