Social Contract Theory in a Global Marketing Context


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  • Examples of hypernorms include: An obligation to respect the dignity of each human personCore human rights, such as personal freedom, physical security and well-being, the ownership of property, and so onEquity, the fair treatment of similarly situated personsAvoiding unnecessary injury to others (Murphy, et al., 2004)These hypernorms serve as a benchmark for the minimal ethical standards surpassing legal necessities alone. Where it is illegal to murder a person, a hypernorm would state that it is unethical to harm them at all.
  • Ethics come into play when an organization is deciding how to best serve their own needs while still fulfilling the obligations they owe to the stakeholders. Warren Keegan suggests that to serve the global community effectively, organizations “must practice corporate social responsibility,” defined as self-regulation to protect society (Keegan, 2013). The next step is to decide how to best address ethical issues which may arise in any facet of the business, from research to production to marketing and sales. After these determinations have been made, a company can begin to build a set code of ethics.
  • If these are established as the hypernorms for a research project, one must consider the implications of researching in other societies. Cultural shifts must be accommodated when creating a metric for ethical behavior and consideration for that culture’s hypernorms must be made. If, for example, an American company is doing business with a Laotian company and the manager learns that it is considered highly unethical in Laos to do research without explicit consent (while in America, they accept implicit consent), the American manager should find new research methods to abide this standard. By combining the theories of Rousseau and Donaldson, the manager should be able to find an ethical solution to his dilemma.
  • If a company has two factories, one in America, and one in Vietnam, they should be held to the same standard. While the two locations likely have different appeals to the company, either geographically or financially, the existence of a Vietnamese location should not serve only as a cost-cutting mechanism, but should also exist to better the lives of the workers. This form of corporate social responsibility would not only serve to further the economic goals of the corporation, but to also enhance the society around it by providing safe jobs to citizens in the area and by otherwise improving the area, thus serving all relevant stakeholders.
  • The company must make enough money to continue production. If this imperative is not met, not only will shareholders be at a loss, but so will employees and other businesses within the supply chain. Secondly, the company holds an ethical responsibility to the consumer. Not only is this in the interest of common human courtesy, but good treatment of consumers can save an otherwise mediocre company and poor treatment of customers can destroy an otherwise brilliant company. Treating the consumers fairly is the right thing to do by virtue, but the consequences otherwise are damning. Salespeople must consider the customs of the area to which they are selling to be successful. If it is a highly religious Christian area, not only will making calls on Sunday be unsuccessful, it will also be offensive. In some areas it would also be considered offensive to turn away a small gift, while in others it may be considered a bribe. Understanding the culture of the area is vital. Finally, the company should consider their responsibility to society. If a company is otherwise ethically perfect, but still dumps toxins in the river, they are harming the society as a whole. The consequences of a company’s actions must be considered as part of their ethical footing.
  • Both tests begin with the simple question, “is our action legal?” The important part is that neither stops at this minimum standard, however. The Texas Instruments method is not as thorough as the Laczniak Test, but serves as a good starting block as an ethical test. It can be easily modified to add other questions like “Does this action affect the environment adversely?” or “Is this practice beneficial for the local community?” The Laczniak Test is very thorough, covering multiple concerns, including legality, obligations, motives, and rights, among others. As it is very thorough it is better suited to large-impact decisions, but impractical for everyday decisions.
  • Social Contract Theory in a Global Marketing Context

    1. 1. SOCIAL CONTRACT THEORY IN A GLOBAL MARKETING CONTEXT Emily Rich – MKT 350 – Southern New Hampshire University
    2. 2. International vs. Global Marketplace “Markets do not exist in a state of nature. They are social constructs, with defined customs and regulations that are established through political struggle and compromise…Until recently, the politics of the global economy has been largely viewed as “international,” i.e., focussed on the questions of “which nation gets what,” with the central conflict between countries that are rich and poor…There is no political constitution to match the growing global market.” – Jeff Faux, October 25th 2000
    3. 3. Variations on Social Contract Theory Thomas Hobbes   The “natural state” for man is one outside of government rule. The social contract begins when two (or more) parties compromise and concede individual rights to one another. Jean-Jacques Rousseau    “Obedience to a selfprescribed law is liberty” (de la Parra, 2010). Citizens must take action in building the ruling organization. The “general will” occurs when citizens work together toward the good of the collective.
    4. 4. Variations on Social Contract Theory Immanuel Kant   Combined with the “general will,” an “original contract” suggests that consent to be governed and the will of the sovereign is implicit for all those in the society as they created the governing body. Suggests that no law may be declared which, “a whole people could not possibly give its consent to” (Rousseau, qtd. in Rauscher, 2012). John Rawls   Creates an “original position” and “veil of ignorance” to create an objective vacuum to which one may make an “impartial moral judgment” (Murphy, et al., 2004). Establishes the Liberty Principle and Difference Principle   Liberty Principle – each person must have a same equal right to the “most extensive basic liberty compatible with a similar liberty for others” (Murphy, et al., 2004). Difference Principle - suggests that “social and economic equalities are to be arranged so that they are to the greatest benefit of the most disadvantaged” and that no actions should be taken which would in any way harm those who are disadvantaged (Murphy, et al., 2004).
    5. 5. Variations on Social Contract Theory David Gauthier   Assumes men have no natural reason for compromise other than for self-service.  Prisoner’s Dilemma  Two distinctive contracts are integrated:  Assumes that when there are two parties, each controlled by a third, they will each sell the other out in attempt to reduce their own sentence.   Thomas Donaldson & Thomas Dunfee Instead, they should work together against the third to reduce both sentences beneath the singular threshold.  Compliance Problem  An issue of rational compliance with accepted norms.  Solved by “minimax relative concession” – a theory that should the concessions suffered by each party be perceived as equal, they will both be able to most effectively minimize concessions and maximize utility (Cudd, 2013).  1st – The global community should work together to find a “rational arrangement for ethics in economic life.” 2nd - business groups or other entities should have “moral free space” so they may “keep their moral options open until they confront the full context and environment of a decision” (Murphy, 2004). Hypernorms  Universal norms used as a standard for all other norms.
    6. 6. Delineation of Stakeholders   Primary stakeholders may include employees, customers, stockholders, and managers of the company. Secondary stakeholders include the government, the company’s competition, the community, media, nongovernmental organizations, and society as a whole.
    7. 7. Issues in Research  The Three Norms of Western Society 1. 2. 3. The right of selfdetermination within the law (informed consent) The obligation of a fiduciary to protect the welfare of a beneficiary The fiduciary’s obligation to be trustworthy for social stability reasons (Smith, et al., 2009)
    8. 8. Issues in Production  Companies must have Corporate Social Responsibilities and must fulfill them in their actions.
    9. 9. Issues in Sales and Marketing  Important Considerations  The company must be profitable.  There is a responsibility held to the consumer of the product.  Salespeople must be culturally aware.  The company must remember the responsibility to society as a whole.
    10. 10. Solutions and Building an Ethical Code    A company should begin by establishing its own Code of Ethics. After an ethical code is established, consideration should be taken to determine a method to best create mutual codes with business partners. The business should never deal below their own standard, though some consideration should be taken toward cultural norms.  If the company has a policy against bribery, for example, they should consider their stance regarding gifting in foreign areas.
    11. 11. Suggested Metrics for Ethical Judgments Texas Instruments Method 1. 2. 3. Are we complying with all legal requirements on a local level? Are there business practices or requirements at the local level which impact how we interact with co-workers in other parts of the world? Do some of our practices need to be adapted based on the local laws and customs of a specific locale? On what basis do we define our universal standards that apply to TI employees everywhere? (2008 Corporate Citizenship Report) Laczniak Test 1. Does the contemplated action violate the law? (The legal test) 2. Is this action contrary to widely accepted moral obligations? (The duties test) 3. Does the proposed action violate any other special obligations that stem from this type of marketing organization? (The special obligations test) 4. Is the intent of the contemplated action harmful? (The motives test) 5. Is it likely that any major damages to people or organizations will result from the contemplated action? (The consequences test) 6. Does this action enhance the ideal of a moral community, and is it consonant with what the marketing organization wants to be? (The virtues test) 7. Does the contemplated action infringe upon property rights, privacy rights, or the rights of the consumer? (The rights test) 8. Does the proposed action leave another person or group less well off? Is this person or group already a member of a relatively underprivileged class? (The justice test) (Murphy, et al., 2004)
    12. 12. Conclusion By striking an ethical code with the other members, a company may use a combination of all the previously mentioned theories. The two (or more) members of the agreement could work together to create a mutually beneficial arrangement. It requires Rousseau’s consent, Donaldson’s establishment of norms, Kant’s general will, and Rawls’ liberty principle, all under Gauthier’s presupposition that two parties who work together will achieve the greatest net good.
    13. 13. References  2008 corporate citizenship report. (n.d.). Retrieved from  Auchter, L., & Dziewa, M. (2013). Managing business values in a globalized economy by isct (integrated social contract theory) - a comparative study. (Master's thesis)Retrieved from  Bradley, J. (2013). Social contract theories in business. Retrieved from  Cudd, A. (2013). Contractarianism. In E. Zalta (Ed.),Stanford Encyclopedia of Philosophy. Stanford, California: Retrieved from  de la Perra, O. (2010). Rousseau's social contract and a theory for global citizenship. (Master's thesis)Retrieved from  Donaldson, T., & Dunfee, T. (1994). Toward a unified conception of business ethics: Integrative social contract theory. The Academy of Management Review, 19(2), 252-284. Retrieved from  Dunfee, T., Smith, N., & Ross, W. (1999). Social contracts and marketing ethics. Journal of Marketing, 63,14-32. Retrieved from  Faux, J. (2002, March 04). Toward a global social contract. Retrieved from  Keegan, W., & Green, M. (2013). Global marketing. (7th ed.). Upper Saddle River, New Jersey: Pearson Education, Inc.  Lloyd, S., & Sreedhar, S. (2013). Hobbes's moral and political philosophy. In E. Zalta (Ed.), Stanford Encyclopedia of Philosophy. Stanford, California: Retrieved from  Murphy, P., Laczniak, G., Bowie, N., & Klein, T. (2004).Ethical marketing. (1st ed.). Upper Saddle River, New Jersey: Pearson Education, Inc.  Neidlemen, J. (2012, October 09). The social contract theory in a global context. Retrieved from  Rauscher, F. (2012). Kant's social and political philosophy. In E. Zalta (Ed.), Stanford Encyclopedia of Philosophy. Stanford, California: Retrieved from  Smith, N., Kimmel, A., & Klein, J. (2009). Social contract theory and the ethics of deception in consumer research . Retrieved from