This article assesses the quality of Integrative Social Contracts Theory (ISCT) as a social contract argument. For this purpose, it embarks on a comparative analysis of the use of the social contract model as a theory of political authority and as a theory of social justice. Building on this comparison, it then develops four criteria for any future contractarian theory of business ethics (CBE). To apply the social contract model properly to the domain of business ethics, it should be: (1) (...) self-disciplined, i.e., not aspire results beyond what the contract model can realistically establish; (2) argumentative, i.e., it should seek to provide principles that are demonstrative results of the contractarian method; (3) task-directed, i.e., it should be clear what the social contract thought-experiment is intended to model; and (4) domain-specific, i.e., the contractarian choice situation should be tailored to the defining problems of business ethics. (shrink)

Social contract theory offers a powerful method and metaphor for the study of organizational ethics. This paper considers the variant of the social contract that has arguably gained the most attention among business ethicists: integrative social contracts theory or ISCT [Donaldson and Dunfee: 1999, Ties That Bind (Harvard Business School Press, Boston)]. A core precept of ISCT - that consent to membership in an organization entails obligations to follow the norms of that organization, subject to the moral minimums of basic (...) human rights - is a reasonable and appealing notion. One potential challenge for those attempting to apply this idea, however, lies in the dynamic nature of social norms. Organizational norms evolve, often through the conscious efforts of community members and leaders. As currently formulated, ISCT offers a framework that under-appreciates the evolving nature of moral norms. In this paper, we extend ISCT by considering the circumstances under which the terms of and parties to social contracts change. We also consider a number of principles that should be considered as the terms and parties to organizational social contracts change. (shrink)

Business and Society Review, Volume 126, Issue 1, Page 3-23, Spring 2021.

Contractualism is one of the most promising ‘centers of gravity’ in business ethics. In this guest editorial we provide a concise roadmap to the field, sketching contractualism’s historic and disciplinary antecedents, the basic argumentative structure of the contract model, and its boundary conditions. We also sketch two main dimensions along which contributions to the contractualist tradition can be positioned. The first dimension entails positive versus normative theorizing – does a given contribution analyze the world as it is or how it (...) ought to be? The second dimension involves four different levels of analysis that are commonly employed in contractualist business ethics: the nano, micro, meso, and macro levels. We then proceed to position the articles comprising this special issue along these two dimensions. (shrink)

This paper is intended to fill the gap in the literature on moral hazard amongst companies. It seeks to explore the moral hazard for companies by linking the leverage range with the risk involuntarily assumed by third parties. The paper takes the distinctive approach of trying to understand the nature of the moral hazard affected not only through asymmetries but also through lack of resources in companies. The paper also seeks to establish the importance of companies' moral hazard from an (...) ethical perspective and proposes an index –the moral hazard index– which provides the option of reducing risk when managers make decisions on leverage and equity levels; subsequently the assumed risk is controlled. An extreme case is set out of companies that have such high leverage that they survive with negative equity. In such cases the assumption of risk by third parties is undeniable. The paper explains the problem and shows the concern regarding company leverage. Although the index is still only theoretical, it offers opportunities for improvement to determine its applications and utility. Moral decisions are expected to be taken with regard to the structure of the capital of companies in order to reduce the risk assumed by third parties. (shrink)

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. (shrink)

During the past ten years Integrative Social Contracts Theory (ISCT) has become part of the repertoire of specialized decision-oriented theories in the business ethics literature. The intention here is to (1)␣provide a brief overview of the structure and strengths of ISCT; (2) identify recurring themes in the extensive commentary on the theory including brief mention of how ISCT has been applied outside the business ethics literature; (3) describe where research appears to be headed; and (4) specify challenges faced by those (...) who seek to reform ISCT. Key themes in the critiquing literature relate to (a) the identification process for hypernorms; (b) justification of the recognition of hypernorms; (c) proposals for considering meso or meta norms; (d)␣clarification of the relationship between stakeholder concepts and ISCT; (e) problems with potentially unoccupied moral free space; (f) sources of ethical obligation within the ISCT framework; and (g) the potential role for concepts of stakeholder dialogue and engagement. (shrink)