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A Critique of Social Contracts for Business
Abstract
This article evaluates the social contract theorizing of Professors Thomas Donaldson, Thomas Dunfee and Michael Keeley. This theorizing is tested with G.E. Moore’s concept of moral authority, with moral psychology, and by managerial utility. Both strengths and weaknesses are found in the theories and the author concludes that while there is great potential, much work in theory development remains.
... Although ISCT is undoubtedly the most promising concept in international business ethics (on which even the critics agree), it has also been heavily criticized on a number of accounts (Boatright, 2000Boatright, , 2007 Conry, 1995; Douglas, 2000; Heugens et al., 2004; Mayer and Cava, 1995; Rowan, 2001; Soule, 2002; Van Oosterhout et al., 2007). These authors in particular discuss assumptions about human nature in ISCT (Conry, 1995), the principle of consent as a basis of this concept (Keeley, 1995; Van Buren, 2001), a lack of practical guidance for businesses (Hartman et al., 2003; Phillips and Johnson-Cramer, 2006), the empirical methods used to develop guidelines for international business ethics (Husted, 1999), and the internal morality of contracting 218 Dirk Ulrich Gilbert and Michael Behnam (Van Oosterhout et al., 2006). ...
... Although ISCT is undoubtedly the most promising concept in international business ethics (on which even the critics agree), it has also been heavily criticized on a number of accounts (Boatright, 2000Boatright, , 2007 Conry, 1995; Douglas, 2000; Heugens et al., 2004; Mayer and Cava, 1995; Rowan, 2001; Soule, 2002; Van Oosterhout et al., 2007). These authors in particular discuss assumptions about human nature in ISCT (Conry, 1995), the principle of consent as a basis of this concept (Keeley, 1995; Van Buren, 2001), a lack of practical guidance for businesses (Hartman et al., 2003; Phillips and Johnson-Cramer, 2006), the empirical methods used to develop guidelines for international business ethics (Husted, 1999), and the internal morality of contracting 218 Dirk Ulrich Gilbert and Michael Behnam (Van Oosterhout et al., 2006). Although all these articles point out meaningful deficits of ISCT, the business ethics community agrees that the most significant shortcoming of Donaldson and Dunfee's approach lies in its insufficient justification of substantive hypernorms (Boatright, 2000; Douglas, 2000; Gilbert and Behnam, 2006; Van Oosterhout et al., 2006). ...
We critically assess integrative social contracts theory (ISCT) and show that the concept particularly lacks of moral justification
of substantive hypernorms. By drawing on Habermasian philosophy, in particular discourse ethics and its recent application in the theory of deliberative democracy, we further advance ISCT and show that social contracting in business ethics requires a well-justified procedural rather
than a substantive focus for managing stakeholder relations. We also replace the monological concept of hypothetical thought
experiments in ISCT by a concept of practical discourse to better govern business activities on the macro-level of organizational
actors such as firms, governments, and NGOs.
... Donaldson & Dunfee's approach has been criticized by fellow business ethicists (e.g., Husted, 1999;Conry, 1995;Douglas, 2000), and we do not agree with their assertion that "international business ethics seldom come in black and white" (1999, p. 233). On the contrary, we observe a relatively high and increasing degree of convergence around hypernorms, driven by international business itself as well as the much deeper knowledge and rapid communication of ideas and events in the modern world. ...
In this article we first review the development of the concept of global business citizenship and show how the libertarian political philosophy of free-market capitalism must give way to a communitarian view in order for the voluntaristic, local notion of "corporate citizenship" to take root. We then distinguish the concept of global business citizenship from "corporate citizenship" by showing how the former concept requires a transition from communitarian thinking to a position of universal human rights. In addition, we link global business citizenship to global business strategy and to three analytical levels of ethical norms. Finally, we trace a process whereby global businesses can implement fundamental norms and learn to accommodate to legitimate cultural differences.
... For another social contract based on Hobbes' s state of nature, seeHorvath (1995). 2 For a detailed description of the traditional social contract methodology, seeConry (1995) andHeugens et al. (2006). For a detailed description of Rawls's method of justifying and constructing his social contract, seeDaniels (1996). ...
This article begins with a detailed analysis of how the choice situation of a social contract for international business ethics can be constructed and justified. A choice situation is developed by analyzing conceptions of the multinational firm and the domain of international business. The result is a hypothetical negotiation between two fictional characters, J. Duncan Grey and Elizabeth Redd, who respectively represent the interests of businesses and communities seeking to engage in international trade. The negotiators agree on ethical principles governing wages, the environment, and compliance social and cultural norms. These principles are then shown to rest in wide reflective equilibrium with considered moral judgments on international business ethics, which are drawn from international agreements, such as the UN Declaration on Human Rights, and voluntary business initiatives, such as the Global Sullivan Principles and the UN Global Compact.
... Along with Thomas Dunfee, Donaldson elaborated and refined this heuristic in a series of articles (e.g., 1991, 1995a, b) that culminated in their 1999 book, Ties that Bind. The book has earned well-deserved praise for its success at framing ethical quandaries in terms that managers can understand and appreciate (Conroy, 1995). Others (Gauthier, 1985;Keeley, 1988) have also applied their own versions of voluntary social contracting to the organizational and business environments. ...
A generation ago, the field of business ethics largely abandoned analyzing the broader issue of social justice to focus upon
more micro concerns. Donaldson applied the social contract tradition of Locke and Rawls to the ethics of management decision-making,
and with Dunfee, has advanced this project ever since. Current events suggest that if the field is to remain relevant it needs
to return to examining social and economic fairness, and␣Rawl’s approach to social contracting suggests a way to start. First,
however, the field needs to discard the weaker and counterproductive aspects of its Lockean legacy: Locke’s hostility to government
activism and his indifference with regard to outcomes for the bulk of society. Donaldson’s and Dunfee’s social contracting
approach is not suited to, nor was it designed to, analyze or resolve broad issues of social and economic justice. Their postulated
network of communities upon which they rely is problematic in a number of ways, and while they take the legal and political
status quo into account, their method does not deal with the historical reality that, as the economic and social environment
changes, promoting greater justice requires new and sometimes coercive government interventions. Rawls’s work, however, does
acknowledge the historically demonstrable necessity of using the power of government to help to achieve desirable social outcomes.
While he rejected Mill’s methodology, Rawls was inspired by the earlier philosopher’s concerns for social justice at a time
of major economic change. The field would do well to follow the example of both men in this respect.
For more than three decades, Integrative Social Contracts Theory (ISCT) has been lauded as a business ethics theory particularly well suited to the international arena, especially because of its alleged ability to reconcile respect for cultural idiosyncrasies and normative teeth. However, this theory has also faced various objections, many of which its authors have responded to with varying degrees of satisfaction. As a contribution to this debate, this article provides a unifying rationale for many of those objections by exploring their rooting in the Separation thesis. It submits that this fact negatively impacts the theory with three major challenges, namely: significant limitations to correctly frame moral issues and situations; poor identification of hypernorms; and insufficient theoretical grounding of hypernorms. This critique highlights the need for the entanglement of the normative and the empirical in business ethics theorizing.
Meine ursprüngliche Absicht war es eigentlich, eine Arbeit zum Thema "Marketing und Ethik" zu schreiben und in diesem Zusammenhang auch den Beitrag bestehender unternehmensethischer Konzepte zur Handhabung moralischer Probleme im Marketing zu untersuchen. Bei der Auseinandersetzung mit den zahlreichen, mittler weile praktisch unüberschaubar gewordenen Publikationen zum Themenbereich Wirt schafts- und Unternehmensethik wurde allerdings sehr bald deutlich, daß die Diskussion sehr heterogen und unübersichtlich verläuft und es keine Unternehmens ethik-Konzepte gibt, die instrumentell zur Lösung moralischer Probleme im Marketing herangezogen werden könnten. Die Beiträge gehen von ganz unterschiedlichen theoretischen oder praktischen Forschungsperspektiven aus - philosophische Argu mentationen, unternehmenspraktische Detailprobleme und mehr oder weniger konkrete Handlungsempfehlungen stehen in der Diskussion oft beziehungslos neben einander. Gerade diese Unübersichtlichkeit und Vielfalt an Problemstellungen habe ich nun als Ansatzpunkt für meine Habilitationsschrift gewählt. Ein wesentliches Ziel der Arbeit besteht darin, die komplexen Problemfelder und unterschiedlichen Frage stellungen zu strukturieren und in einen systematischen Zusammenhang zu bringen. Auf der Grundlage einer kritischen Würdigung theoretisch fundierter Konzepte der Unternehmensethik habe ich versucht, die unternehmensethische Problemsituation zu klären und konzeptionelle und pragmatische Ansatzpunkte für eine Weiterentwicklung des Forschungsbereiches herauszuarbeiten. Dabei geht die Argumentation explizit von einer Unternehmensperspektive aus und bleibt in bezug auf eine gesellschafts theoretische Rekonstruktion offen. Die vorliegende Arbeit wurde im Oktober 1997 abgeschlossen und von der Fakultät für Wirtschaftswissenschaften und Informatik der Universität Klagenfurt im April 1998 als Habilitationsschrift für "Betriebswirtschaftslehre" angenommen. Für die Veröffentlichung wurden noch einige Korrekturen und Kürzungen am Manuskript vorgenommen.
Of the many developments in business ethics that Thomas Donaldson has helped pioneer, one is the application of social contract theory to address questions about the responsibilities of business actors. In
Corporations and Morality
, Donaldson develops one of the most sustained and comprehensive accounts that aims to justify the existence of for-profit corporations and to specify and ground their responsibilities. In order to further our understanding about the purpose and responsibilities of productive organizations, and as a contribution to the scholarship on Donaldson’s thought, this paper gathers together the critical responses to Donaldson’s account along with Donaldson’s replies to his critics. The paper argues that we would do well to continue engaging with Donaldson’s account because of its distinctive and challenging conception of the purpose and responsibilities of productive organizations, but that many of the insights to be gained come from reframing the role played by social contract theory.
This article challenges Becker's objectivist account of integrity in organizations. Although existing approaches to workplace integrity are flawed by conceptual and methodological inconsistencies, an objectivist analysis is unable to resolve these problems and raises new concerns. We develop three lines of argument. First, we critique objectivism as a philosophical system of questionable legitimacy and coherence. Second, we argue that the fundamental objectivist principle of rational egoism is inferior to existing theories of business ethics as a means of defining moral behavior in organizations. Third, we contend that the objectivist account of integrity understates the role of social power as a determinant of organizational choices and outcomes.
Work on stakeholder theory has proceeded on a variety of fronts; as Donaldson and Preston (1995) have noted, such work can be parsed into descriptive, instrumental, and normative research streams. In a normative vein, Phillips (1997) has made an argument for a principle of fairness as a means of identifying and adjudicating among stakeholders. In this essay, I propose that a reconstructed principle of fairness can be combined with the idea of consent as outlined in integrative social contract theory (ISCT) to bring about a more normative stakeholder theory that also has ramifications for corporate governance.
Business is increasingly concerned to reconcile investor driven pressure to perform with state driven pressure to conform (to a cascade of new regulation). Ethics generally favors the latter at the expense of the former. The ethical frameworks developed in the last few years differ from their classical predecessors, however. Integrative Social Contract Theory begins with the business contract and moves out from there to the wider society. Care theory begins with the relationship between two individual persons and moves out from there. Both theories are skeptical of the Universalist claims of classical ethical and religious frameworks and both claim to be
user friendly. This paper compares and contrasts the two theories and hopes to show how the ethical lacunae in ISCT can be fixed by Care Theory. How a business would operate under the sway of Care Theory is described. Fears that Care Theory cannot be applied to business without
weakening competitive strength are addressed. The paper is offered as a step towards merging ISCT and Care Theory to evolve an ethical framework for business. It would be a framework that engages fully with business realities, especially competitive realities, but that is directly and clearly guided by classical ethical principles.
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Advertisers often use computers to create fantastic images. Generally, these are perfectly harmless images that are used for comic or dramatic effect. Sometimes, however, they are problematic human images that I call computer-generated images of perfection. Advertisers create these images by using computer technology to remove unwanted traits from models or to generate entire human bodies. They are images that portray ideal human beauty, bodies, or looks. In this paper, I argue that the use of such images is unethical. I begin by explaining the common objections against advertising and by demonstrating how critics might argue that those objections apply to computer-generated images of perfection. Along the way, I demonstrate an ethically significant difference between computer-generated images of perfection and the images in ordinary ads. I argue that although critics might use this fact to apply the common objections to the use of computer-generated images of perfection, the objections fail. Finally, I argue that despite surviving the common objections, the use of computer-generated images of perfection is subject to an ethical objection that is based on aesthetic considerations. Advertisers are ethically obligated to avoid certain aesthetic results that are produced by computer-generated images of perfection.
This manuscript discusses the utility of Integrative Social Contracts Theory in describing the social conduct of corporations in the area of drug testing. As a hybrid of classical contractarian theory and descriptive organizational theory, Integrative Social Contracts Theory (ISCT) occupies conceptual space at the intersection of normative and empirical approaches to analysis of business phenomena. Therefore, ISCT does not lend itself well to empirical testing in the positivist tradition. However, the expectations derived from ISCT can be examined through empirical testing and observation to determine if ISCT is useful in describing corporate conduct. This study asks not if ISCT is scientifically correct, but rather is it analytically insightful. The results suggest that ISCT provides a valuable framework for identifying areas of disagreement and convergence on important social and moral issues in business and society. However, the principle of implied consent through failure to exit may not be as strong as originally thought.
Integrative social contracts theory (ISCT) uses empirical methods to develop guidelines for international business ethics. This article criticizes ISCT in terms of the way people actually think about contracts and agreements around the globe. Differences in orientations to communications context, moral reasoning, and institutional and structural conditions make the identification of authentic norms, hypernorms, and relevant communities problematic. The difficulties of the empirical methods suggest recourse to more traditional theoretical approaches for the identification of hypernorms as well as a stronger test for the compatibility of authentic norms with hypernorms.
This paper carries forward the conceptual clarification of normative theories of business ethics ably begun by Hasnas in the January 1998 issue of BEQ. This paper proposes a normatively neutral framework for discussing and assessing such normative theories. Every normative theory needs to address these seven issues: it needs to specify a moral principle that identifies (1) recommended values and (2) the grounds for accepting those values. It also must specify (3) a decision principle that business people who accept the theory can use. It must determine (4) who the normative theory applies to and (5) whose interests need to be considered. It must also outline (6) in what contexts it applies, and (7) what legal and regulatory structures it assumes. Once clarified, this paper applies the framework to the normative versions of stockholder theory, stakeholder theory, and ISCT. It is concluded that ISCT is the most promising normative theory currently under discussion, but that there are some major issues that ISCT has not dealt with yet.
Business ethics serves the important social function of integrating business and society, by promoting the legitimacy of business operations, through critical reflection. Although the social function of business ethics is implicit in leading business ethics foundation theories, it has never been presented in a systematic way. This article sets out to fill this theoretical lacuna, and to explore the theoretical potentials of a functional approach to business ethics. Key concepts from Parsonian functionalistic sociology are applied to establish the social integrative function of business ethics. This produces a theoretical framework for business ethics that provides strong theoretical arguments against often-heard criticisms of business ethics. Many of these criticisms are ideological in nature, in that they systematically play down the importance of integrative functions in the business-society relationship, on the grounds of unrealistic assumptions about the performance of economic and bureaucratic institutions. However, business ethics itself can also become ideological, if it forgets that the conditions for the application of ethics to business are not always ideal as well.
Downsizing has become a significant public issue that has not yet been significantly studied by business ethicists. It is proposed that reasonable social and psychological contracts bound the moral free space of managers contemplating downsizing; the degree of constraint is also dependent on the organization's resource munificence. A framework for considering the extent of managerial moral free space and implications thereof for managerial practice are offered.
The absorption of the cultural sphere into the commercial sphere signals a fundamental change in human relationships with troubling consequences for the future of society. From the beginning of civilization to now, culture has always preceded markets. People create communities, construct elaborate codes of social conduct, reproduce shared meanings and values, and build social trust in the form of social capital Only when social trust and social exchange are well developed do communities engage in commerce and trade…. When the commercial sphere begins to devour the cultural sphere … it threatens to destroy the very social foundations that give rise to commercial relations.†
There is a growing need to study the dynamic interdependence between business and society as a reciprocal relationship which
ought to be supported and not constrained by refocusing on ethical values. Instead of describing how economic institutions
impact society, the new view attempts to analyze how stakeholders‘ views and concerns affect business corporations‘ strategy
assessment and formation processes. These processes can be enhanced by a renewed awareness of the moral issues at stake. The
case describes the Norwegian aluminium industry‘s collective effort to gain not only deeper scientific insight into their
impact on the environment but also increase their understanding of their stakeholders‘ concerns. As the analysis shows the
process was definitely strengthened through what the author calls the principle of participative dialogue with stakeholders.
Information technology in the form of the Internet and its commercial offspring (referred to in this article collectively as the Net) has received much attention as a vehicle to increase political participation. In this article, we explore the potential of the Net, a vast, loosely coupled system of electronic forums, for facilitating and hindering democratic participation. In so doing, we identify five assumptions that undergird the claim that the Net will enhance democratic participation and suggest that increased democratic participation rests on three fundamental characteristics: access, voice, and dialogue. In order for this network of electronic forums to facilitate democratic participation, educational, economic, and cultural barriers to access, voice, and dialogue must be overcome. The final part of this article raises additional challenges to realizing democracy via the Net.
Este estudo trata da convergência ideológica entre as doutrinas gerenciais [management] e a ética empresarial [business ethics]. Utiliza a análise de textos atuais, e apoia-se em textos seminais, para identificar na categoria da gerência um eixo significativo da ética empresarial. Localiza a convergência ideológica na questão da harmonização do conflito entre capital e trabalho. A partir daí, analisa a instrumentação das empresas para lidarem com a ética: a burocratização da ética, os códigos de ética, e as estratégias de controle e supervisão postas em operação. Conclui que o movimento da ética empresarial resultou no desenvolvimento de algumas ferramentas de gestão que amplificam o potencial de controle social nas organizações empresariais.
This study explores a world of pretence and glamour, uncovering and explaining the causes of workplace problems and dubious practices lying behind the cheerful facade of commercial hospitality. Such an exploration necessarily extends into unethical, unsafe and unfair practices, eight of which are selected for detailed analysis. These are: working in smoke, sexual harassment, constructive dismissal, staffing levels, training, illegal alcohol service, poor food hygiene, and theft. Some of these problems or practices are deliberately destructive (and are therefore considered as ethical issues), some can cause harm (so are health and safety issues), and some concern the way staff are managed (and are therefore labour issues). The persistent focus however, is the avoidable harm and wrongdoing that can occur where groups of people are controlled by a few. Several themes are explored, in particular the causes of poor ethical standards and management's influence on these standards. The hypotheses address the behaviour of hospitality workers generally, but managers in particular, as they are ultimately responsible for workplace conduct, and are therefore best placed to make change. Ethical standards are investigated by measuring the actual and perceived incidence, tolerance and management acceptance of problems according to individuals' demographic attributes. The combination of quantitative and qualitative data enables a thorough and scientific analysis of practices in a domain well known for persistent social problems, with the specific intention of identifying causes, and therefore solutions. The following hypotheses are examined: H1) Unethical behaviour is common in hospitality; H2) Management is aware of unethical behaviour in hospitality; H3) Management actively or passively supports unethical behaviour in hospitality, and H4) Management's support is a cause of unethical behaviour. Although unethical practices are found to be common, many managers are unaware of this, while some are significant causes of sexual harassment, constructive dismissals and poor standards of training. Observations include the influence of codes of ethics on undesirable behaviours such as sexual harassment, the influence of social consensus on workplace behaviour, and the profound unhappiness of many hospitality employees. The causes of workplace problems and unethical behaviour are found to be low pay and poor training. A principle of reciprocated loyalty is proposed, based on the relationships identified between employer commitment and employee behaviour, and informed by mechanism theory, which states that for every action there is an equal and opposite reaction. This is the first major analysis of workplace issues in New Zealand hospitality, and offers solutions to problems such as theft, sexual harassment and understaffing, that significantly undermine the industry's credibility and potential for success.
This essay seeks to give a contractarian foundation to the concept of Corporate Social Responsibility (CSR), meant as an extended model of corporate governance of the firm. It focuses on justification according to the contractarian point of view (leaving compliance and implementation problems to a related article, [Sacconi 2004b, forthcoming in the Journal of Business Ethics]). It begins by providing a definition of CSR as an extended model of corporate governance, based on the fiduciary duties owed to all the firm’s stakeholders. Then, by establishing the basic context of incompleteness of contracts and abuse of authority, it analyses how the extended view of corporate governance arises directly from criticism of the contemporary neo-institutional economic theory of the firm. Thereafter, an application of the theory of bargaining games is used to deduce the structure of a multi-stakeholder firm, on the basis of the idea of a constitutional contract, which satisfies basic requirements of impartial justification and accordance with intuitions of social justice. This is a sequential model of constitutional bargaining, whereby a constitution is first chosen, and then a post-constitutional coalition game is played. On the basis of the unique solution given to each step in the bargaining model, the quest for a prescriptive theory of governance and strategic management is accomplished, so that I am able to define an objective-function for the firm consistent with the idea of CSR. Finally, a contractarian potential explanation for the emergence of the multi-fiduciary firm is provided. Copyright Springer Science+Business Media, Inc. 2006
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