A critical perspective of isct

Journal of Business Ethics (2006) 68:303–328 Ó Springer 2006
DOI 10.1007/s10551-006-9016-6

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

ABSTRACT. During the past ten years Integrative ticated and valuable ideas. See for example,
Social Contracts Theory (ISCT) has become part of the Donaldson (1989, 1982), Keeley (1988), a special
repertoire of specialized decision-oriented theories in the issue of the Business Ethics Quarterly (5:2) on the
business ethics literature. The intention here is to topic, and current research by Van Oosterhout et al.
(1) provide a brief overview of the structure and (forthcoming) and Wempe (forthcoming). Integra-
strengths of ISCT; (2) identify recurring themes in the
tive Social Contracts Theory (ISCT) initially
extensive commentary on the theory including brief
mention of how ISCT has been applied outside the
developed by Thomas Donaldson and Thomas
business ethics literature; (3) describe where research Dunfee is an important example of a contextual
appears to be headed; and (4) specify challenges faced by approach within the broad domain of contractualist
those who seek to reform ISCT. Key themes in the business ethics. ISCT will be the primary focus of
critiquing literature relate to (a) the identification process this essay.
for hypernorms; (b) justification of the recognition of ISCT1 was introduced in two articles published
hypernorms; (c) proposals for considering meso or meta in 1994 and 1995.2 In the intervening ten-year
norms; (d) clarification of the relationship between period, ISCT has become part of the repertoire of
stakeholder concepts and ISCT; (e) problems with specialized decision-oriented theories in the busi-
potentially unoccupied moral free space; (f) sources of ness ethics literature.3 ISCT has been subjected to
ethical obligation within the ISCT framework; and (g) varied and extensive critiques questioning virtually
the potential role for concepts of stakeholder dialogue
every aspect of the theory. In 1999, Donaldson and
and engagement.
Dunfee (hereafter referred to as TD24) published
KEY WORDS: social contract, integrative social con- Ties That Bind (1999), the book providing a full
tracts theory, moral free space, hypernorms, stakeholder elaboration of their theory. In Ties they responded
theory to the commentary existing at the time of its
writing. Subsequently, they have twice responded
Contractualist approaches to business ethics have directly to review essays on the book (Donaldson
become increasingly important over the past quarter and Dunfee, 2000; Dunfee and Donaldson, 2000)
century. The contractualist visions developed during and have written one book chapter summarizing
this period constitute a wide-ranging set of sophis- certain critiques of the theory (2003). There has
not, however, been any attempt to survey the
Thomas Dunfee is the Kolodny Professor of Social Responsi-
overall literature on ISCT since the publication of
bility at The Wharton School of the University of Pennsyl-
vania. He is a former president of the Academy of Legal
Ties.
Studies in Business and the Society for Business Ethics. He is The intention here is to (1) provide a brief
a former director of the Wharton Ethics Program and the overview of the nature and strengths of ISCT; (2)
Carol and Lawrence Zicklin Center for Business Ethics identify recurring themes in the extensive com-
Research. Professor Dunfee has written widely on topics in mentary on the theory, including brief mention of
business law and business ethics. how ISCT has been applied outside the business

304 Thomas W. Dunfee

ethics literature; (3) describe where research appears Ultimately, the primary purpose of ISCT is to
to be headed; and (4) specify challenges faced by provide a means of practical guidance to ethical
those who seek to reform ISCT. decision makers, particularly managers. ISCT is
designed to enhance ethical decision-making by
requiring managers to consider the impact of their
The nature and strengths of ISCT decisions on relevant communities while simulta-
neously insisting that they step even farther back and
It will be assumed that readers are familiar with ask whether the decision implicates universal moral
ISCT. Those who are interested in an executive principles. At the most basic level, if all ISCT
summary are referred to the entry on ISCT in the achieves is to influence managers to consider the
second edition of The Blackwell Encyclopedia of interests of relevant communities and the existence
Management: Business Ethics (2005, pp. 243–247) and of universal moral principles, it will have had a po-
´
the precis written by TD2 (2001). The title of the sitive impact.
theory suggests its basic nature. The term ‘‘integra- Whether ISCT has achieved its lofty ambitions is
tive’’ is used to illustrate that ISCT is based upon a controversial as will become clear in the subsequent
hypothetical social contract whose terms allow for sections. Nonetheless, the goals and context of ISCT
the generation of binding ethical obligations help clarify the difficulties involved in designing a
through the recognition of actual norms created in conceptual framework capable of satisfying Soule’s
real social and economic communities. A hypo- (2004) ‘‘lax’’ standard of whether a framework can
thetical social contract is thereby integrated with real ‘‘illuminate the moral salience of commercial life and
or extant social contracts. The plural ‘‘contracts’’ is guide scholars, practitioners, and students through its
used to emphasize the fact that ISCT envisions complexities’’ (p. 2). Four fundamental concerns
multitudinous local community-based social con- arise with approaches that seek to add concepts or
tracts establishing binding ethical norms. These in procedures to the existing framework of ISCT. First,
turn are limited by universal moral principles called they can limit the applicability of ISCT, causing it to
hypernorms. fall far short of its objective of providing general
Before summarizing the critical literature on guidance on issues of business ethics. Second,
ISCT, it is helpful to provide balance by detailing depending on their nature, additions can limit the
some of the recognized strengths of the theory. universality of ISCT, making it appear Western or
Doing so helps clarify the criteria by which chal- even limited to the United States. Third, additional
lenges and suggested modifications should be procedures can complicate the decision process
judged. Frederick (2004) states that ‘‘(c)ompared making it much less useful as a practical decision
with its current theoretical rivals .... ISCT is more tool. Fourth, they may cause the theoretical frame-
comprehensive, more analytically sophisticated, work to become incoherent or inconsistent, for
more socio-culturally grounded, and more mana- example, when concepts exogenous to contractarian
gerially operational’’ (p. 1). He goes on to note that thought are imposed on ISCT. With these caveats in
ISCT uniquely integrates core concepts from phi- mind, let us now turn to the identification of
losophy, social science and managerial practice while recurring critical themes in the literature on ISCT.
recognizing core value sources from political, reli-
gious, economic and philosophic norms. These
diverse foundations allow for an appropriate recog- Recurring themes in the literature critical
nition of ‘‘the social embeddedness of localized rule- of ISCT
making within a highly diverse global economy’’
(p. 2). According to Frederick, ISCT accepts the The substantial literature critiquing ISCT reveals
necessity of economic efficiency while at the same several recurring themes. Multiple writers have
time it provides for a system of procedural justice raised questions about (1) the nature, value and even
and due process. Within the business ethics acad- the existence of hypernorms; (2) the practicality of
emy, ISCT seeks to provide a bridge between nor- the theory for decision-making by managers; (3) the
mative and descriptive theorists.5 robustness of the theory; and (4) the sufficiency of its

Critical Perspective of Integrative Social Contracts Theory 305

justifications for creating ethical obligations for Thus, they suggest that the application of hyper-
managers. The critical commentary is fragmented, norms in a particular decision context is an inductive
with the commentators implicitly disagreeing with rather than a deductive exercise.
each other as much as they challenge ISCT. This is TD2 describe and emphasize a process by which
particularly true in reference to one of ISCT’s decision makers may identify hypernorms relevant to
most important components: substantive hyper- a pending decision. Their pragmatic approach is to
norms. Fans of hypernorms (e.g. Hartman et al., offer a set of proxies for identifying presumptive
2003; Rowan, 2001; Shaw, 2000) want to see hypernorms. Suggested proxies include widespread
them reformed so that they can play an enlarged global consensus, global industry standards, policies
role in ISCT. Critics of hypernorms (Douglas, of NGOs and intergovernmental organizations,
2000; Frederick, 2000a; Hartman, 1996) see them precepts of major religions and philosophies, global
as unnecessary to the theory or even as threats to professional standards and consistency with laws of
the legitimate interests of key stakeholders. Others multiple countries (1999, p. 60). They do not,
take a middle position advocating that the concept however, provide a detailed example of the appli-
be refined and justified (Soule, 2002). In the sec- cation of such a process in their own writings.
tions that follow, the major foci of the most Rowan (2001) is among those who find this
important criticisms will be summarized and ana- process-based approach unsatisfactory. He claims
lyzed. The first, questions about hypernorms, have that without a list of hypernorms ISCT is opera-
generated the greatest attention in the critiquing tionally impractical. Soule (2002) argues that the
literature. normative context of substantive hypernorms within
ISCT is too vague to be useful to managers. His
Critiques concerning hypernorms greatest concern, however, is that bias in identifying
Hypernorms have been a lightning rod for criticism substantive hypernorms will distort the value ISCT
of ISCT. The recurring themes concern whether brings to ethical decision-making. Soule is con-
hypernorms (1) can be identified for actual deci- cerned that ‘‘(t)he chances for carelessly or oppor-
sion-making; (2) are sufficiently justified in the tunistically locating wrong, rogue, or conveniently
ISCT macrosocial contract; (3) should be redefined self-servicing hypernorms are significant’’ (p. 119).
in some significant way; and (4) are even necessary Shaw (2000) shares this concern arguing that even
to the overall framework of ISCT. Implicit in TD2 are reading their own preferred outcomes into
some of these critiques is a fifth issue: whether the examples they give for candidate substantive
hypernorms change or evolve over time and hypernorms. Shaw further argues that their examples
whether in a given context conflicting hypernorms are tainted by excessive weight given to U.S.
might be identified, necessitating priority rules for practice.
hypernorms. Hartman et al. (2003) engage in an extensive
analysis by which they seek to apply the proxies to
Identifying hypernorms issues pertaining to global sweatshops and sourcing.
The usefulness of ISCT as a decision aid depends in Their approach is to use hypernorms as proactive
large part on the ability of users to identify quickly ethical rules. They do not seek to identify specific
non-controversial hypernorms capable of providing authentic norms and test those against hypernorms.
discrete guidance. This admonition applies with Taking this approach, Hartman et al. are able to
equal force to all three types of hypernorms: pro- identify four highly generalized hypernorms. How-
cedural, structural and substantive. TD2 have pro- ever, they find these unsatisfactory for providing
vided examples of candidate hypernorms but have specific answers to questions such as the precise
resolutely refused to provide a comprehensive listing number of maximum hours of work or amount of
of substantive hypernorms. Nor have they encour- pay that would be appropriate in a given context. As
aged others to do so. Instead, they see the search for a result, they conclude that ISCT is adequate for
hypernorms as a process that is ‘‘bottom-up in the identifying some basic parameters for ethical analysis,
sense that it is used to identify potential hypernorms but is incapable of providing the fine-grained dis-
relevant to a particular decision’’ (2000, p. 483). tinctions essential to the resolution of important


current issues in business ethics. Although the U.S. managers in the U.S. with the responses of
manner in which Hartman et al. identified hyper- Russians in Russia and obtained similar results. The
norms seems exemplary, their ultimate analysis is question that immediately arises is whether the
flawed by a failure to identify authentic norms ‘‘hypernorms’’ discovered in those studies are con-
capable of providing more fine grained analysis of sistent with ISCT. In fact, they may not be true
the issues they investigated. Analogous to swinging a examples of hypernorms. More analysis of convergence
golf club with one hand, they used only the hy- is needed before definitive conclusions can be reached.
pernorm component of ISCT, without consider- TD2 have never indicated that hypernorms are
ation of authentic norms. Had they applied ISCT by merely the product of global consensus. Instead,
first identifying authentic norms in firms and host global convergence of opinion is offered as only one
communities, and then testing those under hyper- of many proxies for substantive hypernorms. Thus,
norms,6 they should have gotten a much more sat- any findings of convergence have to be ratified by
isfactory result. In most cases, authentic norms will other proxies before a final conclusion can be drawn
provide the essential meat for the ethical analysis. In concerning the existence of a particular hypernorm.
rare instances, it may be that hypernorms can be used As they themselves recognize, the Hisrich and Spicer
alone, in a proactive manner and without reference studies demonstrate the challenges of empirical
to authentic norms to provide ethical guidance.7 research in this area. The fact that managers from
The experience with ISCT-influenced analyses of two or even four countries agree in an assessment of
ethical issues validates that the theory encourages whether an action is ethical does not, ipso facto,
active consideration of the possible existence of indicate the existence of a hypernorm. The con-
manifest universal ethical principles. vergence may solely represent the fact that there are
We can learn about the feasibility of identifying identical authentic norms in the communities being
hypernorms from empirical research using the ISCT tested. Perhaps even more important, these surveys
framework. To date, this research has focused on were limited to managers. As a consequence they
identifying cross-cultural norms by seeking to may not be reflective of the opinions of broader
establish commonality across diverse business com- humanity and, instead, may only represent authentic
munities. Hisrich et al. (2003) conducted a broad norms for a multi-lateral or global business com-
survey of reactions to scenarios emphasizing ethical munity. On the other hand, generating data on areas
decisions involving manager subjects in the United of agreement concerning specific issues in business
States, Slovenia, Russia and Turkey. The authors ethics provides a starting point for seeking evidence
considered consistent results across all four groups to of convergence that may ultimately result in recog-
indicate the existence of a hypernorm. Otherwise, nition of specific substantive hypernorms. Further
they considered divergent findings to represent empirical research needs to encompass more com-
authentic norms. Spicer et al. (2004) conducted a munities and countries. Bailey and Spicer (2004)
survey of U.S. expatriate managers in Russia con- make a contribution by demonstrating how empir-
trasting the results with a survey of managers in the ical research can be structured to provide insights
United States. They used six scenarios, three of concerning hypernorms. Although their research
which were intended to represent issues invoking may not have yet definitively established specific
substantive hypernorms (based on hypernorm can- substantive hypernorms, it does, nonetheless, pro-
didates described by TD2) and three of which were duce useful and important insights. For example,
intended to represent ‘‘local’’ norms in contexts in they determined that expatriate managers in Russia
which no hypernorms seemed applicable, where the who tend to socialize extensively with Russian
local norms were expected to vary between the friends are more likely to follow local Russian norms
United States and Russia based on published than U.S. norms of business ethics. This is certainly
behavioral evidence. Spicer et al. found a conver- important information for managers of U.S.-based
gence of ethical evaluation and intended behaviors multinationals who rely on U.S. expatriates in their
for the hypernorm-based scenarios, and divergence Russian operations.
for the local norms. Bailey and Spicer (2004) On the normative side, Lucas (2001) applied the
extended this research by comparing the responses of hypernorm of necessary social efficiency to condemn


certain strategies used by banks in marketing credit TD2 state clearly that the hypernorm they envision is
cards to college students. She concluded that the not coextensive with economic definitions of effi-
structural hypernorm would condemn the bankers’ ciency. True, aggressive marketing of credit cards to
opportunism, which she argued created inefficien- college students may disrupt some credit markets.
cies in capital and credit markets. Dunfee et al. But it is not apparent how the marketing of credit
(1999) identified a hypernorm condemning ‘‘coarse cards to college students might rise to the level of
bribery’’8 in applying ISCT to the phenomenon of affecting the overall efficiency of the US political and
bribery, specifically the use of bribes by the adver- economic system in providing necessary social goods,
tising agency, Young & Rubicam, to win an account which is the criterion emphasized by TD2. A rela-
with the Jamaican government. They justified the tively small reduction in economic efficiency should
hypernorm on the basis of a convergence of legal, not suffice for the application of the hypernorm of
religious and philosophical condemnation of the necessary social efficiency as described in Ties.
practice. Smith (2000) applied ISCT to the publi- One lesson from these applications is that, in most
cizing of family planning to the Bangladeshi people cases, ISCT should be applied in its full scope. That
and concluded that a hypernorm would condemn a is, attention needs to be given to both authentic
coercive approach. norms and to hypernorms. Hartman et al. (2003)
The efforts to identify hypernorms in the ethics make no effort to identify authentic norms relevant
literature are instructive. Hypernorms alone may in to the sweatshop practices they are evaluating. It,
special circumstances provide guidance for resolving therefore, is not surprising that they are unable to
ethical dilemmas, but as Hartman et al. (2003) realize specific guidance from ISCT concerning
found, it may be difficult to identify the type of sourcing issues. They have applied the general aspect
detailed guidance required for a satisfactory resolu- of ISCT while ignoring the context-specific com-
tion of an issue. Lucas (2001) represents the opposite ponent. In a sense, they have conducted a non-
problem: overly fine-grained analysis at the hyper- integrated use of ISCT. Presumably there are a
norm level. Applying a highly detailed hypernorm, number of communities that have relevant norms
which supposedly provides clear guidance for the concerning workshop practices in developing
resolution of a specific marketing practice in relation countries. The citizens of those countries may hold
to a particular product marketed to an identified discernible views relevant to a particular decision.
sub-set of customers, is problematic. The more Similarly, the global business community may have
specific and detailed an alleged substantive hyper- discernible norms delineating appropriate behavior.
norm is, the more likely it will be controversial with It may well be the case that some of the more
many disputing its existence. Soule (2004) challenges controversial practices are conducted by firms that
TD2’s description of a substantive hypernorm sup- are outliers in their industries or in global business in
porting informed consent in medical research by general. The views of IGOs such as the ILO and
providing contexts in which their candidate hyper- WHO may well represent authentic norms relevant
norm appears counter-intuitive or seems to violate for evaluating specific sweatshop practices.
well-known ethical principles. The greater the Lucas (2001) did seek to apply the full scope of
number of substantive hypernorms claimed to exist ISCT, but ultimately relied upon the application of
and the more specific their application, the weaker the hypernorm of necessary social efficiency. When
their moral authority. If Moses had come down from she evaluated authentic norms she identified two key
the mountain with 128,000 commandments, their examples. One was the norm of the banks issuing
credibility and impact would have been greatly credit cards that supported the use of aggressive
reduced. marketing practices in marketing to college students.
Lucas applies the hypernorm of necessary social The other was a norm opposed to those practices
efficiency on the basis of a claim that the marketing that was associated with the broader community of
practice at issue creates economic inefficiencies in U.S. citizens. In applying the six priority rules of
capital and credit markets. Her approach raises thumb, she found that one was not applicable and
questions about the nature and practicality of the one did not provide clear guidance while the other
suggested hypernorm of necessary social efficiency. four supported giving priority to the anti-practice


norm of the broader U.S. community. Thus, when source for hypernorms. In one sense, they can be
applying the full scope of ISCT, Lucas could have seen as translators of substantive hypernorms in
reached the same result without having to rely upon contexts in which there is ambiguity, conflict or
an expansive interpretation of the hypernorm of uncertainty. Reisel and Sama describe this approach
necessary social efficiency. in the conflict between social and economic obli-
To date, it is a fair conclusion that some of those gations that the major pharmaceutical firms face in
applying ISCT have had nontrivial difficulties in decisions whether to reprice AIDS/HIV treatment
identifying hypernorms. Soule (2002, 2004) provides regimes for African countries afflicted by the pan-
several suggestions that deserve further attention for demic. Resiel and Sama recognize problems with
resolving these difficulties in reference to substantive identifying the IGOs relevant to a given decision and
hypernorms. Soule recognizes that if detailed quali- the potential for conflicting views among relevant
fications are added to hypernorms to enhance their IGOs. In a recent paper (2004), they encourage the
action-guiding capacity, they are likely to become use of stakeholder dialogue/engagement as a con-
unwieldy in application and irrelevant in the event tingency based approach to resolution of the prob-
of rapidly changing circumstances. On the other lem. The promising recommendation of coupling
hand, if they are left at a high level of abstraction ISCT with stakeholder dialogue has been advanced
they provide little or no guidance. In response, Soule by several critics and will be dealt with in a sub-
makes two basic arguments. First, he takes some sequent section.
pressure off the need to identify accurate, precise In summary, there is a great need for more nor-
hypernorms by recommending that they be recog- mative and empirical research on the processes for
nized as only prima facie. He then proposes a search identifying substantive hypernorms. Normative
for managerial moral principles analogous to the research can expand our understandings of voice and
principles developed by Beauchamp and Childress exit in the context of norm-generating communi-
(2001) in the field of biomedical ethics. These ties. Normative scholars may identify additional
principles could then be used to determine whether structural hypernorms, for example, those recog-
prima facie hypernorms are ultimately valid. Although nizing certain property rights.
Soule uses this approach to attack a candidate hy-
pernorm of informed consent described in Ties
(p. 249): ‘‘organizations may not use nonconsenting, Justifying hypernorms
uninformed human subjects for new drug develop- TD2 indicate that the source for procedural hyper-
ment,’’ his approach appears basically consistent with norms is the macrosocial contract while the source
that taken in Ties. TD2 advocate the use of pre- for structural hypernorms is economic system-level
sumptive evidence in identifying hypernorms. Such microsocial contracts. (1999, p. 53). Substantive
an approach results in the identification of tentative hypernorms derive from a ‘‘convergence of human
hypernorms that may be displaced as more evidence experience and intellectual thought’’ (Id.). TD2
becomes available. Both approaches recognize ele- explain the ‘‘justification’’ of the differing types of
ments of uncertainty. Soule goes one step further hypernorms in ISCT as follows: procedural and
than TD2 by recognizing specific principles that can structural hypernorms are justified by ‘‘specification’’
be used to determine the ultimate validity of in the macrosocial contract while substantive
hypernorms. The consistency of such an approach hypernorms are justified by ‘‘recognition’’ by the
with that taken in Ties will be determinable only macrosocial contractors. In the overall framework of
after a specific set of ‘‘managerial principles’’ are ISCT, the original contractors consent to a search for
proposed and evaluated. manifest universal values relevant to resolving ethical
Reisel and Sama (2003, 2004) take a quite dif- dilemmas in business by virtue of their agreement to
ferent approach to the issue of identifying substan- the macrosocial contract’s terms. Thus the search for
tive hypernorms. They propose IGOs as distributive hypernorms occurs in the context of decision-
mechanisms that serve as purveyors of hypernorms. making; they are not to be fully ‘‘discovered’’ and
Since these organizations represent very broad listed ex ante. As a consequence, there will be
communities, they are considered a more credible ambiguity regarding substantive hypernorms. TD2


accept this as unavoidable when developing a realist tractualist framework itself. These include commit-
response to human cognitive limitations. They ments to individualism, freedom, private property
quote Sisella Bok in support of their approach: and free market exchange. From these commit-
ments, they argue that norms and principles
(C)ross-cultural cooperation will continue to lag far endogenous to the process of contracting and
behind existing needs unless it can draw upon funda-
immanent to contracting practices can be derived.
mental values that have traditionally promoted the
Such norms and principles can be instrumental in
cohesion and survival of communities under stress.
Agreement regarding their justification is unlikely weeding out inappropriate norms generated within
but we can no longer afford not to press the long- moral free space. This line of reasoning is promising.
standing dialectic regarding universal values’ beyond At the least, it can help to clarify the nature of
today’s conventional certainties about the self-evi- substantive hypernorms.9 The assumptions under-
dence or nonexistence of such values’’ (1999, p. 52.). lying the setup of the macrosocial contract are clear
in ISCT. If many find them plausible, that should
Several commentators find these explanations suffice, at least in the near term. It may be possible
unsatisfactory. Van Oosterhout et al. (forthcoming) that research on these themes will bolster the design
argue that substantive hypernorms are ruled out by of the macrosocial contract, providing greater clarity
what they call the contractualist fallacy – the and ultimately greater acceptance of ISCT among
importation of unjustified and unjustifiable assump- decision makers.
tions in setting up the macrosocial contract in ISCT.
They characterize as erroneous the assumption that
Redefining hypernorms
the sole solution to the problem of a Hobbesean-like
Some critics have offered alternative approaches to
economic environment is represented by the
the universalist/hypernorm dimension of ISCT.
hypernorm conditions in the macrosocial contract
Lucas (2004), for example, now argues that all that is
described by TD2. Instead, they argue that ISCT
needed to guard against relativism in ISCT is a
fails to provide a basis for establishing the primacy of
modified structural hypernorm of necessary social
a particular set of action-guiding norms over other
efficiency. Her work implies that she would modify
moral claims. ISCT ends up indeterminate because it
the hypernorm to focus on aggregate economic
cannot sort among the many sets of competing
welfare. She thinks it would be helpful if there were
norms. Consistent with this critique, Boatright
a convergence around certain substantive hyper-
(2000) argues that there must be some external
norms, but does not think such convergence is
ethical theory that serves as the justification for hy-
essential for the operation of ISCT. Husted (1999)
pernorms. He and others would import an ethical
expresses concern that ISCT in general and hyper-
theory into ISCT to serve as the foundation for
norms in particular are likely to give greater weight
substantive hypernorms. Along with Soule (2002),
to elite values than to mass values. It is not clear
Boatright (2000), and Van Oosterhout et al. (forth-
whether his concern is that hypernorms are likely to
coming), Douglas (2000) is concerned about the
be misidentified, or whether valid hypernorms
sources of substantive hypernorms because in his
would for some reason give preference to the
view they are not grounded in the macrosocial
interests of the rich and educated. As a solution,
contract serving as the overall foundation for ISCT.
Husted would base hypernorms solely on philo-
Certainly the issue of justification is ripe for fur-
sophical argument, although he does not indicate
ther analysis. To date, criticisms have been focused
exactly how that would be achieved. It seems highly
primarily on objecting to the assumptions made by
likely that critiques focused on reformulation of the
TD2 in setting up the macrosocial contract. The
hypernorms concept will continue.
fundamental argument has been that, although
plausible, the extant assumptions fail to satisfy the Necessity of hypernorms
claim that they represent the only tenable solution to Some believe that the concept of hypernorms is so
the specified problem. Van Oosterhout et al. fundamentally flawed that it is beyond salvation.
(forthcoming) undertake to rectify this shortcoming Douglas (2000) is among those who argue that
by relying on commitments implied in the con- hypernorms should be dropped from ISCT because


they do not serve any functional role. Instead, he authentic norms among relevant communities, as
would emphasize the use of priority rules and mi- surely is the case in this context. Then, if different
crosocial norms. Similarly, Frederick (2000a) is no hypernorms give conflicting signals, it may be
fan of hypernorms, referring to them as ‘‘cleverly but impossible to determine which authentic norms are
unfortunately named’’ (p. 473). He chides that, legitimate. Reisel and Sama recognize that the
‘‘reliance on hypernorms verges on commitment to problem may be due, in part, to an inadequate
what might conversely be called the ‘‘philosophistic stipulation of hypernorms. If that is the case, then the
fallacy’’ (in contrast to the naturalistic fallacy) solution is relatively straightforward. Correctly stip-
wherein abstract, non-experiential moral principles ulate the hypernorms. If instead, hypernorms may
are imposed on individuals, organizations, and indeed conflict, then some means is needed for
communities. In other words, an ‘‘ought’’ attempt to prioritization.
produce a desired ‘‘is’’.’’ Whether or not hypernorms can conflict is another
The scope and nature of hypernorms remains an dimension of ISCT on which TD2 are silent. It seems
open research issue, as are the justifications given for quite likely that different decision makers may iden-
hypernorms. Hypernorms are an important bulwark tify incompatible hypernorms. The process of
against cultural relativism. If they are removed, ‘‘looking up’’ encouraged by TD2 should increase
leaving only authentic norms and the moral free the chances of quite different hypernorms being
space component of ISCT, then some other means identified by decision makers from different cultures.
of guarding against relativism is required. Arnold When that happens, there are two alternative expla-
(2004) has proposed that the general concept of nations possible. First, one of the decision makers may
human rights be used as an alternative. This have mistakenly identified an incorrect hypernorm.
approach proposes a plausible and legitimate means Second, it may be possible that they have each
for limiting relativism with reference to those types accurately identified different relevant yet conflicting
of authentic norms that implicate human rights. The hypernorms, resulting in the possibility for mutually
problem is that his approach severely limits the range exclusive outcomes as Reisel and Sama (2004) sug-
of issues encompassed by ISCT. How, for example, gest. This is certainly an important and interesting
would principles of human rights be relevant to research issue. Are substantive hypernorms so basic
judging the legitimacy of norms pertaining to the use and fundamental that by definition they cannot come
of soft money compensation in the brokerage busi- into conflict? Or instead, because they derive in part
ness, or those supporting informal resale price from historical experience, can they constitute a set
maintenance in certain distribution channels? Thus, that contains mutually exclusive components? If the
ISCT would stand mute regarding large categories of correct answer is the latter, then is it possible to derive
authentic norms common in business, which some principles, consistent with the macrosocial
implicate other fundamental ethical principles out- contract, which would provide priority among
side of the domain of human rights. If hypernorms inconsistent hypernorms?
are to be dropped outright rather than redefined or A related question, on which TD2 are also silent,
repositioned, and ISCT is to be retained as a viable is whether hypernorms can change over time.
approach to ethical decision-making in business, Arnold (2004) imagines the global contractors
then there needs to be some means of disallowing coming together at different points in time to
problematic authentic norms. establish the macrosocial contract. Thus there would
be macrosocial contracts formed at points in time,
Evolving or conflicting hypernorms T1, T2, etc. He speculates that the preferences of the
Reisel and Sama (2004) identify a problem with differing groups of contractors would vary and, as a
possibly conflicting hypernorms. They suggest that result, the terms of the macrosocial contracts estab-
in the case of repricing AIDS drugs for South Africa, lished at each point in time might differ in significant
global pharmaceuticals may get conflicting signals ways, particularly in reference to structural hyper-
from hypernorms endorsing property rights and norms. The question is an interesting one, particu-
those supporting obligations to those in peril. The larly as it pertains to substantive hypernorms. As Don
issue becomes significant when there are conflicting Mayer has argued, let us assume that the test for a


substantive hypernorm against slavery could not developing countries. In order to assist and complete
have been satisfied during the 18th century. Let us their analysis, they construct a set of ‘‘meso norms.’’
further assume that the test could be satisfied today They recognize that their meso norms are ‘‘still
resulting in identification of a substantive hypernorm microsocial contracts, in TD2’s lexicon’’ (p. 379).
prohibiting the ownership of one human by another. These meso norms are derived from corporations,
Does that mean that substantive hypernorms do nation states and regional governmental unions.
change over time as a result of human experience They find that the norms generated at this level are
and condition? Not necessarily. Another interpre- in conflict, and therefore turn to the policies of
tation of the divergence in findings concerning intergovernmental organizations as credible sources
substantive hypernorms could be that one of the of hypernorms because these organizations are as-
identifications is incorrect. If that is the case, then sumed to be without specific affiliations, political
the perceived difference is based on errors in the biases or undue influence. They selected IGOs
identification process rather than a change or evo- considered to be objective and inclusive, such as the
lution in the substantive hypernorms themselves. World Health Organization, the International
Whether or not substantive hypernorms change Labour Organization and the World Trade Orga-
would depend on understandings about their basic nization. By focusing on the policies and statements
nature. If they were assumed to be immutable pre- of those organizations, Reisel and Sama conclude
scriptions from the natural law, as some would that what they call a macrosocial norm exists to the
believe, then they would not be considered effect that pharmaceutical firms cannot be held solely
changeable. Our understanding of them may vary responsible for distribution of life saving drugs in
across time as we become more or less adept in dis- developing countries. Although their process is hard
cerning them. But they themselves would not to square fully with the existing framework of ISCT,
change. On the other hand, if substantive hyper- they are clearly considering three different types of
norms were assumed to reflect the wisdom and norms in their analysis. Similarly Logsdon and Wood
experience of humanity across time and circum- (2002) use a tripartite set of hypernorms, consistent
stance, then they would be assumed to change on the norms and authentic norms (which they call moral
basis of new wisdom and context. This is an addi- free space) in a matrix establishing guidelines for
tional issue worthy of further exploration. business citizenship. They use the set to distinguish
Open research issues on the general nature of when a multi-domestic strategy is appropriate for
hypernorms include (1) identification of candidate business organizations in contrast to a globally inte-
substantive hypernorms that can be used by decision grated strategy.
makers; (2) demonstration of the implications of The idea that an intermediate level of norms
candidate hypernorms for currently pressing ethical should be recognized in ISCT requires careful
issues, such as obligations of major pharmaceutical consideration. The fact that authentic norms can be
companies regarding the pricing and distribution associated with communities ranging in size and
of AIDS/HIV drugs in sub-Saharan Africa; and scope from small businesses, to nation states and
(3) development of frameworks and processes for the ultimately to global business and international
recognition of substantive hypernorms. political entities can be a source of confusion. This
might cause some to mistakenly characterize norms
of regional governments or global institutions as
Intervening norms: A role for meso or meta norms? hypernorms because they seem so removed from and
superior to the norms of a single firm or a small
Several commentators have attempted to deal with a political community. The range of communities and
perceived gap between (too) general hypernorms possible norms is so great that one may question
and (too) narrow or specific microsocial authentic whether the priority rules, the only remedy for
norms by recognizing an intermediate layer of sorting among them described in ISCT, are suffi-
norms. Reisel and Sama (2003) apply ISCT to the cient to the task. Perhaps a set of intermediate
issue of whether pharmaceutical companies should norms, based on either the size of the community or
distribute life-saving drugs on a below-cost basis in certain special characteristics of the community, is a


better way to deal with the problem. The norms of approach that is the hallmark of ISCT as a solution
those communities would trump the norms of lesser to the problems of bounded moral rationality.
communities while, presumably in turn, their norms Advocates for adding meso norms to ISCT would
would still be subject to a legitimacy test based on also have to explain in detail how the process would
hypernorms. It would also be the case that such operate when a decision maker is able to identify
norms could stand alone in the absence of identified local community norms, meso norms of a more
authentic norms. Thus ethical dilemmas could be extensive community and hypernorms all relevant to
resolved on the basis of meso norms alone without a single decision. If they all point toward an identical
the presence of authentic norms. Reisel and Sama resolution of the decision, there is no problem. But
(2003) argue that certain communities’ norms should if they vary in the guidance given, how is such
carry greater weight because their sources can be variance to be sorted out? Perhaps the stickiest
assumed to be non-political and impartial or because questions would arise in circumstances in which
they transcend nation states. hypernorms weighed against the application of a
Several advantages might be associated with a meso norm. How likely is such a circumstance? If
meso norm approach. Identifying norms from the answer is that it is not likely, then meso norms
broader economic and political communities would would not add much robustness to ISCT. Perhaps
have the instrumental advantage of making clear that most of the action would come from meso norms
the norms of such entities are an appropriate com- overriding authentic norms. This would highlight
ponent of ISCT analysis. Identifying meso norms the importance of the criteria used for identifying
could take a lot of the pressure off of the identifi- dynamic meso norms capable of illegitimatizing
cation and use of authentic norms and hypernorms. authentic norms otherwise compatible with hyper-
As discussed elsewhere in this article, there may be norms. The priority rules for sorting among con-
circumstances in which it is difficult to locate and flicting authentic norms already give recognition to a
identify authentic norms or hypernorms. The more global norm and to consistency among com-
availability of meso norms could provide another munity norms. In order to really add something to
useful source for guidance, particularly because they ISCT, a meso norm should be expected to produce
may be more visible and easier to identify than outcomes that would differ from applying the pri-
authentic norms and hypernorms. ority rules of thumb to conflicting authentic norms.
On the other hand, there are serious negatives One case would be when authentic norms can’t be
likely to be associated with adding another layer of recognized. Furthermore, the meso norms would
norms to ISCT. Questions have been raised about have to differ from existing authentic norms. If they
the user friendlessness of ISCT, a topic discussed were just supersized authentic norms, they would be
below. Grafting on another level of norm identifi- recognized already under ISCT and, when in con-
cation and an additional decision-making step would flict with norms of smaller communities, would have
add to the complexity of the theory. Anything added some priority under the rules of thumb. Therefore a
to ISCT must be done in a manner faithful to its meso norm would have to be a norm of a different
original structure and framework. Meso norms type than the current authentic norms. The chal-
would have to be justified as part of the establish- lenge for those who would propose an additional
ment of the original macrosocial contract. Advocates layer of norms is extreme. It seems likely that it will
of such an extension would have to present a per- be easier to distinguish between the two sets of
suasive case why the original contractors would want norms under the current structure of ISCT than to
to rely upon a middle set of norms. One could choose among three possible categories.
argue, in opposition, that such norms would restrict
moral free space to such an extent that the original
contractors would reject them. After all, the impact Questions pertaining to the use of ISCT by ethical decision
would be to constrict the areas in which local makers
communities are entitled to establish moral rules for
themselves. Further, an additional level of norms Many have questioned the user friendliness of ISCT.
would violate the commitment to a parsimonious Critics argue that hypernorms cannot be practically


identified and that authentic norms are likely to be Application of ISCT to specific ethical issues
elusive, if they exist at all. TD2 did not help the case ISCT has been applied to a wide variety of ethical
for user friendliness by publishing a four page decision issues, including gender discrimination where cross
tree for applying ISCT as an appendix to chapter 7 in cultural norms conflict (Mayer and Cava, 1995);
Ties (pp. 208–211). Nonetheless, TD2 have argued computer ethics (Conger and Loch, 2001); down-
that a major virtue of ISCT is that it causes decision sizing (Van Buren III, 2000); bribery (Dunfee et al.,
makers to identify and focus on essential elements 1999); the role of corporations concerning the
required for ethical decision-making in business. impact of relative wealth distribution on human
Thus, depending on the circumstances, using ISCT health (Danis and Sepinwall, 2002); privacy and di-
may direct attention to the relevant norms of pro- rect marketing (Culnan, 1995); consumer privacy
fessional groups, or instead, to a consideration of issues in South Africa (Higgs-Kleyn et al., 2000); the
manifest universal moral principles. TD2 have stres- marketing of family planning in Bangladesh (Smith,
sed that ISCT is not intended as a formal calculus to 2000); brownfield development (Poindexter, 1995);
be applied robotically in making a decision. sweatshop labor standards (Hartman et al., 2003);
Insights may be derived by determining the manner costing issues involved with distributing life-saving
in which others have applied the theory. Have they pharmaceuticals in developing countries (Reisel and
typically used all elements and gone through every Sama, 2003, 2004); banks’ marketing of credit cards
suggested step, e.g. identifying relevant and appro- to college students (Lucas, 2001, 2004); employee
priate communities, identifying authentic norms whistle-blowing and deviance (Warren, 2003); the
within those communities, testing those norms against influence of location between Russia and the United
substantive and structural hypernorms, and finally, States on ethical attitudes (Spicer et al., 2004); a
using the priority rules to sort among multiple sur- comparison of norms between entrepreneurs and
viving norms? Or, instead, have they tended to focus managers in a cross-cultural context (Bucar et al.,
on the aspects of the theory that reasonably appear to 2003); the globalization debate (Mayer, 2001;
be most relevant to the decision at hand? To date, most Madsen, 2003); the effect of national identity and
of the applications of ISCT fall into the latter category. degree of integration of expatriates into host country
So long as they have focused on the critical elements, environments on ethical attitudes (Bailey and Spicer,
taking short cuts has not been problematic. 2004); identifying norms associated with urban
Some critics have suggested that ISCT is in the eye prosperity initiatives (Cava and Mayer, 2004); cor-
of the beholder and therefore subject to biased porate drug testing programs (Strong and Ringer,
applications. For example, political or social biases 2000); and understanding corporate governance in
could result in two individuals coming to contradic- Russia (McCarthy and Puffer, 2004). Beyond these,
tory conclusions when applying ISCT. Applications TD2 have given many examples in their writings
of ISCT to controversial issues may help shed light on about ISCT.
this question. If the applications seem reasonable to It should not be surprising that within the overall
most people, the criticisms should be muted. If experience in applying ISCT, divergent conclusions
instead, the applications seem highly questionable, have been reached. Madsen (2003) advocates the use
the criticisms can be considered affirmed. of ISCT to delineate policies for regulating the
The issue of the availability of evidence to apply behavior of multinational enterprises as a way of
ISCT is critical to the usefulness of the theory. A ‘‘assisting the realization of anti-globalist hopes.’’
manager facing an immediate decision cannot be Mayer (2001), in contrast, is concerned that giving
expected to conduct research into the attitudes and priority to the norms of global or larger communities
behaviors of community members in order to make will result in enshrining the norms of global capi-
an ethical decision. TD2 anticipate this by suggesting talism, concluding that ‘‘(T)he unfinished work of
the use of proxies and presumptions for both ISCT is the discovery of those transcendent stan-
authentic norms and hypernorms. The ease, or lack dards for the process of globalization...’’ (p. 259).
thereof, that commentators have found in looking The few divergent findings appear to be fact
for relevant evidence to apply ISCT should provide dependent. They involve writers making broad
useful insights on this issue. statements based upon their varying factual


assumptions. There has not, to date, been a diver- defection. Understanding these problems has con-
gence in findings among writers engaging in a siderable relevance for stakeholder management.
detailed normative analysis relying upon identified
proxies for norms, nor among those conducting The relationship between ISCT and stakeholder concepts
serious empirical surveys. This is probably due, in By emphasizing relevant communities, ISCT is
part, to the relative sparseness of the literature broadly supportive of the key idea of stakeholder
applying ISCT. Ultimately, variances among com- management: that the interests of those who are
mentators applying the same ethical theory are to be affected by or are at risk as a result of business
expected whenever an analysis is fact or context decisions should be considered. That is not to say
dependent. Thus, one would expect divergence in that ISCT is co-extensive with stakeholder man-
findings among multiple consequentialists analyzing agement. The focus of ISCT is on communities and
the same issue, to the extent that their essential norms, not on individual stakeholders and interests
factual assumptions vary concerning the likely im- not reflected in community norms. It may well be
pact of alternative decisions. that the decision-maker community may follow a
Most of the writers applying ISCT to particular norm of stakeholder management, in which case, the
issues, in whole or in part, have been able to come overlap between stakeholder ideas and ISCT would
up with plausible results, with the notable exception be nearly perfect. But such an outcome requires the
of Hartman et al. (2003). On occasion, writers have existence and identification of a ‘‘stakeholder’’ norm
come up with results that they felt were normatively within a relevant, priority community. On the other
unsatisfactory. Mayer and Cava (1995) were very hand, ISCT does not, within its decision framework,
concerned that ISCT was normatively inadequate require the existence of a stakeholder norm. TD2
for dealing with cross-cultural gender discrimina- (1999, p. 248) summarize the implications of ISCT
tion. They objected to the result that they obtained for stakeholder theory as follows:
applying ISCT, although they did not formally base
their objections on an alternative ethical theory. 1. Relevant sociopolitical communities are a
Instead, they had a particular view of what was right primary source of guidance concerning the
and ISCT did not produce a result consistent with stakeholder obligations of organizations
that view. Normative concerns of this type are dis- formed or operating within their boundaries.
tinct from the issue of whether ISCT is sufficiently 2. Where norms pertaining to stakeholder obli-
user friendly to provide guidance, under its terms gations are not firmly established in the rele-
and assumptions, for the resolution of ethical vant sociopolitical communities, organizations
dilemmas. A review of this extensive literature have substantial discretion in deciding how to
supports the conclusion that ISCT helps to frame the respond to stakeholder claims and interests.
discussion of certain ethical issues in a helpful man- 3. All decisions affecting stakeholders under-
ner by ensuring that there is a focus on identifying taken by organizations must be consistent
relevant communities and their norms, and that with hypernorms.
appropriate consideration is given to the possible 4. Where there are conflicting legitimate norms
existence of relevant manifest universal norms. concerning stakeholder obligations among
The relationship between ISCT and stakeholder relevant sociopolitical communities, the
concepts is a ripe area for further research. Their norms of the community having the most sig-
complementarities should be explored to determine nificant interests in the decision should be
how their respective insights and assumptions have candidates for priority. Otherwise, ... organi-
cross-relevance. Research similar to that conducted zations have substantial discretion....
by Heugens et al. (2004) holds promise for
strengthening both concepts. They used interview- The relationship between ISCT and stakeholder
based research to analyze contracting problems in the concepts is dynamic. Relying on stakeholder con-
context of managing stakeholder relations. The re- cepts should produce better results in identifying
search supported their typology of four contracting ISCT-relevant microsocial communities. ISCT
problems: desolation, deception, defeasance and requires that consideration be given to norms of all


relevant communities by decision makers. This facilities. In other situations, a community may be
requires decision makers to consider the norms of unable to grasp the moral implications of novel or
communities who will be affected by their decisions, rapidly changing technologies or environments, for
e.g. stakeholder communities. example, recent developments in genetic engineer-
Eastman and Santoro (2003, p. 444) note that ing, which hold out great hope for infertile couples
‘‘one of the most important theoretical contributions while simultaneously increasing the risk of deformed
of ISCT is the solution it proposes to classic prob- fetuses.
lems ... of stakeholder theory ... i.e. who to count as So, if there are no legitimate ethical norms to
stakeholders and how to evaluate and prioritize provide guidance, how should the ISCT decision
among competing stakeholder interests.’’ Stake- maker proceed? The next step should involve
holder theorists have not provided normative guid- searching for discernible hypernorms applicable to
ance for resolving competing stakeholder claims. the dilemma. If relevant hypernorms are found, they
ISCT provides a means for solving some, but not all, guide the decision. Unoccupied moral free space
of the prioritization problems that exist when occurs when neither guiding hypernorms nor legit-
legitimate stakeholders present mutually exclusive imate authentic (microsocial) norms can be identi-
claims. To the extent that competing claims are fied. In such circumstances, the use of ISCT does not
reflected in legitimate norms, the priority rules of provide any moral guidance, and by default, man-
thumb offered by ISCT can provide guidance. Or, if agers may rely on other sources of values, including
one of the competing claims runs afoul of a hyper- personal views or organizational values. Table I
norm, again ISCT is helpful. But when stakeholder demonstrates how unoccupied moral free space
interests are not reflected in a discernible legitimate might exist in regard to a particular ethical decision.
norm, ISCT does not provide guidance. Such a Two questions arise from the possibility of
situation might exist when a stakeholder community unoccupied moral free space. First, is unoccupied
lacks knowledge or information relevant to the moral free space likely to be so large that ISCT lacks
practice at issue. sufficient robustness for a meaningful theory of
business ethics? Second, is leaving the decision to the
individual and/or the firm an adequate solution to
Unoccupied moral free space this problem?
Eastman and Santoro (2003) urge that ‘‘... more
In ISCT, moral free space is the large domain in attention needs to be given to the question of how big
which communities of all sorts may generate com- (unoccupied) moral free space is’’ (p. 446) and go on to
munity-specific moral rules consistent with their state their view that unoccupied ‘‘moral free space is
members’ preferences and experience (TD2, 1999, quite large in corporate life’’(Id.). Nielsen (2000)
p. 83). When also legitimate, these norms are suggests that few corporate communities satisfy the
binding upon community members, subject to pri- requirements of providing adequate voice and exit
ority rules of thumb if competing norms from other
communities are also relevant. The legitimacy test TABLE I
insures that all community norms are consistent with Unoccupied moral free space in relation
discernible hypernorms and that all norm-generating to an ethical decision
communities satisfy the procedural hypernorms
protecting voice and exit. In Ties That Bind, TD2 Microsocial norm Hypernorm Neither provide
suggest that there may be circumstances in which a guidance guidance guidance
community is unable to generate a moral preference
in reference to a moral dilemma existing within the One or more No legitimate Unoccupied
community (p. 250). For example, the members of a legitimate norms exist, but moral
authentic recognizable free space
community may be strongly split concerning the
norms exist to hypernorms
correct behavior for issues such as firing workers for
provide provide prescriptive
smoking cigarettes on the job, or having HIV-po- guidance10 guidance11
sitive employees supervising children in day care


options, which would presumably render them The perception that moral free space is unoccupied
incapable of generating authentic norms. Husted may be the result of two distinct possibilities. In the
(1999) argues that consent is difficult to ascertain in first instance, the perception arises because no
cross-cultural interactions and he would therefore authentic norm exists to provide guidance for the
only recognize authentic norms that pass a strong test ethical decision. In that case there is an accurate
of hypernorm compatibility. In order to evaluate these reading indicating the absence of microsocial norms.
claims we must first be clear as to how moral free space The result is genuine unoccupied moral free space.
may be perceived to be unoccupied. TD2 state that In the second situation, an authentic norm in fact
‘‘(a)uthentic ethical norms reflect the aggregate atti- exists but the decision maker fails to identify it. In
tudes and behaviors of the members of an identifiable this circumstance, the result would be a mistaken
community’’ (1999, p. 86). Thus, an authentic ethical conclusion that there is unoccupied moral free space.
norm is based upon a combination of behavioral and Researchers applying ISCT to concrete issues in
attitudinal consensus as represented in Table II. business ethics have apparently found information on
As Phillips and Johnson-Cramer (2004) note, the behaviors more accessible than evidence identifying
norm-generating process is in constant flux as attitudes among members of a relevant community.
behaviors and attitudes constantly change over time. Lucas (2001) applies ISCT to marketing techniques
Although some important norms are surely stable used to induce college students to acquire credit
over time, others come and go as communities adapt cards by relying on behavior as a basis for recognizing
to changing practices and environments. The an authentic norm within the banking community.
requirement that both attitudes and behaviors be Spicer et al. (2004) survey intended behaviors among
considered surely reduces the number of authentic U.S. expatriate managers in Russia and U.S. mangers
norms likely to be identified and therefore may in- in the U.S. as a means of determining the impact of
crease the boundary of unoccupied moral free space. national context on views about the ethical quality of
TD2 justify using both as follows: business actions, but do not identify specific atti-
tudes. Bucar et al. (2003) survey both attitudes and
Why invoke consideration of both behavioral and intended behaviors in seeking to identify authentic
attitudinal evidence....? Neither alone guarantees that
norms among entrepreneurs in a cross-cultural
a putative norm reflects a consensus among the
context. These and similar studies demonstrate that
membership of a community. Behavior may easily be
coerced and may not represent the genuine attitudes ISCT has influenced researchers to seek ethical
of the community members. Thus, attitudes are ad- norms pertaining to particular issues in specific
ded to behaviors to guard against the possibility of communities, which could be used in ISCT-based
coercion. A strong case could be made for relying on ethical decision-making (Culnan, 1995; Higgs-
attitudes alone. {But the existing methodologies for Kleyn et al., 2000; Lucas, 2001; Reisel and Sama,
identifying attitudes} may, on occasion, result in a 2003). Their struggles to come up with definitive
false reading of group attitudes. Thus behaviors are evidence of norms demonstrate the current lack of
added to attitudes to guard against the possibility of hard evidence of behaviors and attitudes necessary to
misreading a community consensus. (1999, p. 90). establish scientifically rigorous ISCT authentic
norms.13 But academic research is not a necessary
TABLE II
precondition for norms-focused ethical decision-
Requirements for an authentic microsocial norm12 making by those on the front lines. Surely, in many
contexts, managers and professionals know with
No attitudinal Attitudinal
some certainty the parameters of key professional
consensus consensus
norms within their relevant business communities.
No behavioral Norm not Norm not Salespeople understand that it is considered inap-
consensus established established propriate to promise a delivery date they know they
are unlikely to meet to a buyer who must have the
Behavioral Norm not Authentic
purchased product by a designated time. Supervisors
consensus established microsocial
norm know that it is wrong to ask an employee to falsify a
document.14 Ironically, managers in the field may


find it easier to identity norms than business ethicists weak presumption based on behavior alone would
peering in from outside the arenas of business help to enhance the robustness of ISCT by nar-
endeavor. rowing the scope of unoccupied moral free space.
TD2 recognize the evidentiary difficulties facing The second explanation for unoccupied moral free
managers who encounter novel ethical dilemmas space is that neither authentic norms nor hypernorms
falling outside standard practice. Their solution is to provide guidance for the decision. Undoubtedly,
propose short-cuts for identifying norms. They set there are situations in which this is the case. TD2
forth a number of proxies, including professional and indicate that these decisions lie outside of the domain
corporate codes, media references, opinion surveys, of ISCT and therefore they offer no decision-making
speeches and statements by respected business leaders advice other than to suggest that, of necessity, the
(1999, p. 105), industry and trade organizations, decision will have to be made by whatever values
ethics consultants, even advocacy groups (Id. pp. drive the individual or corporate decision makers.
110–111). These proxies can be used to establish Eastman and Santoro (2003) propose that in such
presumptive authentic norms. The effect of a pre- circumstances, the decision process is critical and they
sumptive norm is to provide a basis for decision- recommend emphasizing value diversity.
making unless or until there is hard evidence that Ultimately, concerns about coercion or the rec-
such a norm does not, in fact, exist. ognition of false norms can be dealt with through a
If, indeed, evidence of behaviors is more readily process of checks and balances. The use of a weak
available than evidence about attitudes, one way to presumption, based on behavior, appears to be a
limit the area of unoccupied moral free space due to reasonable solution. Members of relevant business
evidentiary failures would be to accept knowledge communities should have ample means and oppor-
about behaviors as presumptive evidence of tunities to challenge coercive or false norms.
authentic norms. The presumption would be a weak Whether unoccupied moral free space is a prob-
one, so that any plausible evidence concerning lem for ISCT depends in large part on what should
inconsistent attitudes would suffice to overturn it. be expected from an ethical theory. Stakeholder
Thus, if there are protests or objections from any concepts are a significant complement to ISCT. Yet,
significant group, or if there is evidence of incon- even strong advocates of that approach, such as Ed
sistent behaviors, the weak presumption would fail. Freeman and his colleagues, argue that it is a mistake
TD2 are rightly concerned about coerced behaviors to consider it a comprehensive moral doctrine,
and the possibility that ISCT might serve to validate stating firmly that ‘‘(s)takeholder theory is not in-
coerced values. Nielsen (2000) and Keeley (1995, tended to provide an answer to all moral questions’’
1988) contend that coerced values are common, (Phillips et al., 2003, p. 493). As a practical matter,
even innate, in the organizational environment. the full information essential for a decision is often
These important concerns must be given signifi- not available for any of the standard ethical theories
cant attention in the process of identifying norms. and is particularly troubling for consequentialist
Caution should be the watchword. However, there theories. One value of ISCT is that it directs the
are also costs associated with a failure to recognize attention of decision makers to the potential exis-
important norms evidenced primarily by behavior. tence of action-guiding norms or manifest universal
Norms are often essential to efficient business moral principles. The fact that there appear to be no
behavior. They reduce transaction costs by provid- relevant microsocial norms or guiding hypernorms is
ing a basis for trust. If most salespeople eschew falsely instructive in itself. It probably means that the issue is
promising an unobtainable delivery date, that so disputed, novel or complex that there is no dis-
behavior should not be discounted as evidence of an cernible consensus concerning correct behavior. In
obligatory norm solely due to lack of confirming such a circumstance, one might become an advocate
evidence about attitudes. Further, when there is for a particular view of what constitutes ethical
sustained behavior over a period of time, one can behavior for such a decision. If the advocate is able
expect it to be consistent with attitudes. Otherwise to persuade others to behave and think as she does,
cognitve dissonance would influence community then over time an authentic norm is likely to
members to modify their behaviors.15 The use of a emerge. Thus the discovery of unoccupied moral


space may be a catalyst for the emergence of new anism and egoism.... Moreover, in debriefing analy-
norms within a cycle of birth, modification and ses it was obvious that respondents had a difficult
death of norms of business ethics. In this way, norms time in understanding and applying the concepts
keep pace with the constantly changing business inherent in utilitarian thinking (p. 647). ... individu-
environment. als tend to rely on a broad sense of moral equity
dominated by concerns for fairness and justice, tem-
This leads us to a significant, but rarely analyzed,
pered by relativistic and social contract dimensions.
aspect of applying ethical theories to business deci-
(p. 649).
sion-making. Do we need a unifying theory that by
itself is capable of handling virtually any question The social contract dimension in Reidenbach and
that arises? Or, instead, can one envision a portfolio Robin’s multidimensional scale is captured in two
approach to business ethics in which decision makers items: (1) violates/does not violate an unspoken
reach into their tool bag of ethical theories to find promise and (2) violates/does not violate an
the most appropriate one for a particular decision? unwritten contract. These concepts are essentially
Rarely does an advocate for the use of a particular consistent with the overall approach of ISCT. The
ethical theory for resolving issues of business ethics implication is that it is not necessary for a single
make a monopolizing claim. Bowie is known as a theory to be able to answer all questions. Thus, the
committed advocate for a Kantian approach (Bowie, fact that ISCT may leave some questions for
1999). His 1999 book represents ‘‘an attempt to answering through other means is not a significant
apply the essential features of Kantian moral phi- failure. Indeed, this is probably true for all theoretical
losophy to the business firm’’ (p. 1). After an elo- approaches to business ethics.
quent and incisive treatment of the subject, Bowie In conclusion, unoccupied moral free space may
concludes that ‘‘... Kantian capitalism will have done be the result of evidentiary difficulties handicapping
most everything a theory of business ethics could do. the recognition of authentic norms. The solution lies
There may be other ways to achieve this end, but in developing better ways for recognizing norms.
the Kantian theory of capitalism offers one clear One suggestion, grounded in the approaches taken
blueprint’’ (p. 174). This is far short of a claim that by several scholars applying ISCT, would be to make
Kantian theory is the only true way of making an use of a weak presumption that behavior alone re-
ethical decision. Bowie’s qualified conclusion indi- flects the existence of an authentic norm. The pre-
cates that other approaches are relevant, perhaps sumption would be overcome by any plausible
even necessary in certain circumstances. It is not evidence indicating that the behavior has been
clear that a single theoretical approach is either coerced. The existence of unoccupied moral space
intellectually desirable or consistent with how peo- due to the absence of action-guiding legitimate
ple tend to think when confronted with dilemmas. norms or hypernorms raises questions about the
Empirical studies have shown that individuals tend robustness of ISCT. The size of unoccupied moral
to be flexible in how they judge ethical dilemmas in free space is speculative and subject to dispute. It is
business. Instead of sloppy thinking or intellectual unrealistic to expect that ISCT would provide
confusion, this may reflect a reality that some ap- guidance on every issue of business ethics.16 The
proaches are more useful for certain contexts. The absence of authentic norms pertaining to a particular
best known decision-making scale in business ethics ethical decision context reflects the natural evolution
involves a multidimensional approach capturing of norms wherein norms emerge to provide guid-
three dimensions: equity, relativistic and contractual ance on new ethical dilemmas produced by the ever-
(Reidenbach and Robin, 1990). These dimensions changing business environment.
were developed through analyses of managers’
reactions to scenarios. Reidenbach and Robin began
Sufficiency of justification for ethical obligations under
with scales based on traditional moral philosophies.
Interestingly, they discovered that: ISCT

...noticeably absent from the three dimensions are A major implication of ISCT is that legitimate norms
ideas which are most closely associated with utilitari- developed within microsocial communities are


ethically binding upon the members of the com- were a prerequisite to maintaining cherished reli-
munity. TD2 use the traditional social contract gious beliefs. Nor will Postow accept the idea that a
concept of hypothetical consent to set up their substantial majority principle would be sufficient to
macrosocial contract. They envision that the initial establish consent to the proposed macrosocial con-
contractors will recognize the ability of communities tract. Instead, she argues, any dissenting minority
to generate binding ethical norms for their members would refuse to agree to a super-majority rules
in what is described as moral free space. Great dis- principle. As an alternative she offers a concept of
cretion is left to communities as to how they gen- cosmopolitan pluralism. At this point the concept
erate norms and interact with their members. Thus, needs considerable fleshing out. Postow is coy about
among other things, governance processes will vary its ultimate meaning although she gives as an
greatly among communities as will the rules and example a wide reflective equilibrium model under-
terms of membership. The only limitations are those girded by a standard of ‘‘appropriateness.’’ Until we
imposed by procedural hypernorms, e.g. the com- know precisely what ‘‘appropriate’’ means, we have
munity must provide sufficient opportunities for to be cautious concerning the potential devils in the
members to exercise rights of exit and voice. The details for this proposed fix to the concerns about
justification for the binding nature of legitimate local consent to the macrosocial contract.
norms is the consent that can be found, first, in the Van Oosterhout et al. (forthcoming) are con-
overall macrosocial contract and, second, in the cerned that unborn children and the environment
community member making instrumental use of the are left out of the set of original contractors. This
community. standard objection, reflected in current debates
A number of critics have challenged the stipula- concerning legal rights and the standing to enforce
tions and assumptions TD2 make concerning the protective statutes, raises the oft-debated question
macrosocial contract. Wempe (2004) makes an whether it is sufficient to represent the interests of
elaborate, articulate case that the four parameters future generations and the environment by proxy,
(e.g. partial veil, sense for hypernorms) and three based upon recognition of these interests in current
behavioral assumptions (e.g. bounded moral ratio- human preferences. Grandparents care about the
nality) that underlie the macrosocial contract are future in which their children and grandchildren will
insufficient grounding for the claim that the original continue to live after the grandparents die. Many
contractors would accept the deal as described by care about the environment, tying their own inter-
TD2. Wempe is particularly concerned that TD2 ests into the continued well-being of the physical
reach outside of traditional social contract method- environment. In the context of ISCT, this question
ology to develop their key stipulations. For example, translates into whether the original contractors can
where does the assumption about bounded moral be considered sufficient guardians of the future and
rationality come from? Wempe, Postow (2004) and the environment. TD2 have not been explicit about
Arnold (2004) all argue that TD2 fail to make a this, but it is possible to imagine that the original
sufficient case that the original ISCT contractors contractors appear from throughout time, so that the
would accept the proposed solution as the only viable unborn will have voice in this process.
one. Arnold (2004) makes the argument that men, Phillips (1997, 2003) has been a constant and
who would comprise a nontrivial segment of the set articulate critic of the consent justification offered in
of original contractors, would have no incentive to ISCT, advocating recognition of a principle of
grant voice to women. Postow (2004) takes a dif- fairness to strengthen obligations to comply with
ferent tack by arguing that ISCT offers a satisfactory legitimate norms. He objects to reliance on acts that
meta-ethical basis for the validity of local norms, but imply consent, stating that they ‘‘are actually no
none for their invalidity. Postow does not agree with consent at all’’ (2003, p. 102). He also criticizes
the claim that contractors would be willing to put an TD2’s argument that a lower standard of consent can
agreement about economic behavior ahead of their be used to justify obligations to follow norms in
religious beliefs. Instead, she advances the claim, commercial life because such norms are supported
highly plausible in a world plagued by terrorists, that only by informal sanctions and mechanisms and do
some original contractors would prefer chaos if that not invoke the coercive power of the state (p. 104).


TD2 replied specifically to Phillips, noting that communities who would adopt it through authentic
what he is actually criticizing is the consent assumed norms governing how the local community will
by the macrosocial contract concerning the impli- operate. (1999, p. 162). Van Buren III limits his
cations to be drawn from ‘‘membership’’ within a analysis to stakeholders, a special case of problems
community. One of the key terms of the macroso- within business ethics. Not all ethical issues involv-
cial contract involves the right of communities to ing norms and community consent revolve around
develop binding norms for their members. The stakeholder interests and rights.
legitimacy of those norms is subject to the com- Critics have focused on large corporations in their
munity recognizing appropriate voice and exit examples and analysis and have assumed that there are
rights. Further, the norms will be tested against hy- certain standard or even preferred ways of exercising
pernorms. Nowhere in this framework is there a voice or establishing membership requirements.
claim that one can only be bound by a particular Although such firms are undeniably an important set
rule/norm of a community when one has explicitly for ethical analysis in business, TD2 mean to capture
consented. Such an approach is untenable because it a much broader and more diverse set of communities.
would mean that corporate employees could still As a consequence, the definition of consent must be
maintain the benefits of a job while disavowing compatible with a broad range of communities
norms or rules against sexual harassment, or taking operating in diverse cultures. The flexible definition
home corporate supplies for personal use and so on. of consent used by TD2 seems compatible with a
Phillips’ essential argument is that obligations arise Middle Eastern business firm committed to following
within a community, including a business corpora- Islamic teachings. The formalistic approaches of
tion, only when a principle of fairness is met. Phil- Phillips and Van Buren III do not.
lips’ alternative principle of stakeholder fairness is TD2 emphasize that dissenters may exit the
detailed and precise: community, or that they may use voice and other
means to try to change the norms within the com-
Whenever persons or groups of persons voluntarily munity. TD2 recognize that, in extreme circum-
accept the benefits of a mutually beneficial scheme of
stances, a community member may engage in the
co-operation requiring sacrifice or contribution on
moral analogue to civil disobedience and that such
the parts of the participants and there exists the possi-
bility of free-riding, obligations of fairness are created actions may be particularly appropriate in circum-
among the participants in the co-operative scheme in stances in which the member personally believes that
proportion to the benefits accepted (2003, p. 92). a local norm violates a hypernorm (1999, pp. 42–
43). Phillips and Johnson-Cramer (2004) question
Van Buren III (2001, 2004) basically agrees with whether this is sufficient and expresses concern that
Phillips, but extends Phillips’ principle of fairness. when norms are changing within a community, the
He includes the right of participants in a mutually members of the community may have difficulty
beneficial scheme of cooperation to participate in identifying when they are free to not comply with a
governance processes in proportion to the sum of norm. They are surely correct that the evolution of
their contributions to and sacrifices for the scheme. norms within a community may create confusion
His extension is seen as a means of compensating for and uncertainty. They note that ISCT provides no
the powerlessness of disadvantaged stakeholders such guidance concerning when a member can behave
as Mexican workers seeking to unionize a Maquil- consistently with a new norm, a requirement before
adora plant. Neither Phillips’ nor Van Buren III’s a norm can obtain status as authentic. When norms
approaches are sufficiently broad to deal with the are changing an original norm may become unau-
extensive range of communities and norms encom- thentic, leading to a transition period in which there
passed within ISCT. TD2 imply that Phillips’ ap- is no authentic norm until a new one is established.
proach is culturally restrictive, noting that it would This phenomenon causes some people to believe
be difficult to argue that culturally diverse macro that violations of the old norm are unethical, while
contractors would agree to this as the only source others hold a different view. Again, Phillips would
of obligation. They do concede that his formal rely upon his principle of stakeholder fairness. He
principle may resonate with certain microsocial would deemphasize the ISCT priority rules and

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