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©2019 Business Ethics Quarterly (2019). ISSN 1052-150X
The Enduring Potential of Justied
University of Applied Sciences for Management & Communication, Vienna
Gastón de los Reyes, Jr.
George Washington University
N. Craig Smith
ABSTRACT: The profound inuence of Thomas Donaldson and Thomas Dunfee’s
integrative social contracts theory (ISCT) on the eld of business ethics has been
challenged by Andreas Scherer and Guido Palazzo’s Habermasian approach, which
has achieved prominence of late with articles that expressly question the defensibility of
ISCT’s hypernorms. This article builds on recent efforts by Donaldson and Scherer
to bridge their accounts by providing discursive foundations to the hypernorms at
the heart of the ISCT framework. Extending prior literature, we propose an ISCT*
framework designed to retain ISCT’s practical virtue of managerial guidance while
answering the demands of Scherer and Palazzo’s discursive account. By subscribing
to a suitable portfolio of discursively justied hypernorms, we argue, companies
unlock the valuable moral guidance of ISCT*, which says to treat these hypernorms
as unequivocal outer bounds to the pursuit of business and as a starting point to
tailor local norms through discursive stakeholder engagement.
KEY WORDS: discourse ethics, human rights, hypernorms, integrative social
contracts theory, legitimacy, multi-stakeholder initiatives
Integrative social contracts theory’s (ISCT) (Donaldson & Dunfee, 1994, 1999,
2002) long standing as one of the leading approaches to business ethics—in the
scholarly literature, as well as in teaching and practice—no doubt stems in part from
its formulation as an applied framework, designed to help managers in the eld
reason thoughtfully and effectively about the ethical conundrums of global business
(Gilbert & Behnam, 2009; van Oosterhout & Heugens, 2009). It is this virtue of ISCT
that motivates us in this article to examine the potential to propose a variation on the
framework that accommodates and responds to the Habermas-inspired discursive
account of moral legitimacy (DAML) that has also become popular and inuential
in recent years. The importance of this examination and updating of ISCT is
reected in DAML’s increasing inuence in the scholarly debate on business ethics.
The urgency comes from the fact that DAML calls into question the viability of
ISCT’s underlying account of moral legitimacy.
Business Ethics Quarterly
ISCT’s distinction as an applied framework is evidenced and enhanced by
the diverse areas of practice that scholars have sought to elucidate through the
application of the framework, including the marketing of bank products (Reisel &
Sama, 2004), the implementation of global citizenship (Logsdon & Wood, 2002),
intercultural management problems (Bucar, Glas, & Hisrich, 2003), corporate
governance (McCarthy & Puffer, 2008), gender discrimination (Mayer & Cava,
1995), sweatshop labor standards (Hartman, Shaw, & Stevenson, 2003), computer
ethics (Conger & Loch, 2001), and bribery (Dunfee, Smith, & Ross, 1999).
The capacity of ISCT to speak meaningfully to managers across the domains and
cultures of business results from the philosophical foundations that undergird the
applied framework theoretically. Building from the “same kind of thought experiment
that was used to justify the traditional social contract arguments of Locke, Rousseau,
Hobbes, and Rawls” (Donaldson & Dunfee, 2002: 1855), Thomas Donaldson and
Thomas Dunfee’s ISCT appeals to hypothetical social contracts as the basis for
the moral legitimacy of decision making in global business (1999, 2002, 2003).
Its structured approach to business ethics has been applied by scholars to provide
actionable insights in numerous business contexts (see Gilbert & Behnam, 2009:
218–19). Donaldson and Dunfee offer an account of moral legitimacy based on
the plausibility of the (hypothetical) agreement of their contractors. As we explain,
the framework either yields an obligation or moral free space. Moral legitimacy
is earned by meeting one’s obligations.
The focal concept in this article, and arguably the cornerstone of ISCT as a theory,
is the “hypernorm,” a term coined by Donaldson and Dunfee (1999: 98) to represent
“metanorms” that “sit in judgment of lower order norms” (i.e., microsocial norms)
(Donaldson, 2017: 138). The most crucial feature of hypernorms as a category in
ISCT is that their status as metanorms is deemed to be cross-cultural. This cosmopol-
itan credential is foundational both to the theory of ISCT—its hypothetical contract
account of moral legitimacy—and to the practical guidance ISCT is designed
to provide managers through its framework. A key concern of this article is exam-
ining and bolstering ISCT’s cosmopolitan claim to legitimacy.
Our focus on hypernorms builds on the considerable debate spawned by the con-
cept in the business ethics literature (Boatright, 2000; Douglas, 2000; Dunfee, 2006;
Gilbert & Behnam, 2009; Phillips & Johnson-Cramer, 2006; Scherer, 2015; Shaw,
2000; van Oosterhout, Heugens, & Kaptein, 2006; Windsor, 2016). Arguably, the most
stinging critique of ISCT has been disseminated by Andreas Scherer and Guido
Palazzo in their far-reaching collaboration (Palazzo & Scherer, 2006; Scherer &
Palazzo, 2007, 2008, 2011; Scherer, Palazzo, & Baumann, 2006; Scherer, Palazzo, &
Matten, 2014; Scherer, Rasche, Palazzo, & Spicer, 2016). Their approach has
become widely popular in the business ethics and management literatures more
generally (as reected in over four thousand citations for these contributions)
and draws inspiration from the thought of Jürgen Habermas and his idea of
deliberative democracy (Habermas, 1996, 1998). In contrast to the hypothetical
contracts providing ISCT’s theoretical roots, the Habermasian camp in business
ethics locates the moral legitimacy of managerial decision making in actual
discursive engagement among and between companies and the parties impacted
The Enduring Potential of Justified Hypernorms
by business activity. Their distinct conceptual foundations—one premised in hypo-
thetical reasoning and the other in discursive engagement—seem to make each of
these leading approaches to business ethics oil to the other’s water, and, with few
exceptions (Gilbert & Behnam, 2009), business ethics scholarship that draws upon
one does not draw upon the other.
The reason why is plain: the DAML that Scherer and Palazzo advance (see, espe-
cially, 2007) is presented by them as necessarily antithetical to ISCT. To embrace
a discursive account of moral legitimacy, they assert, is to reject ISCT. And at the
heart of that critique—which serves to sharpen Scherer and Palazzo’s case for
DAML—is the concept and function within ISCT of hypernorms. The fatal aw
with Donaldson and Dunfee’s ISCT, argue Scherer and Palazzo (2007: 1102) in
what we term the hypernorm challenge, is the justication of hypernorms through
a “monological concept of reasoning.” The monological reasoning they assert to be
faulty—and the challenge to hypernorms—is the hypothetical contract worked out
by Donaldson and Dunfee in the form of a thought experiment to reach substantive
moral conclusions, i.e., that hypernorms are deserving of their alleged status as
cross-cultural metanorms (1994, 1999, 2002, 2003). Scherer and Palazzo argue that
neither philosophers nor managers can “justify business obligations or determine
ethically sound action by the monological (i.e., non-dialogical) development or
application of principles, golden rules, hypernorms, or virtues” (Scherer & Palazzo,
2007: 1103). Consequently, they rule out any a priori justication of hypernorms
(Scherer & Palazzo, 2007: 1102; cf. 1103, 1108), concluding that “because of its
monological concept of reasoning” (2007: 1102), ISCT cannot provide legitimate
moral guidance to managers (cf. van Oosterhout et al., 2006).
The gulf between ISCT and the Habermasian, discursive approach to business
ethics—and the potential for reconciliation and mutual alignment—was recently
broached by Scherer and Donaldson themselves, in connection with this journal’s
special issue (vol. 25, no. 4, 2015) titled “Normative Business Ethics in a Global
Economy: New Directions on Donaldsonian Themes.” Scherer’s (2015) contribution
to the festschrift, “Can hypernorms be justied?,” restates the concern with monolog-
ical reasoning (“Donaldson and Dunfee did not sufciently explore the signicance
of the procedure by which (hyper-)norms can be identied and justied”) but then
immediately pivots towards reconciliation: “Therefore, I suggest building on the
insights of discourse ethics and analyzing the argumentative process by which the
validity of norms, even the validity of hypernorms, can be checked” (2015: 507,
emphasis added). In reply, Donaldson acknowledges the force of the hypernorm
challenge: “Tom Dunfee and I neglected discursive requirements [and] said little about
stakeholder communication and participation in the process of public reasoning”
(2017: 137). More importantly, Donaldson then commences to address the limitation:
“The best procedures for isolating principles in business should reect something
like an ideal speech situation and include employee voice, stakeholder dialogue,
discursive democracy, and public conversation” (2017: 137).
We believe the dialogue between Scherer and Donaldson is fruitful and sets
the stage for probing, and potentially, reconciling the inconsistency that Scherer
and Palazzo assert exists between DAML and ISCT. Instead of directing energies to
Business Ethics Quarterly
adjudicating the normative force of the case for DAML in business ethics as others
have done (see Hussain & Moriarty, 2016) or the case for ISCT on its own terms
(see Scherer, 2015, and many others), we set our sights on formulating a revised
version of ISCT—ISCT*—designed to withstand the force of the critique from
DAML so as to build upon its intercontextual practicability.
Thus, our purpose in this article is to lay groundwork for an ISCT* that is useful to
managers yet does not depend upon a monological concept of reasoning for justication.
We proceed as follows. In section 1, we review ISCT’s hypothetical contract founda-
tions and the function of hypernorms in its managerial framework for making morally
legitimate business decisions in a globalized business world. In section 2, we summarize
Scherer and Palazzo’s critique of ISCT as reected in the hypernorm challenge presented
by DAML. To pursue the constructive project, we take direction from Scherer (2015)
and Donaldson’s (2017) apparent openness to the potential for an account of hypernorms
that includes discursive input legitimacy conditions (Mena & Palazzo, 2012). More
concretely, in section 3, we draw from Gilbert and Behnam’s (2009) signicant effort
to build upon and respond to concerns raised by earlier critiques of ISCT by proposing
to dene processual requirements that serve as necessary conditions for the moral
legitimacy of hypernorms. We view Gilbert and Behnam’s proposal as giving rise to
the concept of “justied hypernorms,” i.e., hypernorms that have garnered justication
(moral legitimation under DAML) via their discursive genesis.
In section 4, we critically assess the limitations of Gilbert and Behnam’s proposal
given ISCT’s requirements of universal scope and bindingness for hypernorms. This
examination leads us to ISCT*, an amended version of the framework that looks
not to the hypernorms characterized by Donaldson and Dunfee, but to the portfolio
of (arguably) justied hypernorms to which a manager’s company has actually sub-
scribed. In section 5, we put ISCT* to the test and nd that ISCT*, when coupled
with a suitable hypernorm portfolio, sets an outer bound (or negative sanction) on
business conduct and norms (e.g., dening human rights commitments of the com-
pany) that is defensible under DAML. In section 6, we argue that ISCT* faces a fun-
damental limitation not acknowledged by Gilbert and Behnam: justied hypernorms
cannot, under the demands of DAML, endorse the legitimacy of conduct or lower
order norms, one of the basic functions and promises of Donaldson and Dunfee’s
hypernorms. Nevertheless, we go on to argue that hypernorm portfolios can play a
defensible and valuable role as a starting point for managers to engage discursively
with stakeholders to tailor norms to local contexts. In section 7, we summarize key
questions companies have to ask to develop suitable hypernorm portfolios to get the
most value from ISCT*. In concluding, we summarize the ndings and limitations
of our analysis and sketch implications for managerial practice and further research.
1. ISCT AS A GUIDE TO THE MORALLY LEGITIMATE NORMS THAT
Fundamentally, ISCT provides a “norm-taking framework,” assisting the manager in the
exercise of picking and choosing from among externally presented microsocial norms
those that are deemed legitimate and binding (de los Reyes, Scholz, & Smith, 2017).
The Enduring Potential of Justified Hypernorms
This positions the framework to answer norm-taking questions: “By whose standards
should business be judged?” and “Do corporations have any obligation to protect the
human rights of those affected by their decisions?” (Donaldson & Dunfee, 1999: vii). It
is its pioneering effort to help managers distinguish legitimate and binding norms from
norms that do not bind, for want of legitimacy, that gives ISCT its strength and deserved
recognition as a major contribution to business ethics thought (see Boatright, 2000;
Brenkert, 2009; Gilbert & Behnam, 2009; Stark, 2015; van Oosterhout et al., 2006).
The theoretical motivation for ISCT comes from the conception of a “macro-
social contract” that encompasses the global community of people doing business
(1999: 37). What do we share as people pursuing our economic interests? Donaldson
and Dunfee anchor their account around two core ideas:
(1) People “bring with them the underlying sense of right and wrong
with which they have grown up. They bring with them these settled
understandings of deep moral values, which we will call ‘hypernorms’”
(Donaldson & Dunfee, 1999: 27).1
(2) People want to have the liberty to join different economic communities,
meaning that “ethical norms must be contoured to the rules of the spe-
cic economic practices and the notions of fairness of the participants”
(Donaldson & Dunfee, 1999: 32).
The thought experiment involved in working out the terms of the macrosocial
contract entered into, based on these commitments, has several important features.
It is intended to be universal, an imagined contractual engagement by and among
“the citizens of all nations” (thus, universal in its hypothetical macrocontractual
genesis) that binds all (thus, universal in its binding reach) in respect of the full
spectrum of business activities around the globe (thus, universal in scope; viz.,
a metanorm) (Donaldson & Dunfee, 1999: 218).
The ISCT framework that Donaldson and Dunfee develop as the embodiment of
the macrosocial contract is designed to give practical guidance that is responsive to
both its anchoring ideas. On the one hand, Donaldson and Dunfee “deny that one can
know in advance what the correct rules of business ethics are for a specic system
without having detailed information about the system and its participants” (1999: 32).
That is why the imagined macrosocial contractors “must rely—at least partially—upon
community-specic microsocial contracts for establishing contextually appropriate rules
of economic ethics” (Donaldson & Dunfee, 1999: 37). This commitment to liberty
in joining economic communities that are to varying degrees self-constituting leads
Donaldson and Dunfee to conclude that the contractors will, rst, agree that “local
economic communities possess moral free space in which they may generate ethical
norms for their members through microsocial contracts” (1999: 41) and “as a means
of enabling the satisfaction of personal precepts and economic efciency” (1999: 38).
On the other hand, the anchoring of the macrosocial contract around “settled under-
standings of deep moral values” provides the second basic term of the ISCT framework:
the moral free space to do business legitimately through microsocial contracts (or
otherwise) is bounded and subject to hypernorms that apply everywhere as the lowest
common denominator standard-bearer of moral legitimacy. Hypernorms set a moral
Business Ethics Quarterly
minimum on acceptable conduct and, by implication, on the legitimacy of microsocial
norms (Donaldson & Dunfee, 1999: 44).
To provide a tangible managerial framework, ISCT goes beyond a prioritization of
commitments to provide the desired norm-taking guidance. For microsocial norms,
the question, as framed by Donaldson and Dunfee, is determining which among the
sea of local norms (i.e., microsocial norms) that confronts managers (see Bicchieri,
2016) are authentic, meaning that they reect the commitments of a microsocial
community and, therefore, qualify as potentially binding. Under Donaldson and
Dunfee’s hypothetical contracts conception, the touchstone is hypothetical consent.
The rst part of consent is the brute fact that a majority of the participants in the
economic community heed the norm (see Donaldson and Dunfee, 1994: 39). That
alone is too lenient a criterion for the macrosocial contractors, according to Donaldson
and Dunfee. There is the risk that popular norms could exist without warranting an
inference of authenticity. A community’s governance could be dictatorial and impose
norms that are followed only under oppression. Countering this risk, Donaldson and
Dunfee reason that the macrosocial contractors would require that as a condition
of authenticity (and for norms to be able to bind), members of communities must
enjoy a right to voice. And to bind even those members of a community who dis-
approve of the norms, Donaldson and Dunfee also hold that to be authentic norms
must emerge from communities that allow members the right of exit. Leaving aside
complications arising from conicts among microsocial norms (Donaldson &
Dunfee, 1999: 175–212), the satisfaction of these two conditions—rights to (1) voice
and (2) exit—render prevalent norms authentic and, therefore, putatively binding.
How are managers to identify the hypernorms that set the outer bounds of global
business? Donaldson and Dunfee provide heuristics for inquiring after hypernorms,
rather than a settled list, opening them up to criticism from many for the vagueness
of their answer. For example: “We would expect [hypernorms] to be reected
in a convergence of religious, philosophical, and cultural beliefs, and, indeed, such
convergence is a handy clue to use in attempting to specify hypernorms” (1994: 265).
In their book, they write that there should at least be “a reasonable hope that we
should discern such a convergence” (1999: 44).
In sum, authentic microsocial norms are morally legitimate and binding if, and
only if, they do not conict with hypernorms. The biconditional “if and only if”
means, rst, that authentic norms are morally legitimate and binding only if they are
compatible with hypernorms. Crossing the bound of hypernorms—i.e., following a
microsocial norm that clashes with hypernorms—exposes managerial action to moral
illegitimacy. The second implication of the biconditional is that authentic norms
are morally legitimate if compatible with hypernorms. We return to this afrmative
endorsement of moral legitimacy in section 6.
2. SCHERER AND PALAZZO’S DAML AND CRITIQUE
OF ISCT—THE HYPERNORM CHALLENGE
In their highly inuential 2007 article, and as further developed in a series of other
well received articles (e.g., Palazzo & Scherer, 2006; Scherer & Palazzo, 2007,
The Enduring Potential of Justified Hypernorms
2008, 2011), Scherer and Palazzo look to Habermasian theory to provide a dif-
ferent account of moral legitimacy in business ethics. Given recent theorizing
(e.g., Hussain & Moriarty, 2016), it is important to emphasize the extent to which
Scherer and Palazzo understand there to be a meaningful divide between the early
Habermas (or Habermas1) (Habermas, 1984, 1985, 1990, 1993) and the later
Habermas (or Habermas2) (e.g., 1996). Habermas1 emphasizes ideal discourse
dened to satisfy a series of “conditions includ[ing] freedom of access, participa-
tion with equal rights, truthfulness of the participants, and ‘absence of coercion’”
(Scherer & Palazzo, 2007: 1104). On this view, the moral legitimacy of any norm
that emerges from ideal discourse stems, not in a purported correspondence with
objective moral truth, but in the “consensus of all experts and affected people”
(2007: 1105). Habermas2, in contrast, emphasizes the concept of deliberative
democracy. Scherer and Palazzo argue that the deliberative engagement of
corporations with multiple stakeholders in multi-stakeholder initiatives (MSIs)
serves to legitimize corporations in their role as political actors.
Scherer and Palazzo choose to build from deliberative democracy (Habermas2),
not because they doubt the capacity of ideal discourse to ground moral legitimacy
(see Hussain & Moriarty, 2016), but rather because ideal discourse “provid[es] a
more utopian than realistic orientation for corporate behavior” (Scherer & Palazzo,
2007: 1105). The key difference between the early and the later Habermas on this
view is the willingness under the latter to relax the strictures of the ideal speech
situation and to allow, and instead call for, “small steps of constant improvement
and transformation of real democratic processes and institutions” (2007: 1107).
Seen thus, consensus is not absolutely essential so long as the discursive process
yields a rational basis for disagreeing about the moral remainder (see Hursthouse,
1995) that keeps the conversation going.
In characterizing DAML, Scherer and Palazzo aim to set forth a conception of
moral legitimacy that can be applied to business, as we nd it today operating across
the “post-national constellation” (Scherer & Palazzo, 2008). The hallmark of their
DAML is anchoring moral legitimacy on the processual inputs to social norm-making
processes. Specically, “the legitimacy of a political decision rests on the discursive
quality of the decision-making process” (Scherer & Palazzo, 2007: 1107). It is the
requirement to practice deliberative democracy, therefore, that we take to be denitive
of DAML’s conception of corporate legitimacy. Scherer and Palazzo position moral
legitimacy not as a past tense, check-the-box compliance model (i.e., the company
enjoys moral legitimacy because managers fullled their obligations), but as a pres-
ent tense and dynamic discourse-based conception: “[f]or a corporation to deal with
changing societal demands in a reasonable way, it must replace implicit compliance
with assumed societal norms and expectations with an explicit participation in public
processes of political will formation” (Scherer & Palazzo, 2007: 1108; cf. Scherer &
Palazzo, 2011). We capture this way of distinguishing ISCT’s conception of moral
legitimacy from DAML’s by referring to their respective modalities (see Table 1).
The underlying oil-and-water mismatch between Donaldson and Dunfee’s con-
ception of hypernorms (D&D’s hypernorms) and DAML is therefore simply stated:
“The difculties lie in the presupposition that the members of a particular community
Business Ethics Quarterly
have agreed to the terms of a social contract” (Scherer & Palazzo, 2007: 1102; see
Dworkin, 1973). As a matter of the framework’s infrastructural logic, the plausibility
of ISCT for macrosocial contractors depends upon the existence of identiable and
universally agreeable metanorms that transcend cultural and national boundaries
(i.e., D&D’s hypernorms). Otherwise, why would macrosocial contractors choose
D&D’s hypernorms to serve as the legitimacy-bestowing touchstones that draw a
universal line dividing morally binding and morally prohibited microsocial norms
(outside of which managers enjoy moral free space)? To undercut D&D’s hyper-
norms’ claim to moral legitimacy, therefore, is also to undercut the moral legitimacy
of ISCT itself. And this is what Scherer and Palazzo purport to do. To them, D&D’s
hypernorms, based as they are on the supposed existence of “convergen[t] religious,
cultural, and philosophical beliefs” (Donaldson & Dunfee, 1999: 59), provide at
best “the ‘hypothesis,’ ‘assumption,’ and ‘presumption’ of the theorist” (2007: 1102,
emphasis in the original). Scherer and Palazzo elaborate:
Any metanorm must be considered as a suggestion of the theorist, and one must wait to
see whether these metanorms can be considered justied—that is, that they are acceptable to
all concerned. This, however, can be tested only in a discursive process with the people
involved and cannot be veried in advance on the theorist’s desk (2007: 1102).
This is exactly where the wedge between DAML and Donaldson and Dunfee’s
ISCT is driven: ISCT’s macrosocial contractors were “unwilling to go so far as to
mandate the existence of such a process [of stakeholder discourse] as a condition”
for moral legitimacy, whether in generating microsocial norms or discerning valid
hypernorms (2003: 119).
So long as one aspires to answer the demands of DAML, D&D’s hypernorms do
not have the conceptualization required for justication—the people bound by these
norms never actually jointly endorsed an authoritative rendering of the lines drawn—
and this destabilizes ISCT’s infrastructure. If D&D’s hypernorms lack the justication
needed under DAML, that means they cannot serve the function ISCT assigns them:
distinguishing legitimate and binding authentic norms from microsocial norms that are
morally prohibited, whether or not authentic. It is along this fault line that Donaldson
(2017: 137–38) acknowledges the potential to bolster ISCT’s legitimacy.
Table 1: ISCT and DAML—Logic, Mechanism, and Modality
ISCT DAML ISCT*
Logic Hypothetical contract Deliberative democracy Deliberative democracy / public
Mechanism Touchstones include
hypernorms and authenticity
of microsocial norms
Fidelity to public contractual
commitments and ongoing
openness to norm-making via
Modality Static, “check the box safe
Dynamic, an activity
of open engagement,
Dynamic, outer bounds guidance,
and poised to engage
The Enduring Potential of Justified Hypernorms
3. DISCURSIVELY JUSTIFIED HYPERNORMS—AN ATTEMPT TO
OVERCOME THE HYPERNORM CHALLENGE
We begin our constructive exercise with Gilbert and Behnam’s (2009) intriguing
and potentially fruitful proposal to address the hypernorm challenge and avoid
the limitations of monological reasoning, anticipating the recent suggestions offered
by Scherer (2015) and Donaldson (2017) who posit that hypernorms can be justied
via Habermasian discursive processes. In contrast with other scholars who have
suggested abandoning ISCT altogether (e.g., van Oosterhout et al., 2006), Gilbert
and Behnam seek, precisely as we do, to address the hypernorm challenge so as to
preserve and build upon the “potential of ISCT in producing action guiding norms
for managers” (2009: 216).
Gilbert and Behnam’s strategy for realizing this promise is to extend the category
of procedural hypernorms—which, in Donaldson and Dunfee’s taxonomy of hyper-
norms, provide the source of the exit and voice requirements for the authenticity
of microsocial norms (Donaldson & Dunfee, 1999: 54)—to reach hypernorms.
In doing so, they appeal to principles of input legitimacy derived from Habermas’s
discourse ethics (see, generally, Mena & Palazzo, 2012), paying special attention, as
do Scherer and Palazzo, to the concept of deliberative democracy (Habermas, 1996,
1998, 2001, 2006; cf. Gilbert & Behnam, 2009: 216, 225). The procedural legitimacy
of hypernorms, they propose, comes from representative multi-stakeholder forums
that constitute argument-based and, to the extent possible, power-free discourse
where the relevant issues can be discussed. Habermas (1996) recognizes that these
conditions for ideal speech situations are idealistic; i.e., difcult, if not impossible,
to realize in real-life discourse. Nevertheless, in Gilbert and Behnam’s reading of
DAML, “this does not in principle preclude the possibility that these assumptions
can usefully inform the conduct of dialogues” (2009: 222–23).
The basic requirement for Gilbert and Behnam, therefore, is the premise that
“those being affected by a norm must be able to participate in a real argumentation
regarding its validity” (2009: 216).2 We refer to this as the “input legitimacy condition,”
where “input legitimacy” refers to a norm’s “rule credibility” by virtue of its proces-
sual history—who talked to whom, when, where, and how (Mena & Palazzo, 2012).
Their insight at the juncture of ISCT and the discourse tradition is thus to posit that
real-world discursive processes can (and should), in theory, provide a justication
of hypernorms consistent with DAML (Donaldson & Dunfee, 2009: 216). Gilbert
and Behnam’s suggestion can be summarized as follows: First, in keeping with
the hypernorm challenge and earlier critical commentary, they identify the major
shortcoming of ISCT to be its monological account of hypernorms. Second, they
propose that if hypernorms are derived from Habermasian discursive processes and
meet the input legitimacy condition, they may be justied. Third, they seek to maintain
the mechanism of ISCT (Table 1), namely its decision rule binding managers to live
up to the requirements of (1) hypernorms in everything they do, and (2) authentic
microsocial norms insofar as they are consistent with hypernorms—the key dif-
ference for Gilbert and Behnam being that the hypernorms in question are justied
Business Ethics Quarterly
For many reasons already indicated, not least Scherer’s (2015) and Donaldson’s
(2017) endorsement of the strategy, we agree that Gilbert and Behnam have identied in
hypernorms the proper site for a corrective intervention into ISCT, given the challenge
posed by DAML. However, the project that Gilbert and Behnam started is far from
complete. We continue next with a critical assessment of their proposal insomuch as
it assumes that justied hypernorms can readily swap into ISCT without structural
repercussions. This is simply not the case. Thus, we now analyze why and propose
important conceptual adjustments that are required to achieve a workable ISCT*.
4. ARRIVING AT JUSTIFIED HYPERNORMS
WITH UNIVERSAL SCOPE AND DEFENSIBLE BINDINGNESS
To test the robustness of Gilbert and Behnam’s proposal to justify hypernorms
discursively in this and the next section (5), our method is to check it against the
account of ISCT’s distinctive features as presented above. In this section, we focus
on the two universality conditions of D&D’s hypernorms: (1) universality in scope
(applies to all kinds of business activities), and (2) universal bindingness (applies to
all business actors). Our objective and contribution in this section is to evaluate and
extend, as necessary, Gilbert and Behnam’s proposal on these dimensions to arrive
at an ISCT* we can trial. We critically assess universality of scope in section 4.1
and make an amendment that leads us to introduce ISO 26000 as a candidate port-
folio of arguably justied hypernorms in 4.2. In 4.3, we examine the question of
universal bindingness, which requires a further adjustment to the operationalization
of the framework.
4.1 The Scope of Justied Hypernorms
To be a metanorm means that hypernorms have the property of universality
in scope—enjoying priority as higher order norms in all contexts: “to evaluate
lower-order norms” as “norms by which all others must be judged” (Donaldson &
Dunfee, 1999: 44; Donaldson, 2017). Hypernorms are metanorms whose form grants
them universal scope; i.e., they are “universal principles” (1999: 49) that speak and
apply to human activity and needs globally and across business contexts generally.
Gilbert and Behnam do not identify this dimension of universality in D&D’s
hypernorms, and we take the opportunity to stress its importance by showing why the
exemplar they use to model discursively justied hypernorms, the Forest Stewardship
Council (FSC) (2009: 225), fails to meet the requisite criterion.
What the FSC aptly models—and Gilbert and Behnam rightly highlight to elucidate
the nature of justied hypernorms—is that the FSC provides a forum “where cor-
porations and NGOs meet and develop sets of principles and criteria for sustainable
forest management” (Gilbert & Behnam, 2009: 225; cf. Forest Stewardship Council,
2014; Scherer and Palazzo, 2007). However, the FSC has not yielded cosmopolitan,
all-purpose principles for business, but rather industry-specic norms that are not at
all universal in scope. The FSC’s area of inuence is limited to a specic industry
(forestry). Take Principle 3 of the FSC as an example: “The Organization shall identify
and uphold indigenous peoples’ legal and customary rights of ownership, use and
The Enduring Potential of Justified Hypernorms
management of land, territories and resources affected by management activities”
(FSC 2014, Principle 3). Although this principle might, to some extent, be function-
ally transferable to other industries (e.g., Brazil nut planters), it was intentionally
designed by, and speaks to, the forestry industry only. Only forest industry partic-
ipants subscribed to the process that yielded its norms.
This undercuts the standing of FSC norms as metanorms since few of its principles
speak to issues relevant across the universe of business practice. FSC Principle 3,
for example, provides no guidance to technology companies involved in capturing
and selling user data. In contrast, “human rights” by their intrinsic universality—
they apply to all humans in any context—have practical relevance for the business
practices of companies in the tech and in every other sector.
This is not simply an arguably technical problem of form under ISCT (viz. metanorm),
but goes to the heart of DAML’s requirements. Do the FSC principles actually enjoy
the input legitimacy required of a justied hypernorm? Gilbert and Behnam look to
FSC as a model because they assume its norms were developed with a legitimate array
of voices from the forestry industry and those impacted by it. It is not clear, however,
that this assumption holds if its principles are put to the service of metanorms trumping
norms of other industries, such as high tech and higher education.
We address this oversight by stipulating expressly that a putative justied hyper-
norm should display universality of scope in its form and express reach—and still
arguably meet the input legitimacy condition.
In our effort to construct an ISCT*, we face, at the threshold, the empirical
question of whether there are examples of portfolios (sets) of universal principles
that arguably do, or could, meet the input legitimacy condition. We see no a priori
reason to assume or conclude that the category of justied hypernorms that meets
these requirements is a null set. To the contrary, in order to advance a plausible
ISCT* we continue in the next section by arguing that ISO 26000 presents a strong
case for a portfolio of arguably justied hypernorms that t the scope requirement.3
4.2 ISO 26000 as a Portfolio of Arguably Justied Hypernorms
ISO 26000 was launched in 2010 after ve years of negotiations between scores
of stakeholders that included representatives from government, NGOs, industry,
consumer groups, and labor organizations around the globe (ISO, 2017a). This
multi-stakeholder initiative was developed against the background of ongoing glo-
balization processes that are characterized, on the one hand, by nation states facing
challenges to their regulatory power (Scherer & Palazzo, 2008) and, on the other,
by corporations and other institutional actors increasing their reach and inuence.
ISO 26000, initiated by the International Organization for Standardization (ISO) to
address the social responsibility of organizations generally, was developed between
2005 and 2010 in an elaborate multi-stakeholder process that included meetings
in eight working group plenary sessions, with additional committee meetings
and supplemental digital consultations (ISO, 2010; Hahn & Weidtmann, 2016).
The guidelines adopted in 2010, ISO 26000 (ISO, 2010), are meant to encour-
age “every organization … to become more socially responsible by using this
International Standard,” aiming to offer “ways to integrate socially responsible
Business Ethics Quarterly
behavior into the organization.” It provides voluntary guidance on the scope of
social responsibility, with best-practice examples and various strategies for the
implementation of responsible management practices in various kinds of organiza-
tions (Hahn & Weidtmann, 2016: 91; cf. Hahn, 2012a, 2012b). ISO, for instance,
contains a concrete declaration of commitment to universal human rights (ISO,
2010: §6.3: 23) such as those set forth in the International Bill of Human Rights,
and asks companies to comply with these rights (ISO, 2010: §4.8: 13; §6.3: 23) and
provides concrete guidance on how to deal with third parties, e.g., “an organization
should not provide goods or services to an entity that uses them to carry out human
rights abuses” (ISO, 2010: §4.8; §6.3). ISO 26000 is recognized in this literature as
a strong representative of a multi-stakeholder discursive approach designed to set
forth global guidelines for each and every company globally willing to sign up or
otherwise adhere, without regard, to industry (Hahn & Weidtmann, 2016).
Relative to the limitations we identied in respect of the FSC principles, the
scope of ISO 26000 is clearly beyond the connes of any one specic industry:
“[it] provides guidance to all types of organizations, regardless of their size or
location” (ISO, 2017b). As such, the scope of ISO 26000 norms can be applied by
members of all industries to the range of their activities. Thus, the problem of scope
we identied above could, in theory, be solved by industry neutral and universalist
approaches such as ISO 26000; provided they make a case for meeting Habermasian
standards of multi-stakeholder discourse (i.e., meet the input legitimacy condition).
The roots of ISO 26000 are promising for its status under DAML. The process
giving rise to these universalist metanorms involved discourse that targeted business
generally and globally with stakeholders across industries, countries, and interest
groups (input legitimacy). Scholars have also observed that the ISO took care to
reduce bargaining power asymmetries among stakeholder-participants negotiating
the norms (Hahn, 2012a; 2012b). Adopting a Habermasian perspective consistent
with DAML, Hahn and Weidtmann (2016) conclude that the process giving rise
to ISO 26000 “is characterized by a relatively high level of normative legitimacy
stemming in particular from its multi-organizational, multi-stakeholder approach
involving experts from different regions, organizational settings, and interest groups”
(2016: 117). And Castka and Balzarova (2008: 303) argue that the extensive multi-
stakeholder discourse leading to the development of ISO 26000 has resulted in “the
most legitimate CSR ‘document’ currently available.”
As such, ISO 26000 might qualify as a portfolio of justied hypernorms that
display universality of scope and make a strong case for legitimacy with their cor-
respondingly universal roots. Therefore, we refer to the ISO 26000 as an arguably
justied portfolio of hypernorms.
4.3 The Question of Universal Binding Reach
With our proposed denitional amendment to preserve the logic of ISCT (justied
hypernorms must have universal scope and correspondingly universal roots), we now
proceed to examine the other dimension of universality: universally binding reach.
We also retain our example of an arguably justied portfolio of hypernorms (ISO 26000)
to give the theory traction. We will demonstrate that justied hypernorms—even
The Enduring Potential of Justified Hypernorms
if they display universal scope and correspondingly universal roots—cannot offer
the universal bindingness promised under ISCT in a way that satises DAML.
The lack of universal bindingness will not be fatal for an ISCT*, but it will require
a substantial modication of the framework’s operationalization.
Central to Donaldson and Dunfee’s objective with the ISCT thought experiment
is grounding inferences about being bound to comply with “core human values”
(Donaldson, 1996), anywhere, anytime, in any industry. Everyone should respect
human rights—whatever they are—and that should be a moral minimum every-
where. Does ISO 26000 (or any other conceivable portfolio of arguably justied
hypernorms) enjoy such binding reach? It seems to us obvious that managers can,
at least in some cases, reasonably question whether the specic social responsibility
agreements drafted into the ISO guidelines are binding upon them, absent the express
consent of the regulated party (typically their employer). And looking ahead to the
perspective of stakeholders and the question we tackle in section 6, we can easily
imagine stakeholder groups questioning whether the requirements in ISO 26000 are
stringent enough in this or that specic context.
On what grounds, then, would the managers of companies that had nothing to do
with ISO 26000 be instructed by a moral framework to follow its requirements? Note
that ISO 26000 is broad enough to get into controversial areas such as responsible
political involvement and sustainable resource use. Absent a theory of hypothetical
consent, there is no self-evident basis to hold a company that neither partici-
pated in the development process for ISO 26000, nor has since signed up for it
(i.e., consented), morally illegitimate for a failure to fulll its expressly speci-
ed norms—notwithstanding ISO 26000’s satisfaction of the input legitimacy
condition. ISCT would reach the same conclusion if treating ISO 26000 as a
microsocial contract (exit and voice are required for norms to bind), just as the
FSC’s certication standards formally apply only to companies that choose to
participate in the scheme. Perhaps ISO 26000 sets a very compelling standard,
and perhaps that standard would meet the criteria set by Donaldson and Dunfee’s
hypernorms. To be clear, we are in no way saying that by refusing to sign up
for ISO 26000 a company can breach its standards with moral impunity under
DAML. Rather, the bindingness of the relevant standard in such a case would
not depend upon the input legitimacy of ISO 26000 (including the lack of partic-
ipation of the target company in the deliberations that gave rise to ISO 26000).
That brings us back to the hypernorm challenge.
Donaldson and Dunfee did not face this bindingness problem because they
had a different conception of hypernorms in mind. For them, since hypernorms
are universally binding by agreement of the hypothetical macrosocial contractors,
hypernorms are supposed to bind everyone, everywhere by force of the thought
experiment (1999: 27–28; 2003: 116–17; see Smith, 2001). It is this presumed feature
of hypernorms that underwrites ISCT’s claim to limit everyone’s moral free space
and, most relevant in our discussion, establishes hypernorms as second-order norms
against which to test (everyone’s) microsocial norms (i.e., lower order norms whose
authenticity hinges on exit and voice). If Donaldson and Dunfee’s hypernorms are
fully replaced in the framework and substituted only with (historically contingent)
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justied hypernorms, who is bound by those justied hypernorms? And why?
The solution we propose to this conundrum is simple and effective: recognize
(in line with ISCT’s account of authentic norms) the extra-strength bind that
results from voluntary subscription to a hypernorm portfolio that spells out the
commitments publicly for all to see (which is not to deny the existence or force
in fact of unwritten yet deep-seated hypernorms). Accordingly, we settle upon
the following statement of ISCT*: managing according to a master portfolio
of justied hypernorms (universal in scope, arguably satisfying the input legit-
imacy condition) that set self-imposed and publicly announced bounds on local
(microsocial) norms and business activity generally.
In the following two sections, we road-test ISCT* to examine its potential to fulll
each of the two functions of hypernorms within the ISCT framework: setting outer
bounds (negative prohibition), and afrmatively sanctioning local norms and activity.
5. ISCT* AND THE ENDURING POTENTIAL OF JUSTIFIED
HYPERNORMS: OUTER BOUNDS
The purpose of this section is to examine whether justied hypernorms can fulll
the outer bounds function in ISCT* (as just stated) in a manner that is defensible
under DAML. We conclude that it can.
By its design, the ISCT* we have presented in this article shines as a screening
device that negatively excludes microsocial norms and business practices of ques-
tionable legitimacy. ISCT is designed around this function, which makes ISCT* that
much easier for managers to apply when their companies have expressly subscribed
to applicable justied hypernorms that are spelled out. Justied hypernorms can be
read off the page, with the plain professional obligation to do so once the company
undertakes a voluntary public commitment to a portfolio of justied hypernorms
(e.g., ISO 26000). There is no need for guesswork and intuitions about convergent
traditions, religious norms, shared values, and the like. These company-level commit-
ments, we now argue, can provide legitimate guidance to managers in the negative—
through the microsocial norms and business decisions that the company’s “hypernorm
portfolio” would reject, assuming a suitable hypernorm portfolio (see section 7).
To develop intuitions about the boundary-setting function of justied hypernorms,
we take a real case from the nancial services industry with alternative counterfac-
tuals. According to a 2013 US Department of Labor order, Bank of America (BoA)
“applied unfair and inconsistent selection criteria resulting in the rejection of quali-
ed African American applicants for teller and entry-level clerical and administrative
positions” (US Department of Labor, 2017). The inquiry into BoA’s hiring practices
went back twenty years to “a routine compliance review that revealed indications
of systemic hiring discrimination affecting African-American job seekers at the
Charlotte [North Carolina] facility” (US Department of Labor, 2017). Assume that
the unfairness of the hiring practices was evidently racially discriminatory and,
counterfactually, that BoA was, during the period in question, a signatory to the
ISO 26000, which sets forth implementable guidelines in line with “the primacy of
human rights [as] emphasized by the international community in the International
The Enduring Potential of Justified Hypernorms
Bill of Human Rights and core human rights instruments” (ISO 26000: §126.96.36.199).4
In this case, BoA would have been governed by an applicable justied hypernorm:
Section 188.8.131.52. To respect human rights, organizations have a responsibility to
exercise due diligence to identify, prevent and address actual or potential human
rights impacts resulting from their activities or the activities of those with which
they have relationships.
Would it be permissible under its voluntary commitments for BoA to institute
hiring practices (i.e., microsocial norms, see Donaldson & Dunfee, 1999: 42) that
are racially discriminatory in the manner of its Charlotte ofce practice? To gure
this out, a manager at BoA would scan for justied hypernorms, and would nd an
applicable obligation in ISO 26000 (that her bank has signed up for). Its principles
of human rights, nondiscrimination, and proactive due diligence atly oppose that
hiring practice. There is no way to square this practice of discrimination under ISCT*.
BoA’s having subscribed to ISO 26000 makes the following as true for ISCT*
as for the ISCT that Donaldson and Dunfee were theorizing: “Even if the norm of
racial discrimination is, or was in certain places and times, considered authentic in
the South, it cannot be classied as a legitimate norm under ISCT since it is incon-
sistent with the hypernorm ensuring the fundamental right not to be discriminated
against” (2003: 117).
This case illustrates the immense practicability of ISCT*. Managers at BoA receive
quick and applied guidance as to what not to do (that does not require managers in a
company to reach and act on shared understandings about core human values). No
discourse is necessary. It is critical to our present argument to see that this prohibition
involves no balancing test, and certainly no requirement of further discourse with
stakeholders. There is no need to ask or to discuss the alternatives to engaging with
the practice whose contemplation is jolting the high-voltage fence of the justied
hypernorm in question. The present question about the moral legitimacy of ISCT*
on a discursive account involves a company deciding to hold off on endorsing a
business decision that is controversial on its face under express commitments that
the company has formally underwritten publicly and without conict with positive
law. We see no basis to question the legitimacy of this application of ISO 26000
The net result is that BoA’s (counterfactual) decision not to engage in racial dis-
crimination would have reected respect for BoA’s express commitment to the fruits
of the discursive process that gave rise to ISO 26000. This hypernorm portfolio tells
BoA and its agents to cease, or better yet, not institute the practice in the rst place.
They don’t need to engage in multi-stakeholder discourse to reach this conclusion.
The discourse that is embedded in the arguably justied hypernorm provides
a boundary that commands respect. The universal principle of nondiscrimination
comes directly between BoA and the adoption of the hiring policy instituted in its
Charlotte ofce. Taking guidance from justied hypernorms enhances rather than
detracts from a company’s moral legitimacy insomuch as managers are prompted to
heed a commitment of their company not to breach set limits, where those limits are
rooted in a global discourse giving rise to guidance in the form of universal principles.
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The same analysis applies to any conict between justied hypernorms and
microsocial norms or business decisions. In all such cases, the negative screening
mechanism of justied hypernorms provides a boundary condition that rules out
activity beyond set limits. For the foregoing reasons, we have argued that an ISCT*
applied under a (suitable) portfolio of justied hypernorms provides a valuable
and immensely practical “life jacket” that helps keep business inside the bounds of
moral legitimacy that were established, in our example, through ISO 26000’s
multi-stakeholder discursive engagement.
Clearly, the utility and effectiveness of ISCT* depends on the quality of a com-
pany’s hypernorm portfolio. We will explore the factors that inform a hypernorm
portfolio’s suitability in section 7. Next, the task is to examine the other side of
the biconditional role that hypernorms play in Donaldson and Dunfee’s ISCT: Can
justied hypernorms provide not only a life jacket to keep companies within moral
minimums, but also a safe harbor that afrmatively endorses the moral legitimacy
of microsocial norms and business practices?
6. ISCT* AND THE ENDURING POTENTIAL OF JUSTIFIED HYPERNORMS:
DISCURSIVE STARTING POINT RATHER THAN SAFE HARBOR
In Donaldson and Dunfee’s presentation of ISCT, the authenticity of a microsocial
norm depends on procedural requirements, but its moral legitimacy comes from its
compatibility with hypernorms. Can arguably justied hypernorms play an equivalent
function in ISCT*? Assuming a suitable hypernorm portfolio, can managers adopt
the posture of a moral safe harbor so long as they fall within its strictures? There are
at two reasons why we argue ISCT* can provide nothing quite like the moral safe
harbor intended under ISCT. Nevertheless, as we will show, the framework can play
an important role to help ensure the moral legitimacy of a company under DAML.
The rst reason why ISCT* cannot provide a moral safe harbor is that, unlike
Donaldson and Dunfee’s hypernorms, which seem to be inherently up to date and
comprehensive, there is no guarantee that this would be the case with a portfolio of
justied hypernorms. Even more fundamentally, the issue turns on the difference
between the modalities of ISCT (static and property-like) and DAML (dynamic and
processual) (see Table 1) (cf. Suddaby, Bitektine, & Haack, 2017).
The difference between these modalities can be appreciated in the distinction
between owning a home and renting the same home. The home-dweller with the
property right can lean on a past-tense fact: transfer of title to the home-dweller. As
we have indicated and will now demonstrate, managing ISCT* as if it yields a moral
safe harbor is bound to fail DAML. ISCT*’s modality of legitimacy is not like owning
but rather like renting a home in the sense that ongoing occupancy requires ongoing
rental payments (see Suddaby et al., 2017). No rent, no home. The same, we argue,
goes for justied hypernorms. The moment management shuts down the ongoing
conversation about the limits of justied hypernorms, moral legitimacy under DAML
is at peril. To the question of whether ISCT* can provide guidance with the requisite
legitimacy, we answer in the negative, but that is if one seeks the property-like
safe harbor afforded under Donaldson and Dunfee’s ISCT. If the modality sought
The Enduring Potential of Justified Hypernorms
from ISCT* (see Table 1) is static and check-the-box, then yes, ISCT* necessarily
fails under DAML. Fortunately, as we now demonstrate with an example, there is
another way to apply ISCT* that helps companies successfully sustain their moral
legitimacy in the discursive, processual sense demanded by DAML.
Reconsider the Bank of America example above; dial back the calendar one hundred
years; and suppose, counterfactually, that the justied hypernorms on offer and sub-
scribed to by BoA track the constitutional law then in place in the United States. The
principle of nondiscrimination and the conception of human rights applicable under
BoA’s hypernorm portfolio is satised by “separate but equal” (Plessy v. Ferguson,
1896). Would there nevertheless be value to a company’s being subscribed to a justi-
ed hypernorm about nondiscrimination that accommodates racism realized through
separate but “equal” opportunities? The reality is that even the separate-but-equal norm
has teeth: it rules out prima facie unequal treatment of racial groups, and that, we claim
as per the previous section, retains enduring value. It is a good and defensible thing
for a manager to step back and reconsider instituting a business policy that is racially
discriminatory on its face. (The reality, unfortunately, is that companies readily nd
proxy categories with which to exhibit racial animosity [Mui, 2012].)
Now set the calendar back to 1954 when the Supreme Court rejected separate-
but-equal as a conception of nondiscrimination. Suppose a decade goes by and
the hypernorm portfolio BoA is subscribed to still treats separate-but-equal as a
permissible form of discrimination. It’s not to suggest that the Supreme Court of
the United States is a leading moral authority, but that times change and with them
the understanding of permissible boundaries. In defending the value of arguably
justied hypernorms as outer bounds earlier, we did not attempt to argue that the
limits being set by a company’s chosen hypernorm portfolio are demanding enough
to satisfy stakeholders as times change. The adequacy of the bounds set by a given
hypernorm portfolio is always an open question. To attend to this potential gap, ISO
26000 and other MSIs build in an automatic consideration of updating norms, as
technologies and social issues and standards shift (e.g., ISO, 2017; cf. ISO, 2010: §7).
So, in the present hypothetical case, imagine it is now 1964, and BoA maintains
strict racial segregation as to restrooms, cafeterias, and with few exceptions, job
categories. Can managers defend the moral legitimacy of their conduct just by
virtue of falling within the line drawn by the relevant justied hypernorm? ISCT is
meant to fulll this function via hypernorms, and to be able to do so would be to
enjoy the static, property-like modality of safe harbor. The BoA case makes it easy
to see that managers cannot rest their laurels on justied hypernorms—“separate
but equal” will not get far in present day public discourse. Justied hypernorms
not only become stale, they are presumptively stale. It is in the openness to freshen
them up with new discursive engagement that companies “pay the rent” and make
the ongoing case for moral legitimacy under DAML. The only remedy for staleness
is to confront affected parties to nd out whether, say, separate but equal passes
muster today (if it ever did). The consensus codied in a justied hypernorm may,
as Scherer (2015) emphasizes, “turn out to be a false consensus. The validity of
normative claims may be challenged by new evidence or by new actors entering the
discourse” (2015: 509; see Donaldson & Dunfee, 2003: 117).
Business Ethics Quarterly
What we take from this limitation is not the need to throw out the baby with the
bath water, i.e., renounce any discursively legitimate role at all for ISCT* outside the
outer bounds function. So long as managers themselves adopt a dynamic modality,
the enduring value of justied hypernorms goes further than the life jacket function.
Capturing that value requires, as a premise, the proposition that even the justied
hypernorms that result from a pristine Habermasian discourse are never more than
arguably justied hypernorms. Justied hypernorms are provisional hypotheses,
handy points of departure both for conduct and for framing forward-looking
stakeholder discourse to tailor norms to local facts. This provisional quality does
not impugn our case for the value of justied hypernorms in setting outer bounds.
What we can see now is that justied hypernorms can support morally legitimate
engagement insomuch as the company becomes positioned to engage stakeholders
constructively—departing from the applicable justied hypernorm—to address the
case at hand, whether that means updating the hypernorm, developing microsocial
norms, or otherwise deliberating about action.
Now return to the case of the hypothetical BoA in the early 1960s. Suppose top man-
agement is making decisions about a major human resources reorganization and ren-
ovation of the facilities and that its proclivities would be to favor separate-but-equal
arrangements if there is a good economic case to be made. The thought experiment
requires imagining that top management brings the issue to multi-stakeholder
engagement, for example, with the National Association for the Advancement of
Colored People (NAACP) and other non-governmental organizations with concern
for employees, trade unions and other labor representatives, local communities, and
governments. Engaging in this discourse in good faith will speak to the question
of fair treatment and discrimination in the workplace. And when kicking off this
conversation, BoA’s managers, if faithful to BoA’s hypernorm portfolio, will depart
from the premise of equality, even if also with the separate-but-equal principle
glossing its meaning. This, rst, establishes a moral minimum to the discursive
negotiation. In addition, because the company subscribed to the justied hypernorm
with denite provenance, managers can rehearse the arguments behind the status
quo version of the norm (see Table 1).
By this point we can see that the enduring role for justied hypernorms—beyond
the life-jacket function of setting outer bounds—is a reection of the dynamic
modality that denes DAML. This modality is process-based: moral legitimacy is
a function of doing—not merely the opening bid written on paper, but requiring the
willingness of the company to explain and listen, drawing support and condence
from the existing hypernorm portfolio (see Table 1).
7. DEVELOPING A SUITABLE HYPERNORM PORTFOLIO
Unlike Donaldson and Dunfee’s ISCT, ISCT* requires managers who wish to
receive the benets of its guidance to pick and choose which portfolios of arguably
justied hypernorms bind them and to follow. The enduring potential of arguably
justied hypernorms within ISCT* (the outer bounds function, section 5, and as a
discursive starting point, section 6) depends directly on the quality of a company’s
The Enduring Potential of Justified Hypernorms
hypernorm portfolio. Up to this point, we have stipulated a “suitable” hypernorm
portfolio, but what makes a hypernorm portfolio suitable? And how should a
company’s managers develop and update theirs? In this article, we can only sketch
the major considerations—the limited selection, comprehensiveness, and freshness—
with a concluding remark about the demandingness of justied hypernorms.
The rst point is that while there might be plenty of discursively justied norms like
the FSC principles (see Mena & Palazzo, 2012), there will only be a limited selection of
portfolios that will arguably satisfy the universal scope condition (with input legitimacy)
and thus qualify as potential justied hypernorms (see Gradert & Engel, 2015).
Justifying hypernorms demands substantial efforts from many parties in order to organize
multi-stakeholder discourses that fulll the input legitimacy conditions. The paucity of
choice suggests companies may need to supplement discursively justied hypernorms
with hypernorms otherwise developed. As Donaldson (2017: 138) explains:
For example, corporations memorialize limits on what’s allowed when pursuing prot
using credo statements that reect rst-order moral (hypernorm) status. Such statements
list hard-to-disagree-with ideals/hypernorms such as “trust,” “respect” and “integrity.”
Moreover, groups of economic actors generate workable precepts that they strive to
uphold, e.g., the Caux Round Table Principles, the Ruggie Principles, the United Nations
Global Compact, ISO 26000, mission statements, and codes of ethics.
Given the limited choice set confronting managers, comprehensiveness becomes
a major factor determining the suitability of a company’s hypernorm portfolio. The
comprehensiveness of a hypernorm portfolio inuences the range of contexts and
situations in which the company’s managers will nd a life jacket to save them. We
do not need to give a rigorous denition of the concept of comprehensiveness
to observe that, in practical terms, companies may choose to develop a master port-
folio that combines, say, ISO 26000 with some other plausible candidate to provide
managers even greater coverage than that afforded by ISO 26000’s already thick
portfolio. On the other hand, hypernorm portfolios may reference common elements,
such as the United Nations Declaration of Human Rights, which ISO 26000 and
several other hypernorm portfolios (not all arguably justied) each incorporate by
reference (Gradert & Engel, 2015: 7). Whether a company’s (master) hypernorm
portfolio is comprehensive enough—in absolute terms or given available options—is
a question for a company’s managers and its stakeholders to gure out.
The freshness of justied hypernorms also matters considerably to the suitability of
a hypernorm portfolio, as reected in the “separate but equal” hypothetical case above.
Global business is dynamic and normative adaptation a sine qua non to survival. This
recommends the approach adopted by ISO, which is to build adaptation into the regular
protocols of the MSI (even though the group recently conrmed a vote not to update
the standards before 2020) (ISO, 2017). In the absence of institutionalized revisions,
companies may need to proactively become norm-makers with calls to revise justied
hypernorms when substantive new issues or technologies arise that create pressing
regulatory voids (de los Reyes et al., 2017: 149–52). The frequency of and precise
form to be taken by recurrent norm-making are both important issues but are beyond
the scope of this article.
Business Ethics Quarterly
To be clear, we have not argued in this section that moral legitimacy under DAML
categorically requires companies to subscribe to justied hypernorms. Rather, the
principle is roughly that the weaker the coverage provided by a company’s hyper-
norm portfolio—less comprehensive and more stale—the more explaining (and
learning) its managers must be prepared to do. Put differently, the company that is
morally compelled to subscribe to a hypernorm portfolio nds itself in that position
because it has no justication for not doing so, in light of all the reasons for doing so.
Managing a large company, especially a global corporation operating across multiple
jurisdictions and cultures, is challenging enough. To willfully eschew the clarity of
purpose that managers draw from publicly stated commitments may, depending on
circumstances and history, seem irresponsible and difcult to defend to stakeholders
who could suffer the negative consequence.
The categories of comprehensiveness and freshness represent two different
ways to call into question the demandingness of a hypernorm portfolio. To inquire
whether a company’s hypernorm portfolio is fresh enough (whether it has been
updated to address recent reconceptualizations of core human values) can be just a
different way of asking about comprehensiveness (whether the hypernorm portfolio
speaks to the range of relevant issues facing a company). Regardless, as these are
two sides of the same coin, the force of the question is identical: Is the company’s
hypernorm portfolio demanding enough? Consider the case of articial intelligence
(AI). None of the ISO 26000 guidelines address, for example, the emerging ethical
issues arising from human resource use of AI. It is, however, possible that soon AI
will evolve to the point where society grapples with the challenges to human rights
resulting from AI. Absent updating, the ISO 26000 will fail to provide managers
any practical guidance, and this limitation can be characterized as a failure of com-
prehensiveness and/or freshness. Either way, the concern would be that ISO 26000
is not demanding enough.
The belt on the suspenders of even undemanding hypernorm portfolios under
ISCT* is openness to playing the part of “a transparent, accountable, and col-
laborative actor within its societal or stakeholder context” (Scherer & Palazzo,
2007: 1114). The same belt of discursive openness is also needed to cover for
the lacuna left by an insufciently comprehensive and fresh hypernorm portfolio.
In sum, the basic shift presented by ISCT* is not to take moral free space for
granted. Donaldson and Dunfee say that “hypernorms are recognized by macrosocial
contractors as key limits on moral free space” (1999: 49). Managers applying
ISCT* expect to nd limits beyond their company’s hypernorm portfolio, and
discursive engagement is the mode of discovery. Whereas ISCT provides managers
(who have a sense of hypernorms and awareness of the company’s microsocial
commitments) condence in the moral legitimacy of corporate strategy, manag-
ing under ISCT* is much more like feeling one’s way in the dark. A company’s
hypernorm portfolio and microsocial commitments command respect, but in the
manner of a life jacket, not a moral safe harbor. ISCT* requires managers to
remain generally open for further discourse, whether to put a ner, more con-
textualized point on an arguably justied hypernorm, or to extend and sharpen
The Enduring Potential of Justified Hypernorms
Responding to the hypernorm challenge and taking the path suggested by
Scherer (2015) and Donaldson (2017), we began our reconstructive program
of ISCT from an earlier proposal (Gilbert & Behnam, 2009) to bolster ISCT
with hypernorms justified through multi-stakeholder discourse. We critically
assessed and modified this proposal, in the first instance by delimiting the
category with the requirement of universal scope (so as to preserve ISCT’s hierar-
chy of norms and the requisite input legitimacy). We then noted the need to
focus on the case of companies that have subscribed to a hypernorm portfolio
(so as to crystallize the bindingness for managers through a quasi-contractual
Managers at these companies can gather highly practical insights from ISCT*;
in particular, these arguably justied hypernorms provide outer bounds, or moral
minimums, that limit business activity in a morally defensible way under DAML.
They are like a life jacket powerful enough to counsel against the dictates of
microsocial norms—or business advantage—that managers would otherwise be
inclined to follow. The logic of Donaldson and Dunfee’s ISCT would suggest that
managers could remain within a moral safe harbor (afrmative endorsement
of the permissibility of conduct) so long as the bounds of hypernorms have
been respected. However, DAML relies on a dynamic modality, wherein moral
legitimacy remains always in question and only the open willingness to engage
in multi-stakeholder discourse can sustain ongoing legitimacy. This is why
we analogized to the case of renting a home: if a company shuts the door to
multi-stakeholder engagement, moral legitimacy vanishes, just like being subject
to eviction when rent is not paid.
And the “rent” does frequently come due. Scherer (2015) quotes Habermas
(2003: 44) for the proposition that “new issues arise, new norms must be developed
and justied in light of new challenges in history” (2015: 507).
Any consensus concerning values or norms that is reached under ideal or almost ideal con-
ditions is assumed to be valid only among those who have taken part in the argumentation
process. However, it may turn out to be a false consensus. The validity of normative claims
may be challenged by new evidence or by new actors entering the discourse (Scherer,
Nevertheless, rent is not due every day. Donaldson (2017) reminds us that
“it is important that their conversations pause from time to time” (2017: 138)
and there are many “paused conversations” to choose from in binding a company
to an express moral commitment:
In the economic sphere, Corporation A may subscribe to and adopt the principles of the
United Nations Global Compact, including the United Nations Declaration of Human
Rights (1948) and the principles promulgated by the ILO; Corporation B may subscribe
to the Caux Round Table Principles for Responsible Business (2009); yet another may
utilize Donaldson’s list of ten Fundamental International Rights (1989: 81) (Donaldson,
Business Ethics Quarterly
Donaldson’s (2017) view overlaps substantially with Scherer’s: “Better and worse
lists are drawn up; hence the need for ongoing, well-formed discussion” (2015: 139).
One might want to confront metaethical questions we expressly set aside—such as
whether the universalization of norms, if possible, is actually a necessary or desirable
endeavor (for an overview of this question from a postmodernist and analytical per-
spective, see Scherer, 2015). Where the focus is on large, and especially transnational
corporations, justied hypernorms, we have argued, play an indispensable practical
role, erecting consistent and express moral minimums that can provide vital guidelines
for practice—as outer bounds and discursive starting points. With all the legitimacy
that issues from their roots, justied hypernorms lead companies away from many
of the problematic and yet widespread business practices and microsocial norms that
remain prevalent today. As such, justied hypernorms can provide an excellent nor-
mative litmus test that yields quick and accessible guidance to managers about outer
bounds of conduct and premises for open stakeholder engagement. With companies
that have subscribed to a suitable hypernorm portfolio—reasonably comprehensive
and fresh enough—ISCT* presents an applied framework full of potential to facilitate
management according to the aspirations of DAML.
But none of this is true if ISCT* is conceptualized statically, as a way to safeguard
and “own” moral legitimacy (Suddaby et al., 2017). The legitimacy of justied
hypernorms under DAML is likely to have lost freshness immediately after the
parties who initially gave effect to the justied hypernorms left the discursive arena
(as when a new car loses value the moment it leaves the sales lot). The “staleness” of a
justied hypernorm—to be clear—is also a feature and not merely a liability. It
is the very dryness of the ink that materializes the justied hypernorm and makes it
tractable within an organization, even a global hierarchy, for calibration and ready
application from its home in a hypernorm portfolio. The specicity and xed nature
of the justied hypernorm makes it the subject of imitation, whether because manag-
ers are copying competitors or have been inuenced to agree with the ideas. Either
way, the grand virtue in a market economy of dissemination of a given portfolio of
justied hypernorms is cancelling the competitive disadvantage of adhering to the
norm (Buchanan, 1996). The dry ink of past commitment steers business decisions
where discussion is costly and unnecessary. Moreover, these (temporarily) frozen
commitments inform the discursive agenda when the time comes to pay the rent.
How often managers need to refresh the discourse that initially justied the
hypernorms is a question we have left aside. On a day-to-day basis, a company’s
discursive focus will naturally tend to microsocial engagements with fewer stake-
holders and more localized agendas. However, depending on applicable microsocial
norms, it may well be a company’s justied hypernorms that provide the leading
edge of a discursive engagement, even in localized discourses. While ISCT*
represents “a kind of Everyman’s conceptual scheme” (Andrews, 1969: 162) that
helps manage a company’s discursive agenda, it only does so at a high level, and a
promising direction for further research is to elucidate how managers can and should
interpret and translate the external environment into effective “stakeholder learning
dialogues” (Donaldson & Dunfee, 2003: 119). Whereas the business ethicists who
have begun to address this project have emphasized the question of when managers
The Enduring Potential of Justified Hypernorms
need to provoke norm-making (Baumann-Pauly, 2013; Donaldson & Schoemaker,
2013; Scherer, Palazzo, & Seidl, 2013; see de los Reyes et al., 2017: 155–57), much
more work is required to provide managers tractable roadmaps for how to pursue
norm-making activities (see de los Reyes et al., 2017: 157–59).5
The rst two authors contributed equally. We would like to thank the three anonymous
reviewers and our action editor for their critical feedback and valuable suggestions.
Their work helped us to signicantly improve our article. Craig Smith gratefully
acknowledges Dreyfus Sons & Co. Ltd., Banquiers for its nancial support of his
contributions to this project.
1. Donaldson and Dunfee (2009) also account for procedural and structural hypernorms (2009: 51–53).
For convenience and consistency with other authors (see Scherer & Palazzo, 2007), we reference “substantive
hypernorms” as hypernorms for short, except below where specically referencing Gilbert and Behnam’s
“development of a procedural framework to justify hypernorms” (2009: 219).
2. The exact meaning of “must be able to participate” is a question we note and set aside.
3. We use the word “arguably” to modify “justied hypernorm” for a specic and theoretically critical
reason. At the threshold, we recognize that empirical questions can always be asked about satisfaction of the
input legitimacy condition, especially when it comes to hypernorms, like ISO 26000, as opposed to industry-
based norms (because of the requisite vastness of scale and scope). To say that hypernorms are arguably jus-
tied is to say there is a decent empirical case to be made for satisfaction of the input legitimacy condition.
Moreover, “arguably” captures the best-case scenario for a discursively-derived hypernorm: that it does make
a good case. And it similarly captures the worst case: that upon challenge the “arguably” justied hypernorm
does not hold up to argument, just like a legal claim may fail in court. The putative hypernorm can fail the
argument as a matter of its processual roots, meaning that it becomes untenable to claim that the input legiti-
macy condition was satised. And, as we will discuss in section 6, it can fail substantively, meaning that it
becomes untenable to defend the moral legitimacy of the line drawn by the putative hypernorm.
4. In effect, ISO 26000 embeds an earlier hypernorm portfolio (the International Bill of Human
Rights), whose arguable justication—likely less plausible—involved different actors and processes.
5. Scherer et al. (2013: 263–64) suggest that in order to maintain their legitimacy, companies should
engage in moral discourse when they perceive a mismatch between the corporation’s status quo and societal
expectations if attempts at strategic persuasion to adjust these expectations and/or isomorphic adaptation
strategies have failed. Donaldson and Schoemaker (2013) identify a series of risk factors (innovation is rapid,
regulators are weak, too much is hidden, experts are few, “hush” prevails, and critics are ignored) that can sig-
nal to executives that it is time to engage in norm-making for the sake of industry legitimacy and health. While
both approaches provide promising starting points, the question of when and why companies should initially
engage in norm-making processes or refresh microsocial norms (such as the FSC) and arguably justied
hypernorms (such as the ISO 26000) remains a pressing topic for further research (de los Reyes et al., 2017).
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