Understanding Money in Islam #

Original Question:  Part of my compensation package includes the company’s stocks. The company’s core business is sharia compliant but it’s finances makes the company’s stocks non compliant (e.g. over leveraged). Can I accept the stocks as compensation?

The following matters need to be considered to assess whether accepting the stock compensation is permissible.

1. Availability of accepting compensation packages other than the restricted stock or restricted stock units.
2. Assumption that the company’s stock is Shariah non-compliant.

Suppose there are shariah-compliant compensation package alternatives other than restricted stock or restricted stock units of Shariah non-compliant companies. In that case, it is advisable to opt for the former, as the Prophet (PBUH) mentioned: “those who avoid doubtful matters clear themselves in regard to their religion and their honour, but those who fall into doubtful matters [eventually] fall into that which is unlawful,”

However, if there are no alternatives available and it is required by the company that the employee accept the stock compensation as per the employee contract, the employee may still proceed with it with the following considerations:

• The employee is entitled to only the initial and original capital investment amount.
• Any profits and dividends should be purified and given to charity.
• The (1) initial and original capital investment amount and (2) profit and dividend amount should be calculated from the vest date price and not the grant date price.
• Losses of one stock shall not be recovered from the gains of another.

Example (A): If stock X is vested at $50 and sold for $60, the employee is entitled to only $50. The $10 profit should be given to charity.

Example (B): If stock X1 is vested at $50 and sold for $40 ($10 loss), and stock X2 is vested at $20 and sold for $40 ($20 profit), the employee is entitled to only $40 from stock X1 and $20 from stock X2. The $20 profit from stock X2 should be given to charity, as the losses from stock X1 should not be recovered from the profit on stock X2.

Allah knows best.