SOCIAL CONTRACT THEORYIN A GLOBAL MARKETING CONTEXTEmily Rich – MKT 350 – Southern New Hampshire University

“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

International vs. Global Marketplace

Variations on Social Contract Theory

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.

“Obedience to a self-prescribed 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.

Thomas Hobbes Jean-Jacques Rousseau

Variations on Social Contract Theory

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).

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).

Immanuel KantJohn Rawls

Variations on Social Contract Theory

Assumes men have no natural reason for compromise other than for self-service.

Prisoner’s Dilemma 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.

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).

Two distinctive contracts are integrated: 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.

David Gauthier Thomas Donaldson & Thomas Dunfee

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.

Issues in Research The Three Norms of Western

Society1. The right of self-

determination within the law (informed consent)

2. The obligation of a fiduciary to protect the welfare of a beneficiary

3. The fiduciary’s obligation to be trustworthy for social stability reasons (Smith, et al., 2009)

Issues in Production Companies must

have Corporate Social Responsibilities and must fulfill them in their actions.

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.

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.

Suggested Metrics for Ethical Judgments

1. Are we complying with all legal requirements on a local level?

2. Are there business practices or requirements at the local level which impact how we interact with co-workers in other parts of the world?

3. 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)

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)

Texas Instruments Method

Laczniak Test

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.

Conclusion

References

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