To the familiar jibe that business ethics is an oxymoron might be added another incongruous juxtaposition, that of business ethics theory. The contradictory flavor of this phrase is not due to a low estimate of the moral tone of business but to skepticism about the practicality of ethical theory. How can any theory of ethics that is rigorous enough to pass muster with picky philosophers possibly give guidance to busy, hardheaded business managers? This challenge is faced squarely by Thomas Donaldson and Thomas W. Dunfee in their book, Ties That Bind: A Social Contracts Approach to Business Ethics.( n1) For moral philosophers, Donaldson and Dunfee offer a grand theory, called Integrative Social Contracts Theory, or ISCT for short, which follows in the contract tradition of Hobbes, Locke, and, more recently, John Rawls. However, ISCT does not consist solely of general, ideal principles that result from most contract approaches, but includes specific agreements made in actual communities. The concreteness of their theory enables the two authors to provide managers with useful tools for ethical decision making in cases of conflicting standards. Ties That Bind is an important contribution to both moral philosophy and the field of management that amply illustrates how ethical theory can yield practical business results. The theory is also intended to guide business ethics research, and the authors themselves apply ISCT to the problem of providing a normative foundation for stakeholder theories of the corporation. Donaldson and Dunfee may not succeed entirely in this ambitious effort, but their book convincingly demonstrates that business ethics theory need not be an oxymoron. AN OUTLINE OF THE THEORY Integrative Social Contracts Theory is constructed from three major building blocks. At the highest level of abstraction are hypernorms, which are fundamental ethical principles that are universally recognized. Hypernorms are not like Rawls's principles of justice, which are derived from a hypothetical contract.( n2) Rather, they are principles that make contracting possible and set limits on possible contracts. Donaldson and Dunfee note the similarity of hypernorms to the thin morality that Michael Walzer finds expressed in different ways by people the world over.( n3) The principles of this thin morality are not "constructed" in Rawls's sense by finding the ground of all our common moral judgments.( n4) They are discovered to exist, if indeed they exist at all, merely by looking for congruence in the principles that are commonly recognized. The second building block is a macrosocial contract. This hypothetical construct is similar to Rawls's choice in the original position but with less stringent conditions on the contractors. The macrosocial contract represents the agreements that would be made by rational contractors who are aware of their limitations as economic actors and want to provide a moral framework for productive economic activity. The macrosocial contract serves little purpose in ISCT except to justify microsocial contracts, which constitute the third building block. Within the limits imposed by hypernorms, the members of each community are permitted by the hypothetical macrosocial contract to form actual localized microcontracts. More precisely, Donaldson and Dunfee assume that in forming the macrosocial contract, the contractors would allow a "moral free space" within which it is morally permissible for communities to create ethical norms for their own members. The main function of the macrosocial contract in ISCT is to establish the justifying conditions for the creation of the norms by means of microsocial contracts. Chief among these conditions are the restrictions that norms must be grounded in genuine consent and be consistent with hypernorms. At the heart of ISCT are the legitimate norms of microsocial contracts. These are the moral guideposts that Donaldson and Dunfee propose for practical business decision making. In general, the norms of a community are discoverable by observing the attitudes and behaviors of its members. A norm is "authentic" when observation of the people's attitudes and behaviors shows the norms to be accepted by a "substantial majority" of the community. Authentic norms are not obligatory, however, unless they are also "legitimate," which is to say that they are consistent with hypernorms. Legitimate norms thus have empirical and normative content. They must, in fact, be accepted by a community in a microsocial contract. and they must be formed within the moral free space provided by the macrosocial contract and be consistent with hypernorms. Legitimate norms are incomplete as guides to practical decision making because of the possibility of multiple communities with conflicting norms. Not only may the norms of any given community be inconsistent, but decision makers may be members of different communities with incompatible norms and may act in ways that are contrary to the norms of other communities that are affected. Donaldson and Dunfee meet this problem with priority rules for choosing among competing legitimate norms. The justification of these rules is left rather vague. On the one hand, the authors admit that rational contractors could not reasonably anticipate all conflicts and devise priority rules for them. On the other, they justify their proposed rules on the grounds of being "consistent with the macrosocial contract." Obviously, priority rules cannot be created by microsocial contracts because they are needed to decide among the norms created by such contracts. As a result, priority rules have a shadowy existence somewhere between macrosocial and microsocial contracts.
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