Rethink the Social Contract– Government, Corporation, People: Reforming the Ties-That-Bind or Just an Empty Concept.


Social Contract: Society is indeed a contract… between those who are living, those who are dead, and those who are to be born… by Edmund Burke (1792). Social contracts play an important role in defining the reciprocal rights, obligations, and responsibilities between government, corporations, people… Social contract is a theory of social order that was popular in the seventeenth and eighteenth centuries, although the idea goes back to Plato… Social contract theory is associated with modern moral and political theory and was given its first full exposition and defense by Thomas Hobbes. After Hobbes, John Locke and Jean-Jacques Rousseau are the best known proponents of this enormously influential theory, which has been one of the most dominant theories within moral and political theory throughout the history of the modern West… Some experts says that a new framework is now needed to redefine the changing relationship between corporations and the other players in the social contract, for example: First, the purpose of corporations must be restated as more than just serving shareholder interests. Secondly, corporations must take a long-term view of wealth creation, rather than concentrating on short-term profits. Third, corporations must recognize the need to operate in partnerships with government and civil society… According to Dr. JJ Irani; the future will belong to those corporations that build win-win partnerships with shareholders, employees and community groups… According to some experts; social contract is a fiction. It doesn’t exist in any manner whatsoever… there is no contract in the traditional sense… There is no consent either implied or expressed. No signatures, no consideration, nothing that would make it a valid contract in any court… Yet, we all have grown up being fed this idea that we are obligated in some way to obey, no matter how much it infringes on our freedoms… Social contract or not, the fact is that not near enough people question the behavior of government and corporations… According to Allen White; it’s time to rewrite the social contract that has existed for centuries among– business, citizens, government. Yet, how to rewrite it?

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In the article Social Contract Theories in Business by Scott Thompson writes: The social contract is a concept in philosophy of ethics and political science that has more recently been applied to the study of business ethics. According to this theory, valid and universally applicable moral rules can be determined by asking what rules people would voluntarily make if there were no rules… For example, not everyone would agree on the best type of music or the best books, so these cannot legitimately be the subject of universal moral rules. However, everyone would agree to outlaw theft, fraud, murder… so these can be. The social contract is an unwritten and strictly hypothetical agreement not to violate moral rules. All members of society are said to agree to this contract simply by participating in society… There are three mainstream theories of business ethics; stockholder theory, stakeholder theory, social contract theory: The stockholder theory holds that a company has no ethical obligations to society other than to earn the largest possible profit for its stockholders or owners within the limits of business ethics and the law. The stakeholder theory holds that a company is morally obligated to all parties with a stake in the outcome of its activities, including; the employees, the community and the environment, as well as stockholders… Ethical decisions in business can be strongly affected by which theory of business ethics conforms to their decision-making process. For example, if a small business receives a buyout offer from a major company, stockholder theory would support whichever decision was most profitable to the owner; whereas, the stakeholder theory would require the owner to consider the impact of selling the company on the employees and community; and, the social contract theory would require the owner to consider the impact of the decision on society as a whole, not just those immediately affected… Social contract theory is a controversial concept in the study of business ethics, because it’s tied in to broader political issues about which many people disagree… People who believe strongly in the laissez-faire model of capitalism usually argue that companies benefit society by creating wealth, providing services and employing people. According to this view, companies can do most good-by concentrating on making profits rather than on difficult and subjective ethical concerns. People who believe in the concept of corporate social responsibility argue that companies receive substantial benefits from society and should reciprocate by acting in the common interest…

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In the article The Biggest Contract by Ian Davis writes: The great, long-running debate about business’s role in society is caught between two contrasting and tired ideological positions. On one side of the debate are those who argue that (i.e., to borrow Milton Friedman’s phrase) the business of business is business; on this view, social issues are peripheral to the challenges of corporate management. And, the sole legitimate purpose of business is to create shareholder value. On the other side are the proponents of corporate social responsibility (CSR), a rapidly growing rather fuzzy movement encompassing both; companies that already claim to practice CSR, and skeptical campaign groups arguing they need to go further in mitigating their social impacts. As other regions of the world move towards the shareholder-value model, debate between these sides has increasingly taken on global significance; where both perspectives, in different ways, obscure the significance of social issues for business success. They also caricature, unhelpfully, the contribution of business to social welfare. It’s time for CEOs of corporations to recast the debate and recapture intellectual and moral high ground from their critics. Corporations need to build social issues into their strategy in a way that reflects their actual business importance. They need to articulate corporation’s social contribution to society and define its ultimate purpose in a way that has more subtlety than Friedman’s business of business is business worldview and is less defensive than most current CSR approaches. In this respect, it can help to view the relationship between government, corporations and society as an implicit social contract; you might say its Jean-Jacques Rousseau’s concept adapted for corporate world with obligations, opportunities, mutual advantage for both sides… More than two centuries ago, Rousseau’s social contract helped to seed the idea among political leaders that they must serve the public good, lest their own legitimacy be threatened. The CEOs of today’s corporations must take the opportunity to restate and reinforce their own social contracts in order to help secure, long-term, the invested resources of their shareholders…

In the article Pros-Cons of Social Contract to Business by Neil Kokemuller writes: The social contract approach to business refers to the strategy a company chooses when it accepts informal expectations from the public and makes social and environmental responsibility important to its business operations. Some companies take on this informal social contract as a point of business differentiation, while others do so to influence potential public scrutiny and backlash for noncompliance. Meeting informal social responsibility guidelines gives corporations significant protection against possible legal and reputation risks that come with walking an ethical line in business. In the information age, consumer-environmental watch groups are calling attention to corporations that either; stand out as social responsibility leaders, or fail to deliver on expectations. Failures to participate in your communities treat customers and employees fairly and preserve the environment can all attract negative attention… More positive benefits of meeting social responsibility expectations from the public can include; stronger customer relationships and better long-term profit potential… Though detractors sometimes question the direct business benefits of social responsibility, one main purpose is to build deep relationships with customers and the community. Over time, deep connection undoubtedly produces more sales and better profits: This is especially true for small business. Some customers in local markets make it a point to support the local businesses that set standard in meeting social responsibility contracts. However, meeting social contract expectations is expensive; for example, committing to better treatment of employees means that companies must invest in training to build a culture of tolerance and acceptance. It means that companies must give portions of their earned profits to charitable groups, organizations, community programs. On the environmental responsibility front, its expensive to manage recycling programs and to use environmental-friendly materials and business processes… Another common argument against social responsibility in business is that it distracts companies from a core business pursuit of profits. Detractors suggest that each dollar and time spent focusing on social responsibility is time-money not on product research, development, marketing or other profit-generating activities… Ultimately, the question is balance; where is the balance between the corporations’ social and business obligations…

We are entering a new era of cooperation between businesses, government and citizenry, because the ability to address environmental and social problems is increasingly being seen as beyond the reach of any one of these players… According to Allen White; it’s time to rewrite the social contract that has existed for centuries among business, citizens, government... For more than two centuries, the social contract has undergone cycles of definition and redefinition. This has occurred not through formal acts of government, but through evolving norms and expectations of the purpose of business in society… The tumultuous business environment of the last decade creates a sense of both urgency and opportunity to rethink the social contract. The rising tide of dialogue around business government, and society is symptomatic of the search to define the elements of a new contract responsive to the demands of the coming decades. Trends and vital signs of many of the world’s economic, environmental, and social communities are sending urgent message that wealth disparities, precipitous decline in the quality of ecosystems, and global healthcare are not being corrected at the rate at which they must to avoid a century of instability and strife among nations and cultures. Neither business nor government nor civil society is capable, by itself, of reversing these perilous trends: The most promising initiatives are built on tri-sectoral partnerships. The conventional definitions of corporate and government purpose are unsuitable to meet the 21st century challenges. Confidence-trust in corporate and government leaders are disturbingly low because of widely held belief that core social values– democracy, stewardship, justice– are being undermined rather than fortified by contemporary corporate and government practices: For this reason, rethinking the social contract remains one of the most urgent imperatives of our time. According to Thomas A. Kochan; determining where the boundaries are placed becomes an important part of the negotiation of new social contracts… According to Carl Ferenbach and Chris Pinney; create the new social contract between– corporations, government, people– that’s equal to the challenges of the global economy, and build a framework that promotes equal justice for all. As Marcus Aurelius said: That which is not good for the bee-hive, cannot be good for the bees


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