A Critique of the Empirical Methods of Integrative Social Contracts Theory

Integrative social contracts theory (ISCT) uses empirical methods to develop guidelines for international business ethics. This article criticizes ISCT in terms of the way people actually think about contracts and agreements around the globe. Differences in orientations to communications context, moral reasoning, and institutional and structural conditions make the identification of authentic norms, hypernorms, and relevant communities problematic. The difficulties of the empirical methods suggest recourse to more traditional theoretical approaches for the identification of hypernorms as well as a stronger test for the compatibility of authentic norms with hypernorms.     

Dynamics for Integrative Social Contracts Theory: Norm Evolution and Individual Mobility

This article proposes a specific logic of dynamics for integrative social contracts theory (ISCT) that combines two empirically oriented process extensions strengthening concreteness of Donaldson and Dunfee’s conceptualization, namely (1) international policy regime theory and (2) Tiebout migration. While either would help “dynamize” and “concretize” ISCT, the two combined are even more insightful. Real-world policy regime processes can develop concrete action-guiding norms instantiating hypernorms to guide business decisions. Donaldson and Dunfee placed empirical reliance on expectation of converging parallel evolution of universal principles and authentic local values. ISCT remains vague on how global or local norms can develop and change, for two reasons. First, ISCT does not explain mechanisms for how proposed hypernorms can become actual global norms and also become accepted across extant authentic communities. International policy regime theory explains how hypernorms can become instantiated as global norms expressed in policy regimes. Second, a basic element in ISCT is implied consent positing free exit from voluntary moral communities. Empirically, individuals or businesses may be unable to exit from undesired membership in authentic communities to which they do not consent. The Tiebout migration model provides valuable insights concerning how substantive mobility or its absence improves on the minimum ISCT assumption of implied consent. An integrated logic of ISCT dynamics generates a three-level framework in which instantiated hypernorms and authentic community (microsocial) norms can empirically change, and individuals or businesses can migrate more freely across extant communities.     

Advancing Integrative Social Contracts Theory: A Habermasian Perspective

We critically assess integrative social contracts theory (ISCT) and show that the concept particularly lacks of moral justification of substantive hypernorms. By drawing on Habermasian philosophy, in particular discourse ethics and its recent application in the theory of deliberative democracy, we further advance ISCT and show that social contracting in business ethics requires a well-justified procedural rather than a substantive focus for managing stakeholder relations. We also replace the monological concept of hypothetical thought experiments in ISCT by a concept of practical discourse to better govern business activities on the macro-level of organizational actors such as firms, governments, and NGOs.     

Integrative Social Contracts Theory: Hype over Hypernorms

Applying social contract theory to business ethics is a relatively new idea, and perhaps nobody has pursued this direction better than Thomas Donaldson and Thomas W. Dunfee. Their "Integrative Social Contracts Theory" manages to combine culturally sensitive decision making capacities with trans-cultural norms by setting up a layered system of social contracts. Lurking behind their work is a concern with the problems of relativism. They hope to alleviate these problems by introducing three concepts important to the ISCT: "authentic norms," which clarify culturally specific norms, "priority rules," which determine the rules of engagement when authentic norms clash, and "hypernorms," which measure the value of authentic norms against a thin set of universally upheld values. This paper traces the genealogy of these hypernorms and challenges their value for the ISCT. It argues that well-conceived priority rules can do everything hypernorms can, and can do so more simply.     

Pluralistic business ethics: the significance and justification of moral free space in integrative social contracts theory

Integrative social contracts theory (ISCT) has been an influential theory in normative business ethics for well over a decade, drawing attention both as an object of criticism and as a source of inspiration. In this paper I argue that, despite this attention, the fact that it is a genuinely pluralistic theory, in the tradition of pluralistic theories of political philosophy, is often overlooked. It is in the notion of moral free space that this pluralism is most clearly expressed. This oversight is unfortunate for two reasons. Firstly, it prevents the potential of ISCT, as a normative theory of business ethics, from being appreciated fully; secondly, it leads us to ignore resources that could help tackle its most problematic flaws. In this second respect, I show how some of these flaws could be addressed by paying closer attention to the similarities between ISCT and John Rawls' theory of Political Liberalism.     

Ethics and entrepreneurs: An international comparative study

In this study, we develop a conceptual framework for the examination of cross-cultural differences in ethical attitudes of business people based on the assumptions of integrative social contract theory (ISCT). ISCT reveals the relevant cultural and economic norms that are predictive of the level of the ethical attitudes among societies and at the same time points out the more subtle impact of social institutions on ethical attitudes of different groups within a society. The evidence supports the use of integrative theoretical approaches within the field of business ethics.     

The organization of relational contracts: The allocation of rights in franchising

Franchising contracts are designed to bring together two kinds of entrepreneurs, the franchiser and the franchisee, and to maintain their relationship in the long run. In contrast to standard exchange contracts in law, which are specifically designed to bring about the completion of an exchange efficiently, franchise contracts are designed to make it possible for the entrepreneurs to initiate, to maintain, and to eventually terminate their relationship without dispute. The research reported in this article is an attempt to see how the dual purpose of franchising contracts are achieved. The article first describes the internal organization of franchise contracts (what we called the micro-contractual aspects) and how different kinds of rights and obligations are allocated to accomplish these multiple ends. The second part of the article provides an empirical examination of 30 franchise contracts to see if the internal organization of the contracts influence both the expansion of the franchise operations through new franchises and the amount of dispute between the two sides of franchise contracts.Every franchise contract includes a set of provisions that define the commencement, termination, and ongoing operations of franchise relations. The internal organization of franchise contracts specifies what kinds of rights and obligations are distributed to the parties and the nature of this allocation within each domain of provisions. We argue that the commencement and termination aspects of franchise contracts are usually written in order to make the relationship between the parties clear, and the contingencies specific. In these provisions, the contract is written in discrete terms in which each party's rights and duties are specifically delineated. The contractual provisions dealing with the ongoing operations and the conduct of the parties, on the other hand, cannot be made specific because it is impossible to define all the future contingencies and possible business opportunities. Under these conditions, the contract is usually written in relational terms in which each party's rights and obligations are defined in terms of powers and liabilities towards each other rather than in terms of specific duties and rights.One critical consequence of writing contracts that include powers and liabilities, however, is that it may lead to disputes and undesirable conflict that are detrimental to the success of the franchise. In order to deal with these conflicts among the parties, the contract needs to specify conflict resolution mechanisms that are an integral part of franchise contracts.These general arguments are tested with the use of 30 randomly selected franchise contracts from a diverse set of businesses. Our results show that, indeed, different parts of franchise contracts allocate rights and obligations differently and the more relational a contract becomes the more likely that it would include various dispute resolution mechanisms. We also found that the success of a franchise contract, which is measured by the number of legal disputes it generates and the growth of franchised units, is influenced by the existence of relational provisions and the explicit dispute resolution mechanisms included in the contract.We recommend that franchise contracts should be written to make the commencement and termination aspect of the relationship as discrete as possible. The operations and conduct provisions of the contract, on the other hand, should be written in relational terms to give the parties the ability to respond to changes in business conditions without renegotiating the contract.It is usually the tendency on the part of franchise lawyers to write discrete contracts that attempt to specify every conceivable contingency to avoid future disputes. We argue here that a better strategy is to limit the discrete aspects of the contract to the commencement and termination clauses and to concentrate more on the dispute resolution mechanisms that can become an integral part of the contract. Thus, we also recommend that various dispute resolution mechanisms, such as franchisee associations, franchisee councils, and third party arbitration should be set up within the contract to address the possible disputes early on rather than to wait for potentially very costly court proceedings for both parties.     

Stakeholder’s Preference and Rational Compliance: A Comment on Sacconi’s “CSR as a Model for Extended Corporate Governance II: Compliance, Reputation and Reciprocity”

Lorenzo Sacconi’s recent re-statement of his social contract account of business ethics is a major contribution to our understanding of the normative nature of CSR as the expression of a fair multi-party agreement supported by the economic rationality of each participant. However, at one crucial point in his theory, Sacconi introduces the concept of stakeholders’ conformist preferences – their disposition to punish the firm if it defects from the agreement, refusing to abide by its own explicit CSR policies and norms. We take issue with him over this concept: we show that the assumption of conformist preferences is a moral premise, and it arguably weakens the normativity of the theory as a whole. As an alternative, we propose an evolutionary game theoretic approach. We draw upon recent applications of evolutionary game theory to moral philosophy (Skyrms, Danielson), and we use a computer simulation of the trust game. According to this approach, the failure of the logic of reputation, which is the problem conformist preferences were introduced to solve, is overcome through the dynamics of interaction.     

Fostering Responsible Communities: A Community Social Marketing Approach to Sustainable Living

Just as socially irresponsible organizational behavior leaves a punitive legacy on society, socially responsible organizations can foster curative change. This article examines whether small organizations can foster societal change toward more sustainable modes of living. We contend that consumption is deeply intertwined with social relations and norms, thus making individual behavioral change toward sustainability a matter of facilitating change in individual behavior, as well as in social norms and relations between organizations and consumers. We argue that it is in this facilitation process that small firms can play a major role, by adopting upstream and downstream approaches to diffuse behavioral change. By synthesizing four key strands of literature – small businesses and corporate social responsibility, ethical consumption, community social marketing, and the diffusion of innovation – and using the exemplar case of Modbury, the iconic “plastic bag-free” town, we demonstrate how responsible small firms can influence communities, and the individuals therein, to encourage environmentally sustainable practice to diffuse and support change in society.     

Breaking the Rules: Examining the Facilitation Effects of Moral Intensity Characteristics on the Recognition of Rule Violations

This research project seeks to discover whether certain characteristics of a moral issue facilitate individuals’ abilities to detect violators of a conditional rule. In business, conditional rules are often framed in terms of a social contract between employer and employee. Of significant concern to business ethicists is the fact that these social contracts are frequently breached. Some researchers in the field of evolutionary psychology argue that there is a biological basis to social contract formation and dissolution in business. However, although it is inescapable that biological forces shaped a fixed neural structure that guides and limits humans’ abilities, we argue that characteristics of the situation in which the person finds himself or herself moderate the activation of these neural circuits in ordinary business social contract situations. Specifically, the moral intensity associated with the social contract conditional rule is likely to influence peoples’ abilities to detect violators of the rule. This study utilizes adapted versions of the Wason selection task and manipulates the issue-contingent moral intensity characteristics of magnitude of consequences, proximity, and social consensus to assess if moral intensity facilitates detection of rule violators. Results from this empirical study indicate no relationship between moral intensity characteristics and issue recognition but do provide insights into the evolutionary psychology approach. David M. Wasieleski is an Assistant Professor in the Leadership and Change Management Division of the A.J. Palumbo School of Business Administration and the John F. Donahue Graduate School of Business at Duquesne University. He received his Ph.D. from the University of Pittsburgh. David’s recent research focuses on individuals’ biological propensity for ethical behavior and its effect on workplace relationships. His other research interests include moral intensity, cognitive moral development, stakeholder agenda-building, and policy learning. Sefa Hayibor is an Assistant Professor of Management in the Sobey School of Business at Saint Mary’s University (Canada). He received his Ph.D. from the University of Pittsburgh. His research interests include business ethics and ethical decision-making, stakeholder motivation and management, charismatic leadership, and cognitive heuristics and biases.     

Participation in the organization: An ethical analysis from the papal social tradition

How one structures an organization is not only important from the perspective of productivity and efficiency, but primarily how it affects the moral formation of those who are employed in that organization. Organizational structures whether in the manufacturing, service or non-profit sector have moral dimensions that cannot be escaped. Papal social tradition has been concerned about the moral formation of all workers within the organization. This tradition has maintained that an essential component to a humane organizational structure is participation of those involved in the organization, and consequently that participation must be understood primarily in terms of the formation of employees. This article explores the papal social tradition's understanding of participation and examines its significance in today's organizational environment, particularly in reference to work-teams.Michael Naughton is an assistant professor at the University of St. Thomas in St. Paul, MN. He holds a joint appointment in the theology and management departments. He received his Ph.D. in theology, where he studied social ethics and organizational theory. He is currently finishing his MBA at the University of St. Thomas. He is the author ofThe Good Stewards which examines the relationship between organizational issues and the Catholic social tradition. He has also published several articles and has delivered several papers, presentations, and workshops on organizational issues and the Christian social tradition.     

A Change in Business Ethics: The Impact on Employer–Employee Relations

This research explores the historical perspective of business ethics from the viewpoint of the employer–employee relationship by outlining the impact of the changing social contract between employer and employee relations from the end of World War II to the current day; provides the basic definition of the key elements of the organizational social contract and outlines the social contract in employment relations. It also provides what the author believes to be the key drivers in employer–employee relations and the benefits to good employer–employee relations for each individual within the employment relationship. The results of this research indicate a significant shift in business ethics as it relates to the employers relationship to the employee within a work environment. It further shows the state of the employment relationship prior to World War II. Written contracts were unheard of, but rather, the employment agreement was steeped in a tradition that carried the promise sealed with nothing but a handshake. Now employees have little or no rights; and the ones they are given are provided not by the employer, but by government regulation and court precedent. Issues such as time off for illness, sexual harassment, and workers’ compensation are all handled through legal or regulatory means rather than ethical considerations. The research further shows that the distinct lack of leadership within organizations play a significant role in the disintegration of employer–employee relationships. Specifically, how the lack of leadership relates to the emotional intelligence of the leader. Areas such as empathy and social skills are under trained and under developed by organizations. This research shows that the employer who is willing to give employees what they want and need are far more likely to have success, but more importantly, the organizations will be doing the right thing.     

A Critical Perspective of Integrative Social Contracts Theory: Recurring Criticisms and Next Generation Research Topics

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. Thomas Dunfee is the Kolodny Professor of Social Responsibility at The Wharton School of the University of Pennsylvania. He is a former president of the Academy of Legal Studies in Business and the Society for Business Ethics. He is a former director of the Wharton Ethics Program and the Carol and Lawrence Zicklin Center for Business Ethics Research. Professor Dunfee has written widely on topics in business law and business ethics.     

供应商专项投资与感知的合作风险:关系发展阶段与控制机制的调节作用研究

This study examines the dynamic nature of suppliers’ perceived relational risks arising from transaction-specific investments (TSIs) in their relationship with manufacturers, and the moderating effects of contracts and relational norms, during the developmental process of manufacturer-supplier relationship. An empirical study was conducted with data collected from 261 suppliers and manufacturers in the Chinese consumer electronic appliances sector. We found that suppliers’ TSIs have a positive effect on their perceived relational risks, and in different phases of a relationship effect varies significantly. Results of the research also show that both contracts and relational norms have negative moderating effects on the relationship between suppliers’ TSIs and their perceived relational risks, and moderating effects during are different across various phases of a relationship. Translated from Zhongguo Guanli Kexue 中国管理科学 (Chinese Management Science), 2006, 14(1): 30–36     

Organizational Governance and Ethical Systems: A Covenantal Approach to Building Trust

American businesses and corporate executives are faced with a serious problem the loss of public confidence. Public criticism, increased government controls, and growing expectations for improved financial performance and accountability have accompanied this decline in trust. Traditional approaches to corporate governance, typified by agency theory and stakeholder theory, have been expensive to direct and have focused on short-term profits and organizational systems that fail to achieve desired results. We explain why the organizational governance theories are fundamentally, inadequate to build trust. We advance a conceptual framework based on stewardship theory characterized by “covenantal relationships” and argue that design of governance mechanisms using a covenantal approach is more effective in building trust in organizations. A covenantal relationship is a specialized form of a relational contract between an employee and his or her organization. We argue that regardless of incentives and control mechanisms carefully designed through contractual mechanisms, in the absence of covenantal relationships it is extremely difficult to build trust within organizations. We propose that organizations are more likely to build trust – both at the organizational level and at the interpersonal level – when they create reinforcing and integrated systems that honor implied duties of “covenantal relationships.”     

But you promised! Managing consumers’ psychological contracts

In management literature, a psychological contract generally refers to an employee's beliefs about the reciprocal obligations that exist between him or her and an organization. Legal contracts, on the other hand, are agreements that create obligations between the parties that are enforceable by law. Psychological contracts are different from legal contracts in that they are characterized by the belief that both parties have entered into a set of mutual obligations. While marketing scholars and practitioners have largely overlooked the notion of psychological contracts, this article argues that a firm's customers might view the promises they believe a firm has made to them as psychological contracts. Psychological contracts are as relevant to marketing as they are to management. This article expands the notion of psychological contracts to marketing relationships and outlines internal and external strategies firms can employ to manage psychological contracts more effectively.     

Can there be a social contract with business?

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.Dr. Hodapp is an associate professor of philosophy at The University of Northern Colorado where he teaches courses in business ethics and legal philosophy. He earned a doctorate at Washington University, St. Louis. Dr. Hodapp also has a law degree from The University of Denver and practices law with a Denver law firm specializing in management labor relations.     

To Pay or Not to Pay? Dynamic Transparency and the Fight Against the Mafia’s Extortionists

This article presents the results of the longitudinal study of Addiopizzo, a successful anti-bribery organization founded in Sicily in 2004. It analyzes how this organization has used information disclosure as a strategy to fight adverse environmental conditions and the immoral activities of the Sicilian Mafia. This article extends the business ethics and corporate social responsibility literature by showing how multi-level strategic information disclosure processes can help gain organizational legitimacy in adverse social environments and successfully fight against social resistance to change, low levels of moral imagination and attacks from criminal organizations. This article provides an additional contribution to the literature by linking the three research streams on corporate transparency, the fight against corruption, and organizational legitimacy. The results of this research also contribute to the special issue of the EBEN AC 2010, “Which values for which organizations”, since it provides a unique example of an organization capable of spreading the values of social justice and honesty in a difficult social environment plagued by Mafia.     

Development of a Scale Measuring Discursive Responsible Leadership

This article extends our understanding of the firm–nongovernmental organization (NGO) relationship by emphasizing the role of language in shaping organizational behavior. It focuses on discursive and rhetorical activity through which firms and NGOs jointly – and not always consciously – define boundaries for socially acceptable corporate behavior. It explores the discursive legitimation struggles of a leading Finnish forest industry company StoraEnso and Greenpeace during 1985–2001 and examines how these struggles participated in the (re)definition and institutionalization of corporate social responsibility. I find a mixture of rational and moral struggles as a key feature of this legitimation work and show how different manifestations of these struggles act as a central mechanism that redefines what the boundaries of corporate responsibility are in a specific setting at a given point of time. The study illustrates how the actors’ ability to sense the public’s views contribute to rhetorical difficulties of the industry and unintended societal consequences for the activists, and how the rational and moral struggles build up in time to trigger changes in the actors’ sensemaking and actions.