The following question and answer by Sheikh Yusuf Talal DeLorenzo attendees of the Dow Jones University Courses on Islamic Investement.
Question:: It has been stressed a number of times the that "the Muslim investor will be morally bound to inform management that s/he cannot approve of such transactions." How should a Muslim investor structure a letter to satisfy such a criteria andwhat kind of items and "arguments" should he put forward to the management/investorrelations of a company so that the letter satisfies the Islamic requirement and isalso effective?
Answer: You may want to begin such a letter by addressing it to the company?s CEO (Chief Executive Officer) and then introducing yourself as a shareholder and practicing Muslim whose religious principles dictate that you invest your in accordance with Shari`ahguidelines. Then you may want to mention that the Islamic investment sector, while arelatively new phenomenon, represents an important and growing market. In order to backup your claim, you might then mention how Muslim investment capital is estimated to totalbetween $80 and $150 billion, how Islamic mutual funds are beginning to proliferate, andhow Dow Jones and Company launched an index to track the performance of stocks foundacceptable to Islamic teachings. This should suffice as an introduction, but you maywant to add more, or to these points or others in greater detail. Thereafter, you maywant to say something about Islam?s prohibition of riba, and how this equates to intereston loans. It would then be appropriate to explain something about the financial screensdeveloped by Muslim scholars. Then, if the company?s debt/asset ratio is nearing thelimits, or if its non-operating interest income percentage is high, you may want totell the CEO that 1. these practices (i.e., of borrowing on interest, and derivingincome from interest-bearing instruments) are repugnant to Islam, and 2. that thecompany is coming close to the limits of disqualification, and 3. that the companyshould find other means of financing and investing cash reserves. Then you might wantto close the letter by thanking the CEO for giving his/her attention to this issue.Please remember that a polite letter is an effective letter, and that in writing thisletter you are acting as an ambassador for all Muslim investors.
A final note: If you know that the company you have invested in has a poor recordwith regard to labor, or the third world, or the environment, or on any other issueof moral, ethical, or religious concern, then you may want to voice your opinions onthese matters as well.