Social Contract Theory: Why Businesses Owe More Than Just According to this Business Ethics Theory
Chuck Gallagher
Ethics and AI keynote speaker | Author | Primeau Productions | Virtual Training Associates | President Sports Ethics | VP American Funeral Financial
Starbucks invests in local communities and provides tuition reimbursement for employees. Why? It’s not just about goodwill—it’s based on social contract theory, which argues that businesses thrive when they support society.
Understanding Social Contract Theory
Derived from the work of Jean-Jacques Rousseau and Thomas Hobbes, social contract theory suggests that businesses operate under an implied agreement with society. This contract involves fulfilling responsibilities to employees, customers, and communities.
Today’s Manifestation: Stakeholder Capitalism
Environmental, Social, and Governance (ESG) initiatives reflect modern applications of social contract theory. Companies like Unilever integrate sustainability and public welfare into their operations, creating value for stakeholders beyond shareholders.
Challenges of Social Contract Theory
Determining the extent of a company’s obligations can be difficult. For instance, should businesses be responsible for addressing climate change, or does this burden fall solely on governments?
Probing Thought: How can companies balance profit motives with societal obligations effectively?