Every contract is built on the basis of three conditions (1) free and informed consent, (2) a quid pro quo, and (3) the rational self interest of the contracting parties.
- Free and Informed Consent: No contract is legitimate that is based on force, fraud or deception. The parties must enter into this agreement freely and without compulsion. They must understand the terms of the contract which excludes deception and fraud. In short, the contract presupposes the uncoerced participation of all the parties. To enter into the contract they must understand all the key issues and consent to the constitutive exchange.
- Quid Pro Quo: Quid Pro Quo literally means something in exchange for something. Every contract is built around a mutually beneficial exchange. I give you my baseball cap in exchange your ice cream. Most exchanges are simultaneous. But some are what Hobbes calls "covenants." Here I give you my baseball cap with the understanding that later this afternoon you will pass by your refrigerator, get my ice cream cone and give it to me. I give you my part now and trust you to carry out your part later.
- Rational Self Interest: Each of us should know the value of the items to be exchanged. (That is one reason why a contract requires free and informed consent.) This knowledge is determined, in part, by the preference schedules that we have developed as rationally self-interested beings. So a legitimate contract assumes that I have interests, that I am capable of determining what promotes these interests, and that I am rational enough to determine means to promote them and avoid other means that interfere with them.
Social Contracts
A social contract differs from other contracts because it is hypothetical. Business and Society have never sat down in a room and hammered out a contract outlining their relation. But this hypothetical contract provides a good means of making sense out of the relation that has gradually evolved between society and business. Forget for a moment the historical details of the relation between business and society. If this relation is summarized as a contract, what does society give to business? What does business give to society? Do these two institutions trust one another or do they each adopt means to monitor and control the other? What are these means? Treating the relation between business and society as a contract between two mutually consenting agents or actors does get some of the facts wrong. But it provides a useful "heuristic" device, i.e., a framework that will help us to summarize, structure, and, in a work, make sense of the relation between the two. Moving from the terms of this "contract" you will be able to develop a framework for understanding the social responsibilities of business corporations. This, in turn, will help you to understand the CSR challenges presented above and the CSRs of the fictional but realistic Burger Man corporation.
Exercise: In small groups, spell out the social contract between society and business.
- How can the absence of force, deception, and fraud be guaranteed in this contract? How should each side hold the other accountable? (This is especially the case where one side delivers at one time and the other side is trusted to deliver later.)
- What benefits can business bring to society? How can society benefit business. Develop a table with one column listing what business has to contribute to society and the other what society has to contribute to business. This table is the heart of your social contract.
- Assume that society and business are rationally self interested. How does this efect the formulation of the goods of the exchange? How does this enforce the terms of the contract? Are these self interests divergent? (Then each side must monitor the other to prevent the corruption of the contract.) Are these interests convergent? (Then the contract consists largely in building social capital and trust between the contracting parties.)
- Donaldson, 1993 uses social contract theory to account for the rights and duties of multinational corporations
Exercise: CSR and STS
Choose one of the CSR challenges above and construct a socio-technical table around it
STS Table
| Component/ Embedded Value | Technology (Hardware) | Technology (Software) | Physical Surroundings | Stakeholders | Procedures | Laws | Information and Information Systems |
| Justice | |||||||
| Free Speech | |||||||
| Property | |||||||
| Privacy | |||||||
| Safety |
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