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)

This article develops contractarian business ethics by applying social contract arguments to a specific question: What are the pre-legal (or moral) rights and responsibilities of corporations? The argument uses a hypothetical social contract to show the existence of for-profit corporations in democratic capitalist societies is consistent with Rawls’s fundamental principles of justice. Corporations ought to have recognised their rights to be autonomous, to pursue private purposes, and to engage in economic activities. Corporations have a responsibility to respect the freedom and (...) human rights of all people, and not to interfere with government programs that ensure people have the education and training they need to find and keep corporate employment and that provide a safety-net that prevents destitution. If corporations have any other rights and responsibilities, those rights and responsibilities need to be established by actual social contracts, probably in the form of legitimate democratic processes. (shrink)

There are two principal philosophical conceptions of socialism, corresponding to two interpretations of the notion of a rational society. The first conception corresponds to an instrumental view of social rationality. Captured by the image of socialism as “one big workshop,” the instrumental view holds that social ownership of the means of production is rational because it promotes the optimal development of the productive forces. Social ownership is optimal because it eliminates the costs of coordination imposed by the conduct of economic (...) activities in formally independent enterprises, and, more generally, overcomes fetters on development that result from the control of resources by individuals whose particular interests imperfectly correspond to a general interest in productive advance. (shrink)

ABSTRACT:The major aim of this article is to show that John Rawls’s theory of justice cannot be applied effectively to questions of business ethics and corporate governance. I begin with a reading of Rawls that emphasizes both the critical and pragmatic nature of his theory. In the second section I look more closely at the notion of society’s “basic structure” and its place within Rawls’s theory. In the third section, I argue that “the corporation” cannot be understood as part of (...) this basic structure and is not, therefore, a subject of justice for Rawls or his interpreters. Finally, I show that Rawls’s inability to speak to the corporation is a weakness, regardless of one’s particular view on the corporation. I conclude by considering what Rawls’s theory helps us to understand about the problems involved in integrating corporate governance, business ethics, and political philosophy. (shrink)

Abstract: In this article, I offer a proposal to clarify what I believe is the proper relation between value maximization and stakeholder theory, which I call enlightened value maximization. Enlightened value maximization utilizes much of the structure of stakeholder theory but accepts maximization of the long-run value of the firm as the criterion for making the requisite tradeoffs among its stakeholders, and specifies long-term value maximization or value seeking as the firm’s objective. This proposal therefore solves the problems that arise (...) from the multiple objectives that accompany traditional stakeholder theory. I also discuss the Balanced Scorecard, which is the managerial equivalent of stakeholder theory, explaining how this theory is flawed because it presents managers with a scorecard that gives no score—that is, no single-valued measure of how they have performed. Thus managers evaluated with such a system (which can easily have two dozen measures and provides no information on the tradeoffs between them) have no way to make principled or purposeful decisions. The solution is to define a true (single dimensional) score for measuring performance for the organization or division (and it must be consistent with the organization’s strategy), and as long as their score is defined properly, (and for lower levels in the organization it will generally not be value) this will enhance their contribution to the firm. (shrink)

In this reply to Professor Hodapp's criticism of my social contract theory, I focus on the misinterpretations I believe Professor Hodapp makes of the social contract tradition as well as my version of the contract. By misinterpreting the underlying purpose of social contract theory, he neglects the contract's heuristic or functional dimension, something that leads him to downplay the importance of the contract as a conceptual catalyst. And by adopting an overly narrow notion of rationality, he imagines circularity where none (...) exists. Later, Professor Hodapp questions the effect of the contract upon individual liberties, and in doing so broaches a critical issue. But I attempt to show that his concerns are eliminated by close attention to the theory itself. (shrink)

Are corporations morally defensible sorts of entities? How might we go about showing that they are? Thomas Donaldson offers us the most detailed contractarian justification for the moral defensibility of corporations. In this paper I show how we can significantly develop this sort of justification to yield a more compelling contractarian justification, though one that is importantly conditional. The primary points I take up in this paper are these:1. The question Donaldson poses to generate his contract is not quite as (...) simple as may appear. The sort of transformation we need to consider is more complex than the sort Donaldson describes.2. Partly because of considerations that arise in discussing the first point, the contract we are considering is a more conditionalagreement. The terms of the agreement will vary depending on the kind of state we are assuming prevails. The sort of contract we wantto draw up is at least a three-way contract: between society, productive organizations and the state. The sort of agreement we reach will have the following form: society a agrees to allow productive organizations of type b to exist if we assume state c will do various things (d1 to dn), productive organizations will do various things (e1 to en) and members of society will do various things (f1 to fn). Importantly, if state c is not doing d1 to dn, productive organizations may not be morally defensible.3. The terms of the contract that can be derived would benefit from the introduction of some of Rawls’s apparatus.4. When we consider the right questions, with more of the background institutions filled in, and when we include some more social contract apparatus, we get a better contract which fills in for us not only the obligations of business but, importantly, many obligationsfor government as well. (shrink)

ABSTRACT:There is considerable overlap between the interests of business ethicists and those of political philosophers. Questions about the moral justifiability of the capitalist system, the basis of property rights, and the problem of inequality in the distribution of income have been of central importance in both fields. However, political philosophers have developed, especially over the past four decades, a set of tools and concepts for addressing these questions that are in many ways quite distinctive. Most business ethicists, on the other (...) hand, consider their field to be primarily a domain of applied ethics, and so adopt methods and conceptual frameworks developed by moral philosophers. In this paper, we discuss some of the salient differences between these two approaches, and suggest some ways in which business ethicists could benefit from taking a more “political philosophy” approach to these questions. Throughout, we underline the importance of seeking greater compatibility among the principles used in normative theorizing about markets, regulations, corporate governance, and business practices. (shrink)

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)

Abstract:Social contract is rapidly becoming one of the significant alternatives for analyzing ethical issues in business. Contractarian approaches emphasizing consent as a means of justifying principles can provide needed context for rendering normative judgements concerning economic behaviors. Current research issues include developing tests of consent for both hypothetical and extant social contracts, and empirically testing the assumptions of the major contractarian approaches. Open questions include exploring the relationship between contractarian business ethics and other approaches, such as stakeholder management and virtue (...) based ethics; and analysis of the intersection of contractarian approaches with the findings and assumptions of the field of moral psychology. Finally, the managerial utility of social contract based approaches needs to be explored with emphasis on identifying “translator” concepts. (shrink)

Professor Donaldson in his book Corporations and Morality has attempted to use a social contract theory to develop moral principles for regulating corporate conduct. I argue in this paper that his attempt fails in large measure because what he refers to as a social contract theory is, in fact, a weak functionalist theory which provides no independent basis for evaluating business corporations. I further argue that given the nature of a morality based on contract and the nature of the modern (...) corporation, it is highly unlikely that any plausible contract theory of business ethics can be developed. (shrink)

This article evaluates the social contract theorizing of Professors Thomas DonaIdson, 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.

Abstract:In contrast to “social contract” theories of the corporation, a moral justification of the corporation as actual, not hypothetical, agreement is presented. Central to the justification is the idea of personal projects, as developed by Loren Lomasky. The key idea is the role that corporations can play in the construction and advancement of personal, value-creating projects. The concept of the corporation as actual agreement, as a type of “right of association” theory, is defended against influential criticism of such theories by (...) Thomas Donaldson. (shrink)