A Social Contract for International Business

8/9/2019 A Social Contract for International Business

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A Social Contract for International Business EthicsPaul Neiman

Received: 8 July 2 !! " Acce#ted: 22 A#ril 2 !2 " Pu$lished online: % &ay 2 !2 'S#rin(er Science)Business &edia B*+*2 !2

A$stract ,his article $e(ins -ith a detailed analysis of ho- the choice situation of a social contract forinternational $usiness ethics can $e constructed and .usti/ed* A choice situation is develo#ed $yanaly0in( conce#tions of the multinational /rm and the domain of international $usiness* ,he result isa hy#othetical ne(otiation $et-een t-o /ctional characters1 J* uncan 3rey and Eli0a$eth Redd1 -hores#ectively re#resent the interests of $usinesses and communities see4in( to en(a(e in internationaltrade* ,he ne(otiators a(ree on ethical #rinci#les (overnin( -a(es1 the environment1 and com#liancesocial and cultural norms* ,hese #rinci#les are then sho-n to rest in -ide re5ective e6uili$rium -ithconsidered moral .ud(ments on international $usiness ethics1 -hich are dra-n from internationala(reements1 such as the 7N eclaration on uman Ri(hts1 and voluntary $usiness initiatives1 such asthe 3lo$al Sullivan Princi#les and the 7N 3lo$al Com#act*

9ey-ords Social contract * Contractarian * Business ethics * a(es * Environment * International *Ra-ls * 3lo$al $usiness

Constructin( a Social Contract for Business Ethics

,he #ur#ose of this social contract for international $usiness ethics ;SCIBE< is to #rovide .usti/cationfor several ethical #rinci#les for international $usiness* Social contracts for $usiness ethics can $eor(ani0ed into three main (rou#s* ,he /rst a##roach directly a##lies the social

P* Neiman ;=< St* Cloud State 7niversity1 St* Cloud1 &N1 7SA e>mail: #(neiman?stcloudstate*educontract theory of a #olitical #hiloso#her to issues of $usiness ethics* Palmer ; 2 !a$ility* ! thers ;Bisho# 2 8 artman !DD < have attem#ted to a##ly Ra-ls s ori(inal #osition andt-o #rinci#les of .ustice to or(ani0ations* &aFettone ;2 D< ar(ues that Ra-ls s conce#ts of the $asic

structure of society and $asic institutions can $e valid for international trade* ,he second a##roach ada#ts the social contract methodolo(y to the domain of $usiness ethics* 2

onaldson ;!D821 !D8Dsocialcontracts1

!or another social contract $ased on o$$es s state of nature1 seeorvath ;!DD%


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P* Neiman-hich are discovered throu(h an em#iricalinvesti(ation into attitudes1 $ehaviors1 and$eliefs* Cra(( ; 2 social contract* hilee@tant social contracts -ithin this a##roachhave $een dif/cult to .ustify ;Calton 29eeley !DD% Philli#s and Johnson>Cramer2 Redd ne(otiation1 -hich is tailored tothe domain of international $usiness ethics*

,his ty#e of social contract has $een critici0edfor failin( to #rovide a suf/ciently detailed con>tractin( situation* or e@am#le1 -hile ,homas

o$$es devotes a (reat deal of attention tohuman nature and the state of nature1 Conry;!DD%1 #* !DMsocial contract in onald>son s and unfee s ISC, ;de 3raaf 2

em#e 2 G


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contractarian $usiness ethics ar(ued for $y Benem#e ;2 8


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conce#tion of .ustice to someone is to (ivehim a #roof of its #rinci#les from #remisesthat -e $oth acce#t1 these #rinci#les havin(in turn conse6uences that match ourconsidered .ud(ments* ,hus mere #roof isnot .usti/cation* A #roof sim#ly dis#layslo(ical relations $et-een #ro#ositions* But#roofs $ecome .usti/cations once thestartin( #oints are mutually reco(ni0ed*

,his descri#tion of .usti/cation is descri$ed insimilar terms in HHJustice as airness: Political not&eta#hysical1 -here Ra-ls notes that

.usti/cation must #roceed from -hat HH-e andothers #u$licly reco(ni0e as true or $etter1#u$licly reco(ni0e as acce#ta$le to us ; !DDDc1#* DG


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claim that constructivist ar(uments do notHHreach all #ossi$le audiences: they are $ased onthe shared conce#tions of citi0ens1 so #rovidereasons for action only for those -hose most$asic commitments they #resu##ose* Becausethe #arties to SCIBE may have diFerent social1#olitical1 economic1 and cultural norms1 SCIBE

identi/es commonly shared #resum#tions from-hat all the #arties have in common1 namely1the desire to reali0e increased economic $ene/tsthrou(h international trade* ,hat is1 instead of focusin( on the #arties to the

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P* Neimansocial contract as citi0ens1 -hich may $ea##ro#riate for $roader 6uestions of .ustice1SCIBE focuses on -hat they have in common aseconomic actors in the (lo$al mar4et#lace* In thefollo-in( section1 the materials of constructionfor SCIBE s choice situation are develo#ed out of an e@amination of the domain of international$usiness* ,hese startin( #oints are reasona$leand -idely shared and can $e used to constructa suf/ciently detailed choice situation that yieldssi(ni/cant ethical #rinci#les*

Ra-ls ; !DDDa1 #* ! < descri$es the choicesituation as follo-s:

***a sim#li/ed situation is descri$ed in -hichrational individuals -ith certain ends andrelated to each other in certain -ays are tochoose amon( various courses of action invie- of their 4no-led(e of the circum>

stances* hat these individuals -ill do isthen derived $y strictly deductive reasonin(from these assum#tions a$out their $eliefsand interests1 their situation and the o#tionso#en to them*

,here mere fact that one can descri$e a /ctionalscenario in -hich contractors arrive at ana(reement does not #rovide .usti/cation for thata(reement* After all1 contractors could $edescri$ed so as to a(ree to anythin(* HH,o .ustifya #articular descri#tion of the initial situation onesho-s that it incor#orates these commonlyshared #resum#tions ;Ra-ls !DDDa1 #* !


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much to $lunt the im#act of consumers moralnorms on the /rm s $ottom line* 3iven theHHremar4a$le freedom to choose the le(al systemthat -ill (overn their o#erations ;Cra(( 2 1 #*2! < le(al1 social1 and cultural standards seeman increasin(ly #oor chec4 on the $ehavior of

multinational /rms*urthermore1 the HHa$ility of states to control the

le(al environmental re(ulatin( internationalcommerce has $een

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further -ea4ened $y free trade a(reements suchas NA ,A and the , ;Cra(( 2 1 #* 2!


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all must have an e6ual ri(ht to #ro#ose and ar(uefor or a(ainst #rinci#les* ,he #resence andin5uence of multinational /rms in the social and#olitical life of communities su((est that it is a

commonly shared #resum#tion that $usiness $econsidered an im#ortant #art of the community1and thus to have a voice

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P* Neimanat the ta$le in determinin( ho- its o#erationsare to $e constrained $y ethical #rinci#les* ,his#resum#tion coheres -ith the conce#tion of the/rm as $oth an economic and #olitical a(ent1 as-ell as the conce#t of the /rm as a citi0en of thecommunity* Oastly1 it seems a reasona$lerestriction that individuals $e held to thecontracts they a(ree to as a result of thene(otiation* ,his is a sim#le re6uirement for any$usiness transaction*

,he construction of SCIBE s contractin(situation must incor#orate these commonlyshared #resum#tions and yield de/nite ethical#rinci#les for international $usiness* ,hus1 thechoice situation descri$ed inthe follo-in( hast-o #rimary (oals: irst1 it must incor#orate thecommonly shared #resum#tions1 and second1 thecontractors and the conditions they are undermust $e descri$ed in suf/cient detail to #roducean a(reement on ethical #rinci#les forinternational $usiness* ,o these ends1 ane(otiation is ima(ined $et-een J* uncan 3reyand Eli0a$eth Redd1 -ho re#resent a $usinessand a community1 res#ectively1 -hich areinterested in see4in( the $ene/ts of internationaltrade*

,he 3reyQRedd Ne(otiation

J* uncan 3rey entered the $ri(ht1 if $are1conference room1 annoyed that his counter#arthad yet to arrive* ,all1 /t1 and dressed shar#ly in-hat a##eared to $e a ne- suit1 &r* 3reyconsidered his time eminently valua$le1 and1thou(h he could not 6uite e@#lain -hy1 he hadthe va(ue feelin( that this -hole #rocess -as a-aste of it* Still1 he -as a$ove all else a$usinessman -ith a .o$ to do* 3rey 4ne- thatthese ne(otiations -ould $e necessary if hiscom#any -as to have access to ne- mar4etso#enin( u# overseas* So1 calmly smoothin( histie1 he sat do-n at the ta$le1 #ausin( only $rie5yas he reali0ed that he could not remem$er any

details a$out his com#any1 or even his industry*ere they tryin( to introduce a #roduct into ane- mar4et or see4in( a chea#er source of la$or In the end1 J* uncan 3rey reali0ed that itdid not really matter his interest -as inensurin( that the ethical #rinci#les a(reed totoday -ould allo- $usiness to ma4e as much#ro/t as #ossi$le*

A clic4in( of heels across the 5oor announcedthe arrival of Eli0a$eth Redd ;/nally sionals* e have all of the information -e needto lay do-n some ethical #rinci#les for ho-forei(n $usiness -ill interact -ith communities*Oet s (et started*&s Redd smiled as she reali0ed that 3rey -asri(ht* She could eFectively ne(otiate for the

economic $ene/ts that trade -ith internationalcom#anies -ould $rin(* hile she lac4ed s#eci/cinformation a$out the nature of his industry orher community1 someho- she 4ne- that 3reycould not force her to acce#tin( a deal that didnot satisfy the interests of her community*

hatever else a$out her community she hadmysteriously lost on enterin( this room1 she4ne- that it -as not de#endent on internationaltrade for its -ell>$ein(* Seein( a similarcon/dence in his eyes1 she reali0ed that 3rey-as in the same #osition* is com#any1 -hatever

it mi(ht $e involved in1 -as not de#endent oninternational trade either* If they -ere to come toan a(reement1 $oth -ould have to $ene/t*


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al4in( a-ay from the ta$le -ould mean losin(advanta(es that could $e (ained throu(hinternational trade1 $ut neither the com#any northe community -ould suFer for it* Smilin((amely1 Redd said1 HHOet s (et to -or4

Commonly Shared Presum#tions in the3reyQRedd Ne(otiations

,he 3reyQRedd ne(otiation descri$ed in#recedin( incor#orates commonly shared#resum#tions from the domain of

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international $usiness1 and1 as sho-n in the ne@tsection1 yields a si(ni/cant set of ethical#rinci#les* ,he contractors lac4 of #articularinformation a$out the com#any and community1com$ined -ith their $elief in the sustaina$ility of their clients1 ensures that the /rst commonlyshared #resum#tion is incor#orated into thechoice situation* Information a$out thecom#any s industry1 #ro/ta$ility1 culture1mission1 and so on is hidden from thecontractors1 as is any 4no-led(e of the culture1economics1 and demo(ra#hics of the community*

,his constraint ma4es it im#ossi$le for eitherne(otiator to use coercion1 of any 4ind1 a(ainstthe other* 3rey1 for e@am#le1 does not 4no--hether he re#resents a multi>$illion dollarcor#oration or a small $usiness o-ner1 and thusis not in a #osition to use economic coercion too$tain Redd s a(reement* Similarly1 3rey andRedd are i(norant of any cultural1 #olitical1 ormilitary #o-er they may #ossess* It1 thus1$ecomes im#ossi$le for these factors to #lay arole in their ne(otiations*

,he $elief that the com#any and thecommunity are sustaina$le also #lays anim#ortant role in incor#oratin( the /rstcommonly shared #resum#tion* ne of the char>acteristics of international $usiness is the a$ilityof multinational cor#orations to e@ert #ressure onnations to -ea4en or avoid le(al restrictions1es#ecially underdevelo#ed nations that may $e

des#erate for forei(n investment* ,hesustaina$ility of each #arty ensures that neitherone is des#erate for -hat the other may #rovide*

,hus1 Redd assumes that the citi0ens of hercommunity have a decent standard of livin( andare reasona$ly safe from environment harms1-hereas 3rey assumes that international trade issomethin( $ene/cial1 thou(h not necessary1 tothe future of the com#any* In the ne(otiations1this ensures that 3rey and Redd cannot forceone another to acce#t any #ro#osals* Becauseeach ne(otiator is free to -al4 a-ay from theta$le -ithout harmin( their clients1 and $ecause

a(reement is needed for either to reali0e the$ene/ts of international trade1 each ne(otiatormust $e -illin( to -ei(h the other s #ro#osals*

,his ensures that the second commonly shared#resum#tion that all #arties have an e6ual ri(htto #ro#ose and ar(ue for ethical #rinci#les isincor#orated into the ne(otiation* inally1 $othreco(ni0e that the $ene/ts of international tradeare only availa$le if they come to an a(reement1and this condition ensures that the #arties ta4ethe ne(otiations seriously1 thus incor#oratin( the/nal commonly shared #resum#tion*

Beyond incor#oratin( SCIBE s commonlyshared #resum#tions1 the choice situation mustalso $e detailed enou(h to #roduce ana(reement to s#eci/c ethical #rinci#les* It may

seem that the constraints on information #reventthis* o-ever1 this constraint seems necessaryto ensure that the ne(otiations ta4e #lace at alevel of a$straction that is suita$le for universal#rinci#les of international $usiness ethics1 ratherthan com#any or industry s#eci/c rules* If1 fore@am#le1 3rey 4ne- he re#resented a mar4etin(

/rm -ith little use for e@#loitation of naturalresources1 he may $e tem#ted to (ive (reaterconcessions on environmental o$li(ations thanhe -ould if he re#resented an oil com#any*3rey and Redd arrive at an a(reement ons#eci/c ethical #rinci#les throu(h a considerationof their shared desire to reali0e the $ene/ts of international trade* 3rey s motivation is reducedto a desire to see4 #ro/t* hatever other (oalsthe com#any may have1 ethical rules that allo- itto $e more #ro/ta$le -ill hel# the com#anyachieve them* 8 hile Redd is concerned for the-ell>$ein( of her entire community1 includin( itssocial and cultural life1 in the ne(otiations herinterest is limited to the economic $ene/ts of international trade* Communities ho#e thatinternational trade -ill increase em#loyment1income1 and -ealth1 as -ell as (enerate (reatersocial (oods* Social (oods are de/ned here asthose thin(s that im#rove the -ell>$ein( of thecommunity as a -hole* ,his mi(ht include#hysical (oods that forei(n $usiness canconstruct or contri$ute to1 such as schools1hos#itals1 or roads* It also includes the ri(hts andli$erties that are necessary for the -ell>$ein( of the community1 such as civil ri(hts to freedomfrom harm or social ri(hts to $asic necessities*

,here is an e@#ectation that international trade-ill increase $oth economic $ene/ts and social(oods ;&atten and Crane 2 % Scherer et al*2


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diFerent set of commonly shared #resum#tions1and

8 Su##ose1 for e@am#le1 that 3rey is re#resentin(a state>run com#any1 -hose main motivation is

to #rovide social (oods for #eo#le in its homenation1 or that he is re#resentin( a family run$usiness1 -hose main motivation is to #rovidefor the future (enerations of the family* Bein(more1 rather than less1 #ro/ta$le can only hel#achieve these aims*

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P* Neiman-ill $e chec4ed a(ainst a diFerent set of considered moral .ud(ments* ,he restrictions on the4no-led(e of the ne(otiators1 alon( -ith the $elief that they re#resent a sustaina$le $usiness andcommunity1 have $een introduced to #revent 3rey or Redd from e@ercisin( any coercive #o-er in thene(otiation over ethical #rinci#les* In this sense1 3rey and Redd are conceived of as e6uals in thene(otiations: ,hey are e6ually s4illed ne(otiators1 and they have e6ual amounts of #o-er* Philli#s and&ar(olis ; !DDD< ar(ue that e6uality in the choice situation may $e a##ro#riate for arrivin( at a .ust$asic structure of society1 $ut it may not $e a##ro#riate for a .ust distri$ution -ithin a $usiness*SCIBE s choice situation is conceived as a ne(otiation $et-een $usiness and the community1 not .ustthe internal sta4eholders of the $usiness* D ,he $usiness and the community are considered e6ualsonly in that each must consent1 free from all coercion1 to the ethical #rinci#les that (overn theirrelationshi#* As the lo(ic of the ne(otiation demonstrates1 the e6uality of #o-er $et-een 3rey andRedd does not necessitate an e6ual distri$ution of ris4s and $ene/ts of international trade*

Accordin( to the #rocedure descri$ed in HHConstructin( and Justifyin( the Social Contract section1the 3reyQ Redd ne(otiation1 as the choice situation for the social contract for international $usinessethics1 is .usti/ed if it incor#orates the commonly shared #resum#tions and leads to a(reement tos#eci/c ethical #rinci#les that match or e@tend considered moral .ud(ments in -ide re5ectivee6uili$rium* ide re5ective e6uili$rium re6uires that the #rinci#les derived from the choice situation$e consistent -ith considered moral .ud(ments and $ac4(round theories that su##ort the commonlyshared #resum#tions on -hich the choice situation -as constructed ; aniels !DD


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$usinesses* ,o 3rey1 the ethical #rinci#les are limitations on the #ro/ta$ility of international trade* ,his does not mean that 3rey has an interest in actin( immorally this ne(otiation is to de/ne -hatimmoral and moral action means $ut1 (iven 3rey s self>interest in #ro/ts1 he -ill see4 to minimi0ethe moral o$li(ations of $usiness* No-1 3rey does not 4no- ho- #ro/ta$le his com#any is1 and so hedoes not 4no- at -hat #oint the moral restrictions on international trade -ill render it undesira$le*

,his is one of the intentional conse6uences of the choice situation* Su##ose1 for e@am#le1 that 3reyre#resented a very #ro/ta$le $usiness* e mi(ht

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then decide that very restrictive moralstandards1 -hich only very #ro/ta$le $usinessescould u#hold1 are desira$le1 $ecause this -oulddrive com#etitors out of international mar4ets*But $ecause 3rey does not have this information1he is forced to ne(otiate for ethical #rinci#les

that e@#and o##ortunities for international tradeto all $usinesses* 3rey s initial $ar(ainin(#osition remains some-hat va(ue1 $ut can $edescri$ed as the #oint at -hich the ris4 of loss ininternational trade threatens the sustaina$ility of the com#any s domestic o#erations*

a(es

Redd $elieves that her community1 -ithoutinternational trade1 en.oys a decent standard of livin(1 -ith access to sustaina$le em#loymentand social (oods* Redd can1 thus1 #resume thatmem$ers of her community earn at least a livin(-a(e that1 in con.unction -ith -hatever (oodsand services are #rovided $y the community1 isca#a$le of sustainin( a decent standard of livin(*Redd s initial $ar(ainin( #osition1 then1 is anethical #rinci#le that o$li(ates forei(n $usinesses

to #ay1 at minimum1 a livin( -a(e* ,here is1 of course1 some de$ate on -hat e@actly a livin(-a(e entails* 3iven -hat is 4no-n a$out Redd scommunity1 it is assumed that a livin( -a(eena$les #ersons to #rovide for themselves andtheir family suita$le food1 -ater1 shelter1 andmedical care* No-1 3rey mi(ht ar(ue thatinternational $usiness -ill increase em#loymento##ortunities1 and that in e@chan(e for this$ene/t to the community1 Redd should $e -illin(to acce#t a su$>livin( -a(e standard* But Redd4no-s that her community is not de#endent oninternational trade for its -ell>$ein(1 and so she

assumes that the current em#loyment rate issuf/cient to #rovide a suita$le standard of livin(*Redd -ill thus al-ays #rioriti0e 6uality over6uantity of em#loyment in ne(otiatin( -ith 3rey1and thus must refuse to $e #ushed $elo- a livin(-a(e standard*

3rey see4s to ma@imi0e the 5e@i$ility of $usinesses to set -a(es* e mi(ht thus $etem#ted to #ro#ose that the free mar4etdetermine -hat -a(e standards are ethical*Alternatively1 he mi(ht #ro#ose that local la-determine ethical standards for -a(es* But(overnments may #ur#osely set -ea4 la$or la-sin ho#es of enticin( forei(n investment1 and inim#overished nations -ith hi(h unem#loyment1free mar4et -a(es may $e similarly undesira$le*Both of these #ro#osals1 then1 call for -a(estandards that are #otentially -ea4er thanRedd s initial $ar(ainin( #osition1 and it is thusirrational for Redd to acce#t them*

Redd see4s to secure the (reatest economic$ene/ts for her community1 and so she mi(ht#ro#ose a -a(e standard that calls for a hi(hlevel of #ro/t sharin( on to# of a livin( -a(e*

o-ever1 the more money forei(n $usinessesare re6uired to s#end on la$or1 the lessattractive international trade $ecomes* ithoutany details a$out the #ro/ta$ility of hiscom#any1 3rey cannot ma4e a #recise

determination at -hat #oint hi(her -a(estandards ma4e international trade undesira$le*It seems1 then1 that 3rey and Redd mi(ht a(reeon an ethical #rinci#le re6uirin( forei(n$usinesses to #ay more than a livin( -a(e* ,hisethical #rinci#le #rovides a $ene/t $eyondRedd s initial $ar(ainin( #osition1 -hile allo-in(3rey to ensure that o##ortunities forinternational trade -ill not $e overly s6uee0ed$y restrictive -a(e standards*

f course1 one mi(ht o$.ect that there are manyreal communities that -ould acce#t su$>livin(

-a(es in e@chan(e for (reater em#loymento##ortunities* If1 for e@am#le1 $usinesses -erere6uired to #ay more than a livin( -a(e tomanufacture (arments1 then $usinesses mayfor(o investin( in underdevelo#ed nations1leavin( #eo#le -orse oF than they -ould have$een* ne mi(ht res#ond $y challen(in( theli4elihood of this chain of conse6uences1 (iventhat a livin( -a(e in1 say1 Ban(ladesh is far lessthan it is in the 7nited States* But instead1 it issuf/cient to #oint out that such actuala(reements are themselves unethical1 as they

often involve multinational /rms1 or theirsu##liers1 usin( economic coercion to o$tain theconsent of (overnments1 su##liers1 orem#loyees* ,he #ur#ose of the 3reyQReddne(otiations is to model a choice situation in-hich1 amon( other restrictions1 economiccoercion does not in5uence the a(reement*

,he Environment

Redd s initial $ar(ainin( #osition onenvironmental o$li(ations is derived from her

$elief that the community is sustaina$le and#rovides a decent standard of livin(* It is thusreasona$le for Redd to assume that thecommunity is e@#osed to an amount of environmental ris4 and harm from domestic$usinesses that is matched $y the community sa$ility to mana(e it* Su##ose1 for e@am#le1 thatRedd s community is home to a com#any thatdrills for oil* Beyond the economic $ene/ts thiscom#any #rovides1 the community must havethe means to #revent an oil s#ill from occurrin(1and1 if one does occur1 to miti(ate the resultin(

dama(e* If an oil s#ill threatens the livelihoods of mem$ers of the community1 then the communitymust have the means $oth to com#ensate the


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aFected individuals and to clean u# the dama(ein a -ay that can restore #eo#le to their formerstandard of livin(* Alternatively1 one mi(htassume that Redd s community has minimalca#acity to mana(e environmental dama(e1 andthis is matched $y a minimal amount of

environmental ris4 #erha#s the communitycontains fe- domestic $usinesses that createsuch ris4* Redd s initial $ar(ainin( #osition1 then1is such that the ris4 of environmental harm isminimal1 and the

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P* Neimancommunity has the means to com#ensate andcare for those -ho mi(ht $e aFected*

f course1 even if Redd s community is at littleris4 from domestic $usinesses1 it may still $ene(atively aFected $y forei(n $usinesseso#eratin( outside the community* or e@am#le1

Redd s community may $e aFected $y climatechan(e re(ardless of the amount of car$onemissions it (enerates* In 4ee#in( -ith her $elief in the sustaina$ility of her community1 Reddassumes that her community is -ell>situated forthe #resent* She is a-are that climate chan(emay #ose a #ro$lem for her community in thefuture1 $ut any im#acts from it1 such as chan(esin #reci#itation or sea levels1 is mana(ea$le*

Because neither ne(otiator 4no-s -hat ty#e of industry 3rey s com#any is involved in1 theymust $e concerned -ith all #ossi$le ty#es of environmental harms it mi(ht $rin( to the

community1 such as contaminated -ater andfood su##lies1 destruction of farm or marineindustries1 air #ollution1 and climate chan(e* orRedd1 this means that she see4s ethical#rinci#les that #rotect her community fromincreased ris4 and that shift as muchres#onsi$ility as #ossi$ility onto incomin( forei(n$usinesses* In this -ay1 she #rotects hercommunity s interest in the $ene/ts of international trade -hile minimi0in( its ris4s*3rey s #osition is similar: e desires as muchmoral freedom as #ossi$le in o#eratin( in Redd scommunity* ,his does not mean that 3rey is-holly o##osed to environmental re(ulations*Rather1 he see4s ma@imum 5e@i$ility in deter>minin( ho- to ma@imi0e #ro/ts*

3rey thus mi(ht #ro#ose to $aseenvironmental standards on the free mar4et* If investors and consumers are concerned that acom#any is shir4in( its environmentalres#onsi$ilities1 then they -ill refuse do $usiness-ith it1 and the com#any -ill ad.ust accordin(lyor #erish* ,his #ro#osal a##eals to 3rey sinterests $ecause it ali(ns its environmentalres#onsi$ility -ith its /duciary res#onsi$ility* Butthis is not a #ro#osal that Redd can acce#t$ecause it falls short of her initial $ar(ainin(#osition* Currently1 her community isenvironmentally sustaina$le* ,he entrance of forei(n $usinesses into the community mayincrease the ris4 of environmental dama(e$eyond the #oint -here the community canmiti(ate harm done to its citi0ens* 3rey s mar4et#ro#osal #laces the moral res#onsi$ility forim#osin( limits on the amount of ris4 Redd scommunity can $e e@#osed to on consumers andinvestors -ho may $e i(norant of orunconcerned -ith the environmental #ro$lems of

a forei(n community* Res#ondin( to #otentially-ea4 mar4et #ressures after the dama(e hasalready $een done does not oFer much

#rotection for Redd s community* 3rey s secondfavorite #ro#osal1 to match ethical standards forenvironmental res#onsi$ility to the local le(alstandards1 li4e-ise fails to rise a$ove Redd sinitial $ar(ainin( #osition* 3iven multinational/rms a$ility to choose and in5uence the le(alenvironment they o#erate in1 this ethical#rinci#le #rovides a #otentially lo-er standardthan the environmental sustaina$ility that Redd scommunity1 as she understands it at the$ar(ainin( ta$le1 #resently en.oys* Because theaddition of forei(n $usiness increases the ris4 of environmental harm1 Redd mi(ht #ush for anethical standard that re6uires 3rey to ta4e all#ossi$le #recautions to #revent dama(es fromoccurrin(* But this -ould re6uire forei(n$usinesses to constantly ado#t the latesttechnolo(ies* ,his -ould ma4e international$usiness overly onerous and limit it to /rms that

have the /nancial resources to fre6uently investin ne- technolo(ies* Because 3rey does not4no- if this -ill e@clude the $usiness here#resents1 he cannot acce#t this #ro#osal*

here1 then1 can 3rey and Redd /ndcom#romise 3rey mi(ht $e(in -ith a #ro#osalthat morally o$li(ates $usinesses to ado#tindustry-ide standards -hen o#eratin( inforei(n nations* ,his #rinci#le means that 3rey-ould no lon(er $e a$le to increase #ro/ta$ility$y see4in( out nations -ith -ea4erenvironmental la-s1 $ut then that -as not one of the acce#ta$le outcomes for Redd any-ay*3rey s #ro#osal does #rovide suf/cient#rotection to Redd s community* Industrystandards may $e set to ful/ll le(al re6uirementsof develo#ed nations1 -hich often have astron(er re(ulatory environment1 or to a##easeconsumers and investors -ho may $e trou$led$y #ast environmental disasters caused or made-orse $y $usinesses* Nevertheless1 Redd s (oalis to #rovide as much #rotection for hercommunity as #ossi$le* She thus counters -ithan ethical #rinci#le re6uirin( forei(n $usinessesto ado#t the hi(hest industry-ide environmentalstandards* hile some industries have clearlyidenti/ed and acce#ted environmental #ractices1in other areas1 such as climate chan(e1 theremay $e a num$er of -idely ado#ted standards-ithin an industry* Redd s #ro#osal thus attem#tsto ensure that $usinesses cannot avoid stricterstandards $y #ointin( to a small num$er of $usinesses -hose #ractices are lessenvironmentally safe* In many cases1 then1 thedistance $et-een the t-o #ro#osals is not (reat*

hile 3rey -ould #refer the 5e@i$ility to choosefrom a variety of industry standards1 it seemsreasona$le for him to acce#t Redd s #ro#osal*

f course1 no matter -hat #recautions are ta4en1some environmental dama(e -ill inevita$lyoccur1 either accidentally or as a $y#roduct of normal $usiness o#erations* hile the #revious


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#rinci#le should limit environmental dama(efrom occurrin(1 -ho shall $ear res#onsi$ility forthe dama(es -hen they do occur Redd s initial$ar(ainin( #osition re6uires that she ta4es avery /rm stance on this issue* As noted earlier1

she $elieves that her community is #resentlyca#a$le of mana(in( environmental harm thatthey are at ris4 of incurrin(* hile the #reviousethical

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#rinci#le limits the ris4 of environmentaldama(e1 if it does occur1 the community mustretain the a$ility to care for its citi0ens*

3rey mi(ht #ro#ose that the com#any and thecommunity $ear e6ual res#onsi$ility for anyenvironmental dama(e* Becuase the communitya##roved of the measures the com#any too4 to

#revent the dama(e1 and $ecause thecommunity rea#s some of the $ene/ts of thecom#any s o#erations1 it should $ear an e6ualshare of the res#onsi$ility for com#ensation andrestoration* hile Redd can see the lo(ic of 3rey s ar(ument1 she is also a-are that manycommunities1 es#ecially those in underdevelo#ednations1 lac4 the means1 technolo(y1 ande@#ertise to deal -ith an environmental disaster*No-1 all Redd 4no-s a$out the community shere#resents is deduced from its sustaina$ility1namely1 that it is ca#a$le of mana(in( theenvironmental dama(es it is at ris4 of* But as she4no-s nothin( a$out the level of economicdevelo#ment in her community1 she does not4no- -hether her community is ca#a$le of this$ecause it is -ealthy and #ros#erous1 or $ecauseit has very fe- domestic industries that cancause severe environmental dama(e* 3rey s#ro#osal1 then1 carries -ith it the #ossi$ility thatafter the com#any has #rovided its share of thecost of com#ensation and clean>u#1 thecommunity -ill still $e devastated* ,hus1 Reddmust stand /rm and #ro#ose that 3rey must $eethically re6uired to $ear the entire res#onsi$ilityfor environmental dama(es caused $y his /rm*

,his ethical #rinci#le increases the lia$ility of com#anies en(a(ed in environmentally sensitiveo#erations1 and as a result more cautiousinternational $usinesses may choose to #ass u#some o##ortunities* But 3rey 4no-s that ris4 isinherent in all investments and feels comforta$leleavin( the ris4Q$ene/t calculation u# to those$usinesses that are -illin( to ta4e (reaterchances to increase #ro/ts* 3iven -hat is atsta4e1 Redd is necessarily more cautious*

,herefore1 thou(h he may not $e entirely#leased -ith it1 3rey a(rees to Redd s #ro#osal

that international com#anies are res#onsi$le forall environmental dama(es resultin( from theiro#erations*

It may seem that 3rey (ives in fairly easily toRedd s demands on environmental issues* ,hisim#ression may stem from the si(ni/cantdistance $et-een the 3reyQRedd ne(otiation andactual relationshi#s $et-een multinational$usinesses and forei(n nations* In Ecuador1 fore@am#le1 Chevron has $een /(htin( a le(al$attle over the clean>u# and miti(ation of oildama(es inherited from ,e@aco for more than 2years* Shell has dealt -ith similar issues in

Ni(eria for an even lon(er #eriod of time* In $othcases1 the cor#orations do not reco(ni0e moralres#onsi$ility for the entirety of dama(es caused

as a result of their #resence1 as re6uired $y the#rinci#le a(reed to $y 3rey and Redd* ,he#ur#ose of an ethical #rinci#le1 thou(h1 is not todescri$e cor#orate $ehavior as it is1 $ut as itou(ht to $e* ,o consider these to $ecountere@am#les to this ethical #rinci#le1 then1 isto assert that Chevron and Shell have $een

models of ethical $ehavior* urthermore1 Chevronand Shell ne(otiate from a #osition of (reatstren(th relative to the #eo#le of Ecuador sAma0on and Ni(eria s Ni(er River delta1 $oth of -hom have had their interests i(nored $y their(overnments* In the ne(otiations1 Redd s#osition is stron(er relative to the #eo#le of Ecuadorian Ama0on and Ni(eria s Ni(er Riverdelta1 and 3rey s #osition is -ea4er relative toChevron and Shell* ,he constraints that ne(o>tiators are #laced under are .usti/ed1 not$ecause they resem$le1 or fail to resem$le1ne(otiations in the real -orld1 $ut $ecause they

incor#orate commonly shared #resum#tions and#roduce ethical #rinci#les that match or e@tendconsidered moral .ud(ments in -ide re5ectivee6uili$rium* 7nder these constraints1 thea(reement 3rey and Redd reach seemsreasona$le*3iven the im#ortance of (lo$al climate chan(e1 itis -orth $rie5y considerin( the im#lications of SCIBE s environmental #rinci#le* orei(n$usinesses -ishin( to enter Redd s communityare re6uired to ado#t the hi(hest industrystandards in limitin( their emissions* It is

#ossi$le that real communities -ould o##ose thisre6uirement* 3iven that climate chan(e is alon(>term #ro$lem1 a community may desire theshort>term $ene/t of #ermittin( heavy #ollutersin e@chan(e for economic (ro-th anddevelo#ment* Because the dama(es fromclimate chan(e are dif/cult to 6uantify1 and maynot even $e felt -ithin the community in -hichthe #ollution occurs1 this may seem to $e arational strate(y to ado#t* Redd is #reventedfrom doin( so for t-o reasons: irst1 she assumesthat her community is at ris4 of dama(e from

climate chan(e1 $ut that these dama(es are1 at#resent1 mana(ea$le* ,his ma4es her littledis#osed to #ut her community at ris4 for eco>nomic $ene/ts that are not needed* Second1Redd does not 4no- -hat #articular communityshe is re#resentin(* ,hus1 she is una$le toassume that the ris4 of dama(e -ould not fall onher community*

Cultural and Social Norms

Perha#s the most trou$lin( item on the a(endafor Redd is ne(otiatin( ethical #rinci#les forcultural and social norms* n this issue1 she feelsthe loss of her communal identity dee#ly* n one


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hand1 she does not -ant to a(ree to ethical#rinci#les that .eo#ardi0e the e@istence ormeanin( of the cultural or social norms of thecommunity* ,he confusion and an@iety she feelsat havin( $een cut oF from her identity is notsomethin( she -ishes to see re#licated in -hole

communities* But on the other hand1 $oth sheand 3rey 4no- that some cultural and socialnorms1 or #ractices that a##ear to $e culturaland social norms1 are 6uite sim#ly immoral*&ultinational cor#orations o#eratin( in

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P* NeimanSouth Africa under a#artheid1 for e@am#le1 -erefaced -ith social norms re6uirin( -hite SouthAfricans to $e (iven (reater com#ensation ando##ortunities than $lac4 or indi(enous SouthAfricans* Redd does not -ant to (ive forei(n$usinesses free rei(n to disre(ard cultural or

social norms1 as this may $e harmful to thecommunity1 $ut neither does she -ish to re6uirethem to follo- all social and cultural norms1$ecause this may also $e harmful to thecommunity* Redd s initial $ar(ainin( #osition isderived from the sustaina$ility and standard of livin( of her community* She thus assumes thatthe social and cultural norms of her communitydo not inhi$it its citi0ens from en.oyin( a decentstandard of livin(*

A(reement on this issue arises from aconsideration of the #rimary concerns of each

contractor* 3rey s concern for #ro/t is narro-and fairly sim#le: is com#any cares a$out thecultural and social norms of the community onlyinsofar as they #ositively or ne(atively aFect the$ottom line* If a$idin( $y local cultural and socialnorms increases #ro/ts1 then so $e it1 $ut if doin( so decreases #ro/ts or causes ne(ative#u$licity1 then it mi(ht $e $est to i(nore them*

es#ite Redd s loss of communal identity1 shecan still ar(ue for ethical #rinci#les that -ill#rotect the community s interest in internationaltrade1 namely1 increased economic $ene/ts andsocial (oods* Social (oods are de/ned as thosethin(s that im#rove the -ell>$ein( of thecommunity as a -hole1 such as #u$lic schools1 ahealth care system accessi$le to mem$ers of thecommunity1 and clean air and drin4in( -ater*

,hese (oods have value to the entirecommunity1 and are accessi$le to the entirecommunity1 -hether individuals choose to ma4euse of them or not* It is1 for e@am#le1 $ene/cialto live in a -ell>educated community even if one#ersonally does not utili0e the community seducation system* Cultural and social norms can$e one as#ect of the -ell>$ein( of a community1and in this sense1 they can $e considered social(oods* Insofar as social (oods are com#onents of the community s standard of livin(1 Redd sconcern is to ensure that forei(n $usinesses donot im#ose or a$ide $y any social or culturalnorms that inhi$it mem$ers of the communityfrom en.oyin( social (oods*

No-1 $ecause social (oods are de/ned ascom#onents of the community s -ell>$ein( thatall mem$ers have access to1 accessi$ility -ill $ethe main criteria $y -hich Redd .ud(es -hethera forei(n $usiness s com#liance -ith a social orcultural norm is harmful* Redd s #ro#osal1 then1

is that forei(n $usinesses have an o$li(ation too$ey social and cultural norms e@ce#t -hen theyrestrict access to economic $ene/ts or social(oods* ,his #rinci#le a##eals to Redd for several

reasons* irst1 it is consistent -ith her #rimary(oal1 -hich is to secure economic $ene/ts andsocial (oods for the community* Because social(oods must $e accessi$le to all1 Redd has nointerest in #rotectin( social or cultural normsthat restrict the availa$ility of social (oods*Second1 Redd has an o$li(ation to all of the#eo#le in the community1 and so she could nevera(ree to a #rinci#le that -ould #rovide $ene/tsto some at a cost to others* 3iven the lac4 of information availa$le to him1 3rey can have nostron( o$.ections to this #rinci#le* ,here are1 of course1 certain instances in -hich com#lyin(-ith or re.ectin( local cultural or social normsmay restrict #rofita$ility1 or #lace the com#any slocal or international re#utation in .eo#ardy*

o-ever1 this $ecomes .ust one more factor toinclude into the com#any s costQ$ene/t analysis*

,he restriction this #laces on o##ortunities for

international trade is not severe enou(h for 3reyto o##ose this #rinci#le*It is -orth considerin( ho- this #rinci#le -ouldaFect international $usiness* orei(n $usinessesin South Africa durin( the a#artheid era1 fore@am#le1 -ould $e re6uired to oFer economic$ene/ts1 such as em#loyment1 -a(es1 or#romotions1 and social (oods1 such as schools orroads1 e6ually to all South Africans* ,he claimthat restrictin( access to -a(es or su#ervisory#ositions -as in accordance -ith South Africansocial norms1 or even le(al re6uirements1 isre.ected $y Redd in her ne(otiations -ith 3rey1and so must $e re.ected $y forei(n $usinesseso#eratin( durin( this time #eriod* !

Another e@am#le is the #ractice1 #revalent insome cultures1 of favorin( or (uaranteein(em#loyment for friends or family of currentem#loyees* Redd does not 4no- if hercommunity favors or o##oses this #ractice$ecause s#eci/c information a$out the culture of her community is hidden* o-ever1 this #racticerestricts the availa$ility of .o$s and income $yma4in( it more dif/cult for those -ithout suchconnections to o$tain em#loyment* Accordin( toRedd s #rinci#le1 forei(n $usinesses should notcom#ly -ith this cultural #ractice* ne moree@am#le: some cultures re6uire -or4ers to $rea4for #rayer at certain times* ,his may seem aninconvenience to a manufacturer1 -ho mi(ht li4eto 4ee# #roduction (oin( at all times* o-ever1$y not allo-in( -or4ers to $rea4 for #rayer1 themanufacturer is restrictin( access to theeconomic $ene/ts of international trade to those-ho are -illin( to #ut aside their reli(ion* ,hus1the manufacturer is morally o$li(ated1 accordin(to the #rinci#le a(reed on $y 3rey and Redd1 tocom#ly -ith this cultural #ractice* ,here aremany cultural and social #ractices that do notrestrict access to the economic $ene/ts or social


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(oods #roduced $y international trade1 andaccordin( to SCIBE1 these ou(ht to $e res#ected$y forei(n $usiness*

! ,his is not to su((est that domestic $usinessesdo not have similar o$li(ations* Redd and 3reyare ne(otiatin( only over #rinci#les forinternational $usiness ethics*

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Considered &oral Jud(ments and ideRe5ective E6uili$rium

,he 3reyQRedd ne(otiation models thecommonly shared #resum#tions it seemsreasona$le and (enerally acce#ta$le to im#oseon ne(otiations for ethical #rinci#les for inter>

national $usiness1 and the t-o ne(otiators haveconsented to several ethical #rinci#les* ,ocom#lete the .usti/catory #rocess1 these ethical#rinci#les must rest in re5ective e6uili$rium -ithconsidered moral .ud(ments on international$usiness1 and the $ac4(round theories thatsu##ort the commonly shared #resum#tions*

,hese .ud(ments can $e dra-n from e@istin(international a(reements and initiatives* ,he7niversal eclaration on uman Ri(hts1 the3lo$al Sullivan Princi#les1 the 7nited Nations3lo$al Com#act1 and the International Oa$or

r(ani0ation s eclaration on undamentalPrinci#les and Ri(hts at or4 are all a##ro#riatesources for considered moral .ud(ments1 in #art$ecause they seem to $e im#artial .ud(mentsHHnot li4ely to $e distorted $y an e@cessiveattention to our o-n interests ;Ra-ls !DDDa1 #*!8


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It has $een demonstrated that SCIBE s #rinci#lesmatch or a##ro#riate e@tend considered moral

.ud(ments on international $usiness* ,hese#rinci#les -ere derived from a choice situation1the 3reyQRedd ne(otiation1 -hich is consistent-ith the conce#tion of the multinational /rm and

the domain of international $usiness* ,o avoidchar(es of relativism1 aniels ;!DD < ar(ues that-ide re5ective e6uili$rium re6uires aninde#endence constraint* ,his

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P* Neimanmeans that the set of considered moral

.ud(ments that constrain the conce#tions of themultinational /rm and the domain of international $usiness must $e si(ni/cantlydiFerent from the set of considered moral

.ud(ments that constrain SCIBE s ethical

#rinci#les* 3iven the varied sources used toe@#licate the conce#tions of the multinational/rm and domain of international $usiness1 itseems reasona$le that this inde#endenceconstraint has $een met* As noted earlier1 theconce#tions of the multinational /rm and domainof international $usiness and the restrictions onthe 3reyQRedd ne(otiation are consistent -ithattem#ts to utili0e JuLr(en a$ermas s ideals#eech conditions as the foundation of e@tantsocial contracts1 as -ell as cor#orate citi0enshi#theories* ,he considered moral .ud(ments that

constrain theories of cor#orate citi0enshi#de#end in #art on the conce#ts of citi0enshi# andcommunity1 and so seem si(ni/cantly diFerentfrom the considered moral .ud(ments used toconstrain SCIBE s ethical #rinci#les* ,hus1SCIBE s #rinci#les1 $ac4(round theories1 andconsidered moral .ud(ments are in -idere5ective e6uili$rium and ful/ll anielsinde#endence constraint*

Conclusions

SCIBE addresses three im#ortant ethical issues ininternational $usiness: -a(es1 environmentalres#onsi$ility1 and res#ect for social and culturalnorms* ne area not s#eci/cally discussed is therelationshi# $et-een multinational /rms andnational (overnments* It is im#ortant to notethat Redd re#resents the interests of acommunity1 not a (overnment* In thene(otiations1 Redd is un-illin( to acce#t 3rey s#ro#osal to match ethical rules -ith le(al rules1lar(ely $ecause the domain of international$usiness is characteri0ed $y the im$alance of #o-er $et-een multinational /rms and(overnments* ,here is no need for Redd to cedecontrol of the ne(otiations to actual (overnments-ho may $e un-illin( or una$le to serve theinterests of the community*

Social contract theory1 es#ecially -hen itutili0es a hy#othetical contractin( situation1 is$ound to $e met -ith some s4e#ticism* -or4in;!DM


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Similarly1 the

!! It mi(ht $e o$.ected that 3rey s /duciaryres#onsi$ility #rohi$its him from ne(otiatin(-ithout full information a$out the com#any he isre#resentin(* o-ever1 it should $e noted thatthe #ur#ose of the 3reyQRedd ne(otiation is to

model the restrictions it seems reason a$le to

im#ose on ar(uments for ethical #rinci#les forinternational $usiness* ,he decision to characteri0e 3reyand Redd as re#resentatives of clients is ar$itrary* 3reymi(ht instead have $een characteri0ed more va(uely asthe #ersoni/cation of multinational $usiness itself1 oreven as the sole o-ner of a multinational /rm -ith no/duciary res#onsi$ilities to anyone else*

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considered moral .ud(ments on international$usiness -ere ta4en from initiatives1 such as the7nited Nations 3lo$al Com#act and the 3lo$alSullivan Princi#les1 -hich many multinational/rms have voluntarily si(ned* ,he 3reyQ Reddne(otiation is a -ay of re#resentin( theconstraints that are already #art of the domain of international $usiness to arrive at ethical#rinci#les that match or e@tend considered moral

.ud(ments that some multinational /rms alreadyhold* ,he value of SCIBE is the normative .usti>/cation it #rovides for these ethical #rinci#les*

inally1 $y follo-in( the #rocedure forconstructin( and .ustifyin( the social contractdescri$ed in HH Constructin( and Justifyin( theSocial Contract section1 SCIBE ful/lls all four of the desi(n criteria identi/ed $y Ben em#e;2 8

disci#lined1 that is1 they should $e HHrestricted toesta$lishin( (eneral #rinci#les rather thanconcrete solutions to #ractical #ro$lems* hilethe restrictions on the 4no-led(e of thecontractors #revent them from solvin( #recise#ro$lems such as e@actly ho- much money a$usiness must devote to -a(es em#e ;2 8ci#les for other issues in international $usiness

could $e (enerated $y considerin( -hat furthera(reements 3rey and Redd mi(ht ne(otiate*em#e s ;2 8< second criterion is

ar(umentativity1 -hich re6uires the socialcontract to demonstrate the internal lo(ic $y-hich the contractors a(ree to certain #rinci#lesrather than others* ,he lo(ic of the ne(otiation$et-een 3rey and Redd has $een demonstratedin HH,he Ne(otiation: Ethical Princi#les forInternational Business section1 includin(e@#lorin( -hy the ne(otiators acce#t some#ro#osals and re.ect others* em#e s ;2 81#* M D< third criterion is tas4 directedness1 -hichre6uires that one must HHesta$lish $eforehand-hat function it Tthe social contractU shouldful/ll1 so as to model the initial contractualsituation accordin(ly* SCIBE s contractualsituation1 the 3reyQRedd ne(otiation1 has $eenconstructed from commonly shared#resum#tions1 $ased on conce#tions of themultinational /rm as a #olitical and economica(ent and the domain of international $usiness*In this -ay1 SCIBE s choice situation also ful/lls

em#e s ;2 81#* M! < fourth criterion1 domain s#eci/city*

References

Bisho#1 J* ;2 8#ro/t cor#orations in a .ust society:

A social contract ar(ument concernin( the ri(hts andres#onsi$ilities of cor#orations* Business EthicsVuarterly1 !8;2


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and the status 6uo* Philoso#hy = Pu$lic AFairs1 ;


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P* Neiman9eyt1 * ;!DMG


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A Social Contract for International Business

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