A Social Contract for International Business Ethics

Paul Neiman

Received: 8 July 2011 / Accepted: 22 April 2012 / Published online: 5 May 2012 Springer Science+Business Media B.V.
2012

Abstract This article begins with a detailed analysis of how the choice situation of a social contract for
international business ethics can be constructed and justied. A choice situation is developed by
analyzing conceptions of the multinational rm and the domain of international business. The result is
a hypothetical negotiation between two ctional characters, J. Duncan Grey and Elizabeth Redd, who
respectively represent the interests of businesses and communities seeking to engage in international
trade. The negotiators agree on ethical principles governing wages, the environment, and compliance
social and cultural norms. These principles are then shown to rest in wide reective equilibrium with
considered moral judgments on international business ethics, which are drawn from international
agreements, such as the UN Declaration on Human Rights, and voluntary business initiatives, such as
the Global Sullivan Principles and the UN Global Compact.
Keywords Social contract . Contractarian . Business ethics . Wages . Environment . International .
Rawls . Global business

Constructing a Social Contract for Business Ethics

The purpose of this social contract for international business ethics (SCIBE) is to provide justication
for several ethical principles for international business. Social contracts for business ethics can be
organized into three main groups. The rst approach directly applies the social
P. Neiman (&) St. Cloud State University, St. Cloud, MN, USA e-mail: pgneiman@stcloudstate.edu

contract theory of a political philosopher to issues of business ethics. Palmer (2001), for example,
notes the parallels between Thomas Hobbess state of nature and concept of human nature, from
which Hobbes justies the powers of government, and multinational corporations in the global
marketplace, from which Palmer justies adherence to national laws and a commitment to sustain1
ability. Others (Bishop 2008; Hartman 1996) have attempted to apply Rawlss original position and
two principles of justice to organizations. Maffettone (2009) argues that Rawlss concepts of the basic
structure of society and basic institutions can be valid for international trade.
2
The second approach adapts the social contract methodology to the domain of business ethics.
Donaldson (1982, 1989), in both Corporations and Morality and The Ethics of International Business,
uses this approach by replacing the traditional state of nature with a state of individual production.
Rather than describing a contracting situation without government, Donaldson (1982, p. 44) describes
one in which people live without productive organizations. Sacconi (2006) develops a contracting
situation to provide justication for an extended model of corporate social responsibility. One of the
key features of this approach to social contracting, then, is the creation of a new contracting situation,
tailored to deal with a specic domain.
The third approach features actually existing social contracts, called extant, tacit, or micro-social
contracts,
1 For another social contract based on Hobbes s state of nature, see
2
Horvath (1995). For a detailed description of the traditional social contract methodology, see Conry
(1995) and Heugens et al. (2006). For a detailed description of Rawlss method of justifying and constructing his social
contract, see Daniels (1996).

123

P. Neiman
teleological than society, Rawlsian devices such

which are discovered through an empirical

investigation into attitudes, behaviors, and
beliefs. Cragg (2000), for example, argues that
there is a tacit social contract between business
and government that has evolved since the end
of World War II, and now requires businesses to
take an expanded role in the promotion of
3
human rights. Donaldson and Dunfee (1999)
Integrative Social Contracts Theory (ISCT) offers
a unique combination of the second and third
approaches, in which extant social contracts are
integrated with a macro-social contract. While
extant social contracts within this approach
have been difcult to justify (Calton 2006;
Keeley 1995; Phillips and Johnson-Cramer
2006), some (Calton 2006; French and Allbright
1998; Reynolds and Yuthas 2008; Smith 2004)
argue that Jurgen Habermas ideal speech
conditions can provide a foundation for
resolving problems with extant social contracts.
SCIBE is among the second group of social
contracts. It constructs a new choice situation,
the Grey-Redd negotiation, which is tailored to
the domain of international business ethics.
This type of social contract has been criticized
for failing to provide a sufciently detailed contracting situation. For example, while Thomas
Hobbes devotes a great deal of attention to
human nature and the state of nature, Conry
(1995, p. 197), argues that Donaldsons state of
individual production does not create a
sufcient denition of human nature.Similar
criticisms
4 have been
made of the macro-social contract in Donaldsons and Dunfees ISCT (de Graaf 2006;
Wempe 2004). Wempe (2004, p. 333), for
example, argues that the authors pay
insufcient attention to the manner in which
such a macrosocial contract would need to be
set up. SCIBE seeks to avoid this problem by
following a careful process for constructing
and justifying the choice situation, which is
suggested by John Rawlss social contract
theory and is detailed in the next section. To
be clear, SCIBE is not an application of Rawlss
original position, or Rawlss principles of
justice. The direct application of a particular
social contract to business ethics
characterizes the rst type of social contract.
This approach is problematic because it uses
devices, such as the state of nature or the
original position, that were constructed for
problems of political philosophy. Phillips and
Margolis (1999), for example, argue that
because society is less voluntary than
organizations, and organizations are more

as the original position are not appropriate for

the domain of business ethics. Indeed, Rawls
(1999a, p. 7) notes that justice as fairness
applies only to the basic structure of society
conceivedas a closed system isolated from
other societies. In Political Liberalism, Rawls
(2005,p.8)
3

For another example of extant social contracts,

see Dunfee (1991). 4 For a similar critique, see
Hodapp (1990).
explicitly limits his theory of justice to modern
constitutional democracies, and more carefully
denes its starting points as that which can be
drawn from the public culture of such societies.
It seems, then, that Rawlss social contractthe
original position and the two principles of justice
derived from itis unsuitable for the domain of
international business ethics, because the moral
problems that arise in this domain result from the
interaction of entities with different social,
cultural, and moral norms. In The Law of
Peoples, Rawls (1999b) extends his social
contract outwards from a single closed liberal
society to construct principles for global justice.
Nien-he Hsieh (2009, 2010) argues that ethical
principles for multinational enterprises can be
5
drawn from this law of peoples. SCIBE does not
follow Rawls in this venture, but rather only
adapts a method of constructing and justifying
choice situations, which is suggested by Rawlss
work, to construct a new choice situation that is
tailored specically to the domain of international
business ethics.
In the following section, a process for constructing
and justifying the contracting situation is laid out.
In Constructing SCIBEs Choice Situation
section, this process is used to develop a set of
commonly shared presumptions, from which a
choice situation for SCIBE is constructed. SCIBEs
choice situation is a ctional negotiation between
J. Duncan Grey, a representative of a business,
and Elizabeth Redd, who represents a community,
both of whom seek the benets of international
business. The Negotiation: Ethical Principles for
International Business section demonstrates the
logic by which the negotiators arrive at ethical
principles for international business governing
wages, the environment, and cultural and social
norms. In Considered Moral Judgments and Wide
Reective Equilibrium section, the justicatory
process is completed by demonstrating that
SCIBEs ethical principles, the considered moral
judgments on international business, and the
conceptions of the multinational rm and domain
of international business rest in wide reective
equilibrium. The article concludes by explaining
how SCIBE fullls the design criteria for

...justication proceeds from what all parties to

the
discussion hold in common. Ideally, to justify a

contractarian business ethics argued for by Ben

Wempe (2008).

Constructing and Justifying the Social Contract

In A Theory of Justice, Rawls (1999a, p. 508)
describes justication in this way:

Gillian Brock (2010) provides a detailed literature

review of the debate over Rawlss law of peoples.

123

conception of justice to someone is to give

him a proof of its principles from premises
that we both accept, these principles having
in turn consequences that match our
considered judgments. Thus mere proof is
not justication. A proof simply displays
logical relations between propositions. But
proofs become justications once the
starting points are mutually recognized.
This description of justication is described in
similar terms in Justice as Fairness: Political not
Metaphysical,
where
Rawls
notes
that
justication must proceed from what we and
others publicly recognize as true; or better,
publicly recognize as acceptable to us (1999c,
6
p. 394). A choice situation must be constructed
that incorporates these commonly shared
presumptions (1999a, p. 16). The choice
situation must be sufciently detailed so as to
yield a signicant set of principles (1999a, p.
18). Finally, the principles derived from the
choice situation must rest in wide reective
equilibrium with considered judgments and
relevant background theories. This may involve
changing the choice situation, and hence the
principles derived from it, or modifying
judgments until these components coincide.
Each of these elements is developed in detail in
the following.
Rawls (1999a, p. 16) describes the commonly
shared presumptions as restrictions that it
seems reasonable to impose on arguments for
principles of justice. These presumptions
constrain the way that individuals in the
contracting situation can argue for principles of
justice. For example, Rawls (1999a, p. 16) says,
it seems reasonable and generally acceptable
that no one should be advantaged or
disadvantaged by natural fortune or social
circumstances in the choice of principles. In
Political Liberalism, Rawls (2005, pp. 1314)
explicitly draws these presumptions from the
public political culture of liberal democracies;
thus, making it likely that these ideas will be
accepted within those societies. Pogge (2007, p.
173) provides an impressive list of the ideas
Rawls draws from the public political culture of
liberal democracies, while Daniels (1996)
subsumes these ideas into various deep theories,
including theories of the person, the role of
morality in society, and the ideal of a well7
ordered society. Rawlss choice situation, the
original position, is an acceptable justicatory
device because the relevant deep theory is
acceptable, as are inferences from it to the
6

Rawls makes similar remarks on justication in

several other places, including Political Liberalism

(2005, pp. 100101) and The Idea of Overlapping
Consensus (1999d, pp. 426427).
7

For other discussions of the nature and

importance of the ideas embedded in public
political culture for Rawlss construction of the
original position, see Brink ( 1987), Hayfa (2004),
Ronzoni (2010), and Wenar (2001).

features of the contract (Daniels 1996, p. 60).

This means, though, that the social contract is
acceptable only if particular component
theories are also accepted (Daniels 1996, p.
60). Similarly, James (2005, p. 282) argues that
Rawlss constructivist method begins from
existing social practices. On this view, the
agreement in the contracting situation has no
authority as such; it must be grounded in
independent judgments about what social
practices exist and what kinds of agents
participate in them (James 2005,
p. 282).
This reliance on the public political culture of
liberal democracies as the materials of
construction for the original position has led
some to question whether Rawlss theory is
relativistic or particularist. Keyt (1974, p. 244)
notes, since the basis of justication, namely
what is regarded as a considered judgment and
as a reasonable or acceptable premise, may
vary, to some extent at least, among persons
and groupsjustication would seem to be
relative to a person or, more generally, to a
group of persons. More recently, Ronzoni (2010,
p. 84) argues that the materials of construction
presupposed by the original position, such as
the veil of ignorance or the perfect rationality of
the contractors, are elements of a contingent
and contextual normative ideal. ONeill (1996,
p. 50) argues that this sort of particularist
reasoning seemingly fails to explain why
appeals to actual traditions, norms or practices,
or to actual sensibilities and preferences, even to
those that are constitutive of identities, should
be held to vindicate principles or legitimate
actionrather than beg questions. ONeill
argues
that
such
thick
materials
of
construction are not necessary to yield specic
ethical principles.
For Rawls, the problem of drawing the materials
of construction from liberal democracies has
been relevant to the debate over globalizing the
original position (Brock 2010). Proponents of a
global version of Rawlss original position may
seek to derive more specic principles for
international business ethics from it. SCIBE does
not attempt to do this, but instead creates its
own choice situation that is tailored to the
problems
of
international
business.
This
restriction aligns with Wempes (2008,
p. 710) warning not to rely on too direct copies
of the contract model imported from other
domains, as well as ONeills (2003, p. 352)

claim that constructivist arguments do not

reach all possible audiences: they are based on
the shared conceptions of citizens, so provide
reasons for action only for those whose most
basic commitments they presuppose. Because
the parties to SCIBE may have different social,
political, economic, and cultural norms, SCIBE

identies commonly shared presumptions from

what all the parties have in common, namely,
the desire to realize increased economic benets
through international trade. That is, instead of
focusing on the parties to the

123

P. Neiman
that the

social contract as citizens, which may be

appropriate for broader questions of justice,
SCIBE focuses on what they have in common as
economic actors in the global marketplace. In the
following section, the materials of construction
for SCIBEs choice situation are developed out of
an examination of the domain of international
business. These starting points are reasonable
and widely shared and can be used to construct
a sufciently detailed choice situation that yields
signicant ethical principles.
Rawls (1999a, p. 103) describes the choice
situation as follows:
...a simplied situation is described in which
rational individuals with certain ends and
related to each other in certain ways are to
choose among various courses of action in
view of their knowledge of the circumstances. What these individuals will do is
then derived by strictly deductive reasoning
from these assumptions about their beliefs
and interests, their situation and the options
open to them.
There mere fact that one can describe a ctional
scenario in which contractors arrive at an
agreement does not provide justication for that
agreement. After all, contractors could be
described so as to agree to anything. To justify
a particular description of the initial situation one
shows that it incorporates these commonly
shared presumptions (Rawls 1999a, p. 16). As
noted earlier, the construction of the choice
situation is xed, at least provisionally, at one
end by the materials used in its construction.
These materials themselves must be reasonable
and generally acceptable, supported by relevant
deep theories (Daniels 1996). This restriction
limits the number of possible descriptions of the
choice situation and thereby limits the possible
principles that may be derived from it.
The construction of the choice situation is also
constrained by the requirement that the
principles derived to it must match our
considered convictionsor extend them in an
acceptable way (Rawls 1999a, p. 17).
Considered convictions are those beliefs that
have been examinedwith care and have
reached what we believe is an impartial
judgment not likely to be distorted by an excessive attention to our own interests (Rawls
1999a, pp. 1718). However, these judgments
are only provisional xed points and may be
revised if a sufciently strong case for principles
of justice that contradict them is made (Rawls
1999a, p. 18). Likewise, if the principles conict
with the considered judgments, one may need to
revise the description of the choice situation so
that it generates agreement to different
principles. Wide reective equilibrium requires

description of the choice situation

produces principles that are consistent with considered
moral
judgments
and
relevant
background or deep theories (Daniels 1996).
Daniels argues that these deep theories must be
acceptable for reasons independent of the
considered moral judgments. Thus, Rawlss
original position, including the veil of ignorance,
is at best a plausible hypothesis until it can
be
conrmed
by
considering
how
its
consequences
t
with
our
considered
judgments in reective equilibrium (Scanlon
2003, p. 156).
SCIBEs choice situation is constrained at one
end by the commonly shared presumptions, and
at the other end by the considered moral
judgments.
To
maintain
SCIBEs
domain
specicity, commonly shared presumptions are
drawn from reasonable and widely shared beliefs
about the domain of international business,
whereas the considered moral judgments are
drawn from internationally accepted declarations
and initiatives, such as the Global Compact and
the Global Sullivan Principles. To avoid charges of
particularism or relativism, SCIBEs principles
must be in wide reective equilibrium with the
considered moral judgments and the background
theories that inform the commonly shared
presumptions.

Constructing SCIBEs Choice Situation

Commonly Shared Presumptions and the
Domain of International Business
Following the procedure of construction detailed
in Constructing and Justifying the Social
Contract section, the rst step in constructing a
choice situation for SCIBE is to identify
commonly shared presumptions from the domain
of international business. One of the most important features of this domain is that the power of
law, as well as social and cultural norms, has
been greatly diminished in regulating the
behavior of multinational corporations. Palmer
(2001, p. 250) describes the domain of
international business as one that features
insufcient curbs to illegal activities of
multinational entities, and no curb at all to legal
but nonetheless non-sustainable action. A
multinational rm may, for example, choose to
relocate to a nation with weaker environmental
and labor standards; thus, limiting the ability of
the law to constrain behavior. Although
consumers in the rms home nation may be
appalled by the conditions under which the
products they enjoy are produced, the
geographical
and
psychological
distance
between production and consumption may do

much to blunt the impact of consumers moral

norms on the rms bottom line. Given the
remarkable freedom to choose the legal system
that will govern their operations (Cragg 2000, p.
210) legal, social, and cultural standards seem
an increasingly poor check on the behavior of

multinational rms.
Furthermore, the ability of states to control the
legal environmental regulating international
commerce has been

123

further weakened by free trade agreements such

as NAFTA and the WTO (Cragg 2000, p. 210).
Not only, then, does the domain of international
business lack institutions that effectively govern
and regulate multinational rms but also it
includes institutions that challenge the ability of
nations to use the law to do so within their own
borders. As the ability of nations to restrain the
behavior of multinational business through legal
or cultural restrictions has waned, the size and
power of multinational businesses has grown.
This creates an imbalance of power between
multinational businesses and the nations and
communities they operate in. Nations, especially
underdeveloped nations struggling with poverty,
may nd it easy to give into the temptation to
attract investment by promising a legal
environment that minimizesstandards (Cragg
2000, p. 210). Individually, nations nd
themselves at a distinct disadvantage when
confronted with multinational rms that have a
great deal of freedom in deciding where to invest.
Multinational rms also have the ability to
inuence the legal, social, and cultural
environment by participating in the political and
social life of the community (Cragg 2000; Matten
and Crane 2005; Matten et al. 2003; Scherer et
al. 2006; Scherer et al. 2009). As Scherer et al.
(2006, p. 507) notes, rms have, willingly or not,
become politically engaged. The multinational
rm can thus be considered both an economic
and political agent (Scherer et al. 2009; Kobrin
2009), and has assumed both social and political
responsibilities (Scherer et al. 2006; Matten and
Crane 2005; Crane et al. 2008; Cragg 2005). This
conception of the multinational rm is also
supported by corporate citizenship theory, which
argues that the rm has social and political duties
as a citizen of the community or as a global
citizen (Matten and Crane 2005; Matten et al.
2003; Logsdon and Wood 2005; Wood and
Logsdon 2008;Post 2002).
By focusing on what rms and communities
engaged in international trade have in common,
it seems possible to discover some commonly
shared presumptions on the restrictions it is
reasonable to impose on arguments for ethical
principles for international business. Both parties,
for example, recognize some of the fundamentals
of free market interactionthe freedom of the
parties to accept or reject a contract, property
ownership as the basis of the business
relationship, and the binding nature of the contract. Where, then, is there consensus on what
restrictions ought to be placed on negotiations
over ethical principles? Rawls (1999a, p. 510)
advises that one must look for a constrained
minimum, a set of weak conditions that still
enables us to construct a workable theory. It,
thus, seems reasonable for the contractorsthe

rm and community interested in the benets of

international tradeto share the following
presumptions:
(1) Contractors should not be coerced in any
way into accepting or rejecting principles.
(2) Contractors must have an equal right to
propose and argue for or against principles.
(3) Contractors must expect that the terms of
the contract will be adhered to.
First, it seems reasonable, and consistent with
their mutual recognition of the fundamentals of
the free market, for the parties to be free, not
forced, to accept or reject a proposal in a free
market. This restriction precludes one party in
the negotiations from using economic, political,
social, or cultural power to coerce another into
accepting principles of justice they would
otherwise reject. Given the description of the
domain of international business earlier, it may
be obvious why this constraint seems
reasonable and acceptable to nations or
communities, who are most at risk of being
economically coerced into accepting rules for
business behavior that may be detrimental to
their citizens. But businesses, too, have reason
to be concerned about coercion. Scherer et al.
(2009, p. 331) note that in economic, nance
and other business related disciplines the
assumption is widely shared that governments
are powerful and even regulate too much and
should rather decrease the level of control.
Furthermore, it might be noted that much of the
discussion surrounding extant social contracts
concerns the rights of voice and exit as a means
to ensure that individuals are not coerced into
accepting the moral norms of a community. This
concern for potential coercion, wielded by the
more powerful party to the social contract,
suggests that this is indeed a commonly shared
presumption and further that the restriction it
imposes is reasonable.
It is of course true that economic coercion is
commonplace in the free market. From the
vantage point of the more powerful party, this
restriction may thus seem to unreasonably limit
its ability to secure benets. This objection,
though, seems too relativistic for either businesses or nations to make, in that one can never
be guaranteed to be the more powerful party.
More to the point, though, the aim here is to
identify reasonable restrictions on arguments. To
deny this restriction is to assert that ethics
always be determined by the most powerful
party. Furthermore, this restriction is also in line
with the recent work (Palazzo and Scherer 2006;
Reynolds and Yuthas 2008; Gilbert and Behnam
2008) to use Jurgen Habermass ideal speech
conditions to form legitimate contracts.
Second, in a free market, one expects all
individuals to have the right to negotiate, and so

all must have an equal right to propose and argue

for or against principles. The presence and
inuence of multinational rms in the social and
political life of communities suggest that it is a

commonly shared presumption that business be

considered an important part of the community,
and thus to have a voice

123

P. Neiman
negotiator, Redd had participated in many of

at the table in determining how its operations

are to be constrained by ethical principles. This
presumption coheres with the conception of the
rm as both an economic and political agent, as
well as the concept of the rm as a citizen of the
community. Lastly, it seems a reasonable
restriction that individuals be held to the
contracts they agree to as a result of the
negotiation. This is a simple requirement for any
business transaction.
The construction of SCIBEs contracting
situation must incorporate these commonly
shared presumptions and yield denite ethical
principles for international business. Thus, the
choice situation described inthe following has
two primary goals: First, it must incorporate the
commonly shared presumptions, and second, the
contractors and the conditions they are under
must be described in sufcient detail to produce
an agreement on ethical principles for
international business. To these ends, a
negotiation is imagined between J. Duncan Grey
and Elizabeth Redd, who represent a business
and a community, respectively, which are
interested in seeking the benets of international
trade.
The GreyRedd Negotiation
J. Duncan Grey entered the bright, if bare,
conference room, annoyed that his counterpart
had yet to arrive. Tall, t, and dressed sharply in
what appeared to be a new suit, Mr. Grey
considered his time eminently valuable, and,
though he could not quite explain why, he had
the vague feeling that this whole process was a
waste of it. Still, he was above all else a
businessman with a job to do. Grey knew that
these negotiations would be necessary if his
company was to have access to new markets
opening up overseas. So, calmly smoothing his
tie, he sat down at the table, pausing only briey
as he realized that he could not remember any
details about his company, or even his industry.
Were they trying to introduce a product into a
new market or seeking a cheaper source of
labor? In the end, J. Duncan Grey realized that it
did not really matter his interest was in
ensuring that the ethical principles agreed to
today would allow business to make as much
prot as possible.
A clicking of heels across the oor announced
the arrival of Elizabeth Redd (nally!). Ms Redd
approached with a bright smile, eager to begin
the afternoons work. After all, these negotiations
could secure great benets for her community.
The most exciting thing about welcoming a new
member to the community, she reected, were
the unknown benets they might bring. A skillful

these meetings. Maybe thats why I cant seem

to remember the particulars of this one, she
thought. She was not sure what industry the
stuffy, though handsome, gentleman at the table
represented. Still, it did not really matter, she
decided. Her interest in these negotiations was
clearsecure the benets of international trade
for her community. This meant she would
concentrate on the economic benetsjobs,
wealth, and incomethat international trade
could bring to the community, as well as the
increased availability of social goodseducation,
health care, clean drinking water, and other
goods that would benet the whole community.
Good afternoon, J. Duncan Grey said, as he
politely rose from his chair. The two shook hands
and took their seats. Liz, why dont we begin
with you telling me a little bit about your
community?
Its Elizabeth, Ms Redd responded sharply,
disliking Greys assumed familiarity. But as she
started to speak, a wave of confusion washed
over her as she realized that she could not begin
to tell Mr Grey a single thing about her
community. Was it wealthy or poor? Were natural
resources plentiful or scarce? Were there
important religious or cultural norms? She had
not the foggiest notion. As she clutched the edge
of the table, struggling to regain composure at
this utter shock to her identity, she could only
mumble,
You
rst.
Mr
Grey
smiled
compassionately. It was one thing to lose track of
your company and your industry, but quite
another to lose touch with your community,
which, after all, might form the basis of your
entire identity. Im in the same position you are.
Something about being in this room he said,
glancing vaguely about. Still, were both professionals. We have all of the information we need
to lay down some ethical principles for how
foreign business will interact with communities.
Lets get started.
Ms Redd smiled as she realized that Grey was
right. She could effectively negotiate for the
economic benets that trade with international
companies would bring. While she lacked specic
information about the nature of his industry or
her community, somehow she knew that Grey
could not force her to accepting a deal that did
not satisfy the interests of her community.
Whatever else about her community she had
mysteriously lost on entering this room, she
knew that it was not dependent on international
trade for its well-being. Seeing a similar
condence in his eyes, she realized that Grey
was in the same position. His company, whatever
it might be involved in, was not dependent on
international trade either. If they were to come to
an agreement, both would have to benet.

Walking away from the table would mean losing

advantages that could be gained through
international trade, but neither the company nor
the community would suffer for it. Smiling
gamely, Redd said, Lets get to work!

Commonly Shared Presumptions in the

GreyRedd Negotiations
The
GreyRedd
negotiation
described
in
preceding
incorporates
commonly
shared
presumptions from the domain of

123

international business, and, as shown in the next

section, yields a signicant set of ethical
principles. The contractors lack of particular
information about the company and community,
combined with their belief in the sustainability of
their clients, ensures that the rst commonly
shared presumption is incorporated into the
choice
situation.
Information
about
the
companys
industry,
protability,
culture,
mission, and so on is hidden from the
contractors, as is any knowledge of the culture,
economics, and demographics of the community.
This constraint makes it impossible for either
negotiator to use coercion, of any kind, against
the other. Grey, for example, does not know
whether he represents a multi-billion dollar
corporation or a small business owner, and thus
is not in a position to use economic coercion to
obtain Redds agreement. Similarly, Grey and
Redd are ignorant of any cultural, political, or
military power they may possess. It, thus,
becomes impossible for these factors to play a
role in their negotiations.
The belief that the company and the
community are sustainable also plays an
important role in incorporating the rst
commonly shared presumption. One of the characteristics of international business is the ability
of multinational corporations to exert pressure on
nations to weaken or avoid legal restrictions,
especially underdeveloped nations that may be
desperate
for
foreign
investment.
The
sustainability of each party ensures that neither
one is desperate for what the other may provide.
Thus, Redd assumes that the citizens of her
community have a decent standard of living and
are reasonably safe from environment harms,
whereas Grey assumes that international trade is
something benecial, though not necessary, to
the future of the company. In the negotiations,
this ensures that Grey and Redd cannot force
one another to accept any proposals. Because
each negotiator is free to walk away from the
table without harming their clients, and because
agreement is needed for either to realize the
benets of international trade, each negotiator
must be willing to weigh the others proposals.
This ensures that the second commonly shared
presumptionthat all parties have an equal right
to propose and argue for ethical principlesis
incorporated into the negotiation. Finally, both
recognize that the benets of international trade
are only available if they come to an agreement,
and this condition ensures that the parties take
the negotiations seriously, thus incorporating the
nal commonly shared presumption.
Beyond incorporating SCIBEs commonly
shared presumptions, the choice situation must
also be detailed enough to produce an
agreement to specic ethical principles. It may

seem that the constraints on information prevent

this. However, this constraint seems necessary
to ensure that the negotiations take place at a
level of abstraction that is suitable for universal
principles of international business ethics, rather
than company or industry specic rules. If, for
example, Grey knew he represented a marketing
rm with little use for exploitation of natural
resources, he may be tempted to give greater
concessions on environmental obligations than
he would if he represented an oil company.
Grey and Redd arrive at an agreement on
specic ethical principles through a consideration
of their shared desire to realize the benets of
international trade. Greys motivation is reduced
to a desire to seek prot. Whatever other goals
the company may have, ethical rules that allow it
to be more protable will help the company
8
achieve them. While Redd is concerned for the
well-being of her entire community, including its
social and cultural life, in the negotiations her
interest is limited to the economic benets of
international trade. Communities hope that
international trade will increase employment,
income, and wealth, as well as generate greater
social goods. Social goods are dened here as
those things that improve the well-being of the
community as a whole. This might include
physical goods that foreign business can
construct or contribute to, such as schools,
hospitals, or roads. It also includes the rights and
liberties that are necessary for the well-being of
the community, such as civil rights to freedom
from harm or social rights to basic necessities.
There is an expectation that international trade
will increase both economic benets and social
goods (Matten and Crane 2005; Scherer et al.
2006). As a representative of the community,
then, Redd is motivated to provide increased
benets from international trade to all members
of the community. Greys and Redds interests
are not entirely opposed. Redd wants foreign
business to succeed, because successful
businesses can pay better wages and provide
more social goods to the community. Grey,
likewise, may have a need for a healthy and
educated labor pool, or a community with more
disposable income. But the more money Greys
company is morally obligated to put into wages,
environmental protection, and social goods, the
smaller the companys prot margin will be.
It will no doubt be noted that the restrictions on
information in the negotiation are similar to
Rawlss veil of ignorance. Phillips and Margolis
(1999) have been critical of using this device,
which was created by Rawls to construct a
theory of justice for the basic structure of
society, for business ethics. It is important to
remember that the GreyRedd negotiation is a
choice situation that is distinct from Rawlss
original position. It has been constructed from a

different set of commonly shared presumptions,

and
8

Suppose, for example, that Grey is representing

a state-run company, whose main motivation is

to provide social goods for people in its home

nation, or that he is representing a family run
business, whose main motivation is to provide
for the future generations of the family. Being
more, rather than less, protable can only help
achieve these aims.

123

P. Neiman

will be checked against a different set of considered moral judgments. The restrictions on the
knowledge of the negotiators, along with the belief that they represent a sustainable business and
community, have been introduced to prevent Grey or Redd from exercising any coercive power in the
negotiation over ethical principles. In this sense, Grey and Redd are conceived of as equals in the
negotiations: They are equally skilled negotiators, and they have equal amounts of power. Phillips and
Margolis (1999) argue that equality in the choice situation may be appropriate for arriving at a just
basic structure of society, but it may not be appropriate for a just distribution within a business.
SCIBEs choice situation is conceived as a negotiation between business and the community, not just
9
the internal stakeholders of the business. The business and the community are considered equals
only in that each must consent, free from all coercion, to the ethical principles that govern their
relationship. As the logic of the negotiation demonstrates, the equality of power between Grey and
Redd does not necessitate an equal distribution of risks and benets of international trade.
According to the procedure described in Constructing and Justifying the Social Contract section,
the Grey Redd negotiation, as the choice situation for the social contract for international business
ethics, is justied if it incorporates the commonly shared presumptions and leads to agreement to
specic ethical principles that match or extend considered moral judgments in wide reective
equilibrium. Wide reective equilibrium requires that the principles derived from the choice situation
be consistent with considered moral judgments and background theories that support the commonly
shared presumptions on which the choice situation was constructed (Daniels 1996). The choice
situation was constructed from an understanding of the domain of international business and a
concept of the multinational rm as an economic and political agent. The unique nature of the
multinational rm, with a footprint and a voice in many communities, suggests that the rm and the
community be the represented in the choice situation. Rather than seeking to justify the conditions
under which individuals would accept the existence of multinational rms, as Donaldson (1989) and
Bishop (2008) do, SCIBE accepts the existence of multinational rms as fundamental to the domain of
international business, and seeks to determine what ethical principles such rms ought to follow.
Because of the weakened role of government in the domain of international business, SCIBE selects
the community as the appropriate partner in these negotiations. Redd, as a direct representative of
the interests of the community, does not enter the choice situation to bargain over what legal or
political institutions
9

See Hartman (2001) for a similar response.

should be constructed to restrain the behavior of multinational businesses. Rather, the focus of SCIBE
is on what ethical principles multinational rms should agree to as a way of regulating their own
behavior (Cragg 2005). This understanding of the domain of international business, the role of the
rm as an economic and political agent, and the commonly shared presumptions restricting coercion
in the choice situation are consistent with various theories in business ethics, including corporate
citizenship theory and work applying Jurgen Habermas ideal speech conditions to business contexts.
In Considered Moral Judgments and Wide Reective Equilibrium section, it is argued that SCIBEs
principles are in wide reective equilibrium with considered moral judgments and these theories, and
that this satises the independence condition, which Daniels (1996) argues is necessary to avoid
charges of relativism.

The Negotiation: Ethical Principles for International Business

Grey and Redd seek an agreement to ethical principles governing wages, environmental obligations,
and social and cultural norms. Each negotiator begins from what David Gauthier (1986) calls an initial
bargaining position, which denes the point at which one would be better off without any agreement.
In negotiations over the benets of international trade, it would be irrational to agree to ethical
principles that leave the company or the community worse off than they would have been without an
agreement. The space between the initial bargaining positions of each negotiator represents the
range of acceptable outcomes.
Redds initial bargaining position is dened by the quality of life in her community. The choice
situation characterizes Redds community as sustainable and not in need of international business to
provide a decent standard of living. In seeking the benets of international trade, then, she is
unwilling to risk ethical principles that put this standard of living at risk. To Redd, ethical principles for
international business serve as protection against potential harms that may be incurred by foreign

businesses. To Grey, the ethical principles are limitations on the protability of international trade.
This does not mean that Grey has an interest in acting immorallythis negotiation is to dene what
immoral and moral action meansbut, given Greys self-interest in prots, he will seek to minimize
the moral obligations of business. Now, Grey does not know how protable his company is, and so he
does not know at what point the moral restrictions on international trade will render it undesirable.
This is one of the intentional consequences of the choice situation. Suppose, for example, that Grey
represented a very protable business. He might

123

then decide that very restrictive moral

standards, which only very protable businesses
could uphold, are desirable, because this would
drive competitors out of international markets.
But because Grey does not have this information,
he is forced to negotiate for ethical principles

that expand opportunities for international trade

to all businesses. Greys initial bargaining
position remains somewhat vague, but can be
described as the point at which the risk of loss in
international trade threatens the sustainability of
the companys domestic operations.

Wages

determination at what point higher wage

standards make international trade undesirable.
It seems, then, that Grey and Redd might agree
on an ethical principle requiring foreign
businesses to pay more than a living wage. This
ethical principle provides a benet beyond
Redds initial bargaining position, while allowing
Grey
to
ensure
that
opportunities
for
international trade will not be overly squeezed
by restrictive wage standards.
Of course, one might object that there are many
real communities that would accept sub-living
wages in exchange for greater employment
opportunities. If, for example, businesses were
required to pay more than a living wage to
manufacture garments, then businesses may
forgo investing in underdeveloped nations,
leaving people worse off than they would have
been. One might respond by challenging the
likelihood of this chain of consequences, given
that a living wage in, say, Bangladesh is far less
than it is in the United States. But instead, it is
sufcient to point out that such actual
agreements are themselves unethical, as they
often involve multinational rms, or their
suppliers, using economic coercion to obtain the
consent
of
governments,
suppliers,
or
employees. The purpose of the GreyRedd
negotiations is to model a choice situation in
which, among other restrictions, economic
coercion does not inuence the agreement.

Redd believes that her community, without

international trade, enjoys a decent standard of
living, with access to sustainable employment
and social goods. Redd can, thus, presume that
members of her community earn at least a living
wage that, in conjunction with whatever goods
and services are provided by the community, is
capable of sustaining a decent standard of living.
Redds initial bargaining position, then, is an
ethical principle that obligates foreign businesses
to pay, at minimum, a living wage. There is, of
course, some debate on what exactly a living
wage entails. Given what is known about Redds
community, it is assumed that a living wage
enables persons to provide for themselves and
their family suitable food, water, shelter, and
medical care. Now, Grey might argue that
international business will increase employment
opportunities, and that in exchange for this
benet to the community, Redd should be willing
to accept a sub-living wage standard. But Redd
knows that her community is not dependent on
international trade for its well-being, and so she
assumes that the current employment rate is
sufcient to provide a suitable standard of living.
Redd will thus always prioritize quality over
quantity of employment in negotiating with Grey,
and thus must refuse to be pushed below a living
wage standard.
Grey seeks to maximize the exibility of
businesses to set wages. He might thus be
tempted to propose that the free market
determine what wage standards are ethical.
Alternatively, he might propose that local law
determine ethical standards for wages. But
governments may purposely set weak labor laws
in hopes of enticing foreign investment, and in
impoverished nations with high unemployment,
free market wages may be similarly undesirable.
Both of these proposals, then, call for wage
standards that are potentially weaker than
Redds initial bargaining position, and it is thus
irrational for Redd to accept them.
Redd seeks to secure the greatest economic
benets for her community, and so she might
propose a wage standard that calls for a high
level of prot sharing on top of a living wage.
However, the more money foreign businesses
are required to spend on labor, the less
attractive international trade becomes. Without
any details about the protability of his
company, Grey cannot make a precise

The Environment
Redds
initial
bargaining
position
on
environmental obligations is derived from her
belief that the community is sustainable and
provides a decent standard of living. It is thus
reasonable for Redd to assume that the
community is exposed to an amount of
environmental risk and harm from domestic
businesses that is matched by the communitys
ability to manage it. Suppose, for example, that
Redds community is home to a company that
drills for oil. Beyond the economic benets this
company provides, the community must have
the means to prevent an oil spill from occurring,
and, if one does occur, to mitigate the resulting
damage. If an oil spill threatens the livelihoods of
members of the community, then the community
must have the means both to compensate the

affected individuals and to clean up the damage

in a way that can restore people to their former
standard of living. Alternatively, one might
assume that Redds community has minimal
capacity to manage environmental damage, and
this is matched by a minimal amount of

environmental riskperhaps the community

contains few domestic businesses that create
such risk. Redds initial bargaining position, then,
is such that the risk of environmental harm is
minimal, and the

123

P. Neiman

community has the means to compensate and

care for those who might be affected.
Of course, even if Redds community is at little
risk from domestic businesses, it may still be
negatively affected by foreign businesses
operating outside the community. For example,
Redds community may be affected by climate
change regardless of the amount of carbon
emissions it generates. In keeping with her belief
in the sustainability of her community, Redd
assumes that her community is well-situated for
the present. She is aware that climate change
may pose a problem for her community in the
future, but any impacts from it, such as changes
in precipitation or sea levels, is manageable.
Because neither negotiator knows what type of
industry Greys company is involved in, they
must be concerned with all possible types of
environmental harms it might bring to the
community, such as contaminated water and
food supplies, destruction of farm or marine
industries, air pollution, and climate change. For
Redd, this means that she seeks ethical
principles that protect her community from
increased risk and that shift as much
responsibility as possibility onto incoming foreign
businesses. In this way, she protects her
communitys interest in the benets of
international trade while minimizing its risks.
Greys position is similar: He desires as much
moral freedom as possible in operating in Redds
community. This does not mean that Grey is
wholly opposed to environmental regulations.
Rather, he seeks maximum exibility in determining how to maximize prots.
Grey
thus
might
propose
to
base
environmental standards on the free market. If
investors and consumers are concerned that a
company
is
shirking
its
environmental
responsibilities, then they will refuse do business
with it, and the company will adjust accordingly
or perish. This proposal appeals to Greys
interests because it aligns its environmental
responsibility with its duciary responsibility. But
this is not a proposal that Redd can accept
because it falls short of her initial bargaining
position.
Currently,
her
community
is
environmentally sustainable. The entrance of
foreign businesses into the community may
increase the risk of environmental damage
beyond the point where the community can
mitigate harm done to its citizens. Greys market
proposal places the moral responsibility for
imposing limits on the amount of risk Redds
community can be exposed to on consumers and
investors who may be ignorant of or
unconcerned with the environmental problems of
a foreign community. Responding to potentially
weak market pressures after the damage has
already been done does not offer much

protection for Redds community. Greys second

favorite proposal, to match ethical standards for
environmental responsibility to the local legal
standards, likewise fails to rise above Redds
initial bargaining position. Given multinational
rms ability to choose and inuence the legal
environment they operate in, this ethical
principle provides a potentially lower standard
than the environmental sustainability that Redds
community, as she understands it at the
bargaining table, presently enjoys. Because the
addition of foreign business increases the risk of
environmental harm, Redd might push for an
ethical standard that requires Grey to take all
possible precautions to prevent damages from
occurring. But this would require foreign
businesses to constantly adopt the latest
technologies. This would make international
business overly onerous and limit it to rms that
have the nancial resources to frequently invest
in new technologies. Because Grey does not
know if this will exclude the business he
represents, he cannot accept this proposal.
Where, then, can Grey and Redd nd
compromise? Grey might begin with a proposal
that morally obligates businesses to adopt
industrywide standards when operating in
foreign nations. This principle means that Grey
would no longer be able to increase protability
by
seeking
out
nations
with
weaker
environmental laws, but then that was not one of
the acceptable outcomes for Redd anyway.
Greys
proposal
does
provide
sufcient
protection to Redds community. Industry
standards may be set to fulll legal requirements
of developed nations, which often have a
stronger regulatory environment, or to appease
consumers and investors who may be troubled
by past environmental disasters caused or made
worse by businesses. Nevertheless, Redds goal
is to provide as much protection for her
community as possible. She thus counters with
an ethical principle requiring foreign businesses
to adopt the highest industrywide environmental
standards. While some industries have clearly
identied and accepted environmental practices,
in other areas, such as climate change, there
may be a number of widely adopted standards
within an industry. Redds proposal thus attempts
to ensure that businesses cannot avoid stricter
standards by pointing to a small number of
businesses
whose
practices
are
less
environmentally safe. In many cases, then, the
distance between the two proposals is not great.
While Grey would prefer the exibility to choose
from a variety of industry standards, it seems
reasonable for him to accept Redds proposal.
Of course, no matter what precautions are taken,
some environmental damage will inevitably
occur, either accidentally or as a byproduct of
normal business operations. While the previous

principle should limit environmental damage

from occurring, who shall bear responsibility for
the damages when they do occur? Redds initial
bargaining position requires that she takes a
very rm stance on this issue. As noted earlier,

123

she believes that her community is presently

capable of managing environmental harm that
they are at risk of incurring. While the previous
ethical

principle limits the risk of environmental

damage, if it does occur, the community must
retain the ability to care for its citizens.
Grey might propose that the company and the
community bear equal responsibility for any
environmental damage. Becuase the community
approved of the measures the company took to
prevent the damage, and because the
community reaps some of the benets of the
companys operations, it should bear an equal
share of the responsibility for compensation and
restoration. While Redd can see the logic of
Greys argument, she is also aware that many
communities, especially those in underdeveloped
nations, lack the means, technology, and
expertise to deal with an environmental disaster.
Now, all Redd knows about the community she
represents is deduced from its sustainability,
namely, that it is capable of managing the
environmental damages it is at risk of. But as she
knows nothing about the level of economic
development in her community, she does not
know whether her community is capable of this
because it is wealthy and prosperous, or because
it has very few domestic industries that can
cause severe environmental damage. Greys
proposal, then, carries with it the possibility that
after the company has provided its share of the
cost of compensation and clean-up, the
community will still be devastated. Thus, Redd
must stand rm and propose that Grey must be
ethically required to bear the entire responsibility
for environmental damages caused by his rm.
This ethical principle increases the liability of
companies engaged in environmentally sensitive
operations, and as a result more cautious
international businesses may choose to pass up
some opportunities. But Grey knows that risk is
inherent in all investments and feels comfortable
leaving the riskbenet calculation up to those
businesses that are willing to take greater
chances to increase prots. Given what is at
stake, Redd is necessarily more cautious.
Therefore, though he may not be entirely
pleased with it, Grey agrees to Redds proposal
that international companies are responsible for
all environmental damages resulting from their
operations.
It may seem that Grey gives in fairly easily to
Redds demands on environmental issues. This
impression may stem from the signicant
distance between the GreyRedd negotiation and
actual
relationships between multinational
businesses and foreign nations. In Ecuador, for
example, Chevron has been ghting a legal
battle over the clean-up and mitigation of oil
damages inherited from Texaco for more than 20
years. Shell has dealt with similar issues in
Nigeria for an even longer period of time. In both
cases, the corporations do not recognize moral
responsibility for the entirety of damages caused

as a result of their presence, as required by the

principle agreed to by Grey and Redd. The
purpose of an ethical principle, though, is not to
describe corporate behavior as it is, but as it
ought to be. To consider these to be
counterexamples to this ethical principle, then, is
to assert that Chevron and Shell have been
models of ethical behavior. Furthermore, Chevron
and Shell negotiate from a position of great
strength relative to the people of Ecuadors
Amazon and Nigerias Niger River delta, both of
whom have had their interests ignored by their
governments. In the negotiations, Redds
position is stronger relative to the people of
Ecuadorian Amazon and Nigerias Niger River
delta, and Greys position is weaker relative to
Chevron and Shell. The constraints that negotiators are placed under are justied, not
because they resemble, or fail to resemble,
negotiations in the real world, but because they
incorporate commonly shared presumptions and
produce ethical principles that match or extend
considered moral judgments in wide reective
equilibrium. Under these constraints, the
agreement Grey and Redd reach seems
reasonable.
Given the importance of global climate change, it
is worth briey considering the implications of
SCIBEs
environmental
principle.
Foreign
businesses wishing to enter Redds community
are required to adopt the highest industry
standards in limiting their emissions. It is
possible that real communities would oppose this
requirement. Given that climate change is a
long-term problem, a community may desire the
short-term benet of permitting heavy polluters
in
exchange
for
economic
growth
and
development. Because the damages from
climate change are difcult to quantify, and may
not even be felt within the community in which
the pollution occurs, this may seem to be a
rational strategy to adopt. Redd is prevented
from doing so for two reasons: First, she assumes
that her community is at risk of damage from
climate change, but that these damages are, at
present, manageable. This makes her little
disposed to put her community at risk for economic benets that are not needed. Second,
Redd does not know what particular community
she is representing. Thus, she is unable to
assume that the risk of damage would not fall on
her community.
Cultural and Social Norms
Perhaps the most troubling item on the agenda
for Redd is negotiating ethical principles for
cultural and social norms. On this issue, she feels
the loss of her communal identity deeply. On one

hand, she does not want to agree to ethical

principles that jeopardize the existence or
meaning of the cultural or social norms of the
community. The confusion and anxiety she feels
at having been cut off from her identity is not
something she wishes to see replicated in whole

communities. But on the other hand, both she

and Grey know that some cultural and social
norms, or practices that appear to be cultural
and social norms, are quite simply immoral.
Multinational corporations operating in

123

P. Neiman

South Africa under apartheid, for example, were

faced with social norms requiring white South
Africans to be given greater compensation and
opportunities than black or indigenous South
Africans. Redd does not want to give foreign
businesses free reign to disregard cultural or
social norms, as this may be harmful to the
community, but neither does she wish to require
them to follow all social and cultural norms,
because this may also be harmful to the
community. Redds initial bargaining position is
derived from the sustainability and standard of
living of her community. She thus assumes that
the social and cultural norms of her community
do not inhibit its citizens from enjoying a decent
standard of living.
Agreement on this issue arises from a
consideration of the primary concerns of each
contractor. Greys concern for prot is narrow
and fairly simple: His company cares about the
cultural and social norms of the community only
insofar as they positively or negatively affect the
bottom line. If abiding by local cultural and social
norms increases prots, then so be it, but if
doing so decreases prots or causes negative
publicity, then it might be best to ignore them.
Despite Redds loss of communal identity, she
can still argue for ethical principles that will
protect the communitys interest in international
trade, namely, increased economic benets and
social goods. Social goods are dened as those
things that improve the well-being of the
community as a whole, such as public schools, a
health care system accessible to members of the
community, and clean air and drinking water.
These goods have value to the entire
community, and are accessible to the entire
community, whether individuals choose to make
use of them or not. It is, for example, benecial
to live in a well-educated community even if one
personally does not utilize the communitys
education system. Cultural and social norms can
be one aspect of the well-being of a community,
and in this sense, they can be considered social
goods. Insofar as social goods are components of
the communitys standard of living, Redds
concern is to ensure that foreign businesses do
not impose or abide by any social or cultural
norms that inhibit members of the community
from enjoying social goods.
Now, because social goods are dened as
components of the communitys well-being that
all members have access to, accessibility will be
the main criteria by which Redd judges whether
a foreign businesss compliance with a social or
cultural norm is harmful. Redds proposal, then,
is that foreign businesses have an obligation to
obey social and cultural norms except when they
restrict access to economic benets or social
goods. This principle appeals to Redd for several

reasons. First, it is consistent with her primary

goal, which is to secure economic benets and
social goods for the community. Because social
goods must be accessible to all, Redd has no
interest in protecting social or cultural norms
that restrict the availability of social goods.
Second, Redd has an obligation to all of the
people in the community, and so she could never
agree to a principle that would provide benets
to some at a cost to others. Given the lack of
information available to him, Grey can have no
strong objections to this principle. There are, of
course, certain instances in which complying
with or rejecting local cultural or social norms
may restrict profitability, or place the companys
local or international reputation in jeopardy.
However, this becomes just one more factor to
include into the companys costbenet analysis.
The restriction this places on opportunities for
international trade is not severe enough for Grey
to oppose this principle.
It is worth considering how this principle would
affect international business. Foreign businesses
in South Africa during the apartheid era, for
example, would be required to offer economic
benets, such as employment, wages, or
promotions, and social goods, such as schools or
roads, equally to all South Africans. The claim
that restricting access to wages or supervisory
positions was in accordance with South African
social norms, or even legal requirements, is
rejected by Redd in her negotiations with Grey,
and so must be rejected by foreign businesses
10
operating during this time period.
Another example is the practice, prevalent in
some cultures, of favoring or guaranteeing
employment for friends or family of current
employees. Redd does not know if her
community favors or opposes this practice
because specic information about the culture of
her community is hidden. However, this practice
restricts the availability of jobs and income by
making it more difcult for those without such
connections to obtain employment. According to
Redds principle, foreign businesses should not
comply with this cultural practice. One more
example: some cultures require workers to break
for prayer at certain times. This may seem an
inconvenience to a manufacturer, who might like
to keep production going at all times. However,
by not allowing workers to break for prayer, the
manufacturer is restricting access to the
economic benets of international trade to those
who are willing to put aside their religion. Thus,
the manufacturer is morally obligated, according
to the principle agreed on by Grey and Redd, to
comply with this cultural practice. There are
many cultural and social practices that do not
restrict access to the economic benets or social

goods produced by international trade, and

according to SCIBE, these ought to be respected
by foreign business.

123

10

This is not to suggest that domestic businesses

do not have similar obligations. Redd and Grey
are negotiating only over principles for
international business ethics.

Considered Moral Judgments

Reective Equilibrium

and

Wide

The
GreyRedd
negotiation
models
the
commonly shared presumptions it seems
reasonable and generally acceptable to impose
on negotiations for ethical principles for international business, and the two negotiators have
consented to several ethical principles. To
complete the justicatory process, these ethical
principles must rest in reective equilibrium with
considered moral judgments on international
business, and the background theories that
support the commonly shared presumptions.
These judgments can be drawn from existing
international agreements and initiatives. The
Universal Declaration on Human Rights, the
Global Sullivan Principles, the United Nations
Global Compact, and the International Labor
Organizations Declaration on Fundamental
Principles and Rights at Work are all appropriate
sources for considered moral judgments, in part
because they seem to be impartial judgments
not likely to be distorted by an excessive
attention to our own interests (Rawls 1999a, p.
18). The purpose of utilizing these international
agreements is not to provide justication for
them. Rather, these agreements simply serve as
a convenient list of considered convictions on
business ethics. If the principles agreed to by
Grey and Redd are justied, then they must
either rest in reective equilibrium with these
judgments or else provide compelling reasons to
revise them.
The rst principle, companies must pay more
than a living wage, is an extension of moral
judgments contained in the Universal Declaration
on Human Rights, the Global Sullivan Principles,
and other international agreements. Article 23,
paragraph 3 of the Universal Declaration on
Human Rights asserts that everyone has the
right to just and favourable remuneration
ensuring for himself and his family an existence
worthy of human dignity. The Global Sullivan
Principles requires voluntary signatories to
compensate our employees to enable them to
meet at least their basic needs and provide the
opportunity to improve their skill and capability
in order to raise their social and economic
opportunities. The requirement that companies
must pay more than a living wage extends these
convictions. The right to organize and bargain
collectively, an important way of improving
wages, is also recognized in these documents, as
well as in the International Labor Organizations
Declaration on Fundamental Principles and
Rights at Work.
The
second
principle,
dealing
with
environmental obligations, asserts that foreign
businesses are obligated to operate according to
the highest industry standards and that foreign

business will take responsibility for all damages

that are incurred as a result of their presence.
This principle is also aligned with a number of
international agreements.
The seventh principle of the United Nations
Global Compact, for example, states businesses
should support a precautionary approach to
environmental challenges. Two of the Global
Compacts
practical
recommendations
are
especially relevant. It calls on signatories to
develop a code of conduct or practice for its
operations
and
products
that
conrms
commitment to care for health and the
environment and create a managerial
committee or steering group that oversees the
company application of precaution, in particular
risk management in sensitive issue areas.
These practical proposals reect the reasoning
that led Grey and Redd to this principle. In
particular, Redd is concerned about the serious
and potentially irreversible risk environmental
damage may pose to her community. The
principle she proposes, and Grey ultimately
accepts, reects this conviction that business
should take a precautionary approach to actions
that may pose great risks to the community.
The third principle declares that international
business has a moral obligation to comply with
social and cultural norms except when they
restrict access to economic benets or social
goods. The requirement that members of the
community have equal access to economic
benets and social goods seems to be aligned
with the principles of several international
agreements. Article two of the Universal
Declaration on Human Rights, for example,
states everyone is entitled to all the rights and
freedoms set forth in this Declaration, without
distinction of any kind, such as race, colour, sex,
language, religion, political or other opinion,
national or social origin, property, birth, or other
status. The Global Sullivan Principles avow that
signatories will promote equal opportunity for
our employees at all levels of the company with
respect to issues such as color, race, gender,
age, ethnicity or religious belief.
As discussed in Constructing and Justifying the
Social Contract section, to complete the
justication of SCIBE, each of the following
elements must cohere in reective equilibrium:

The ethical principles agreed to by Grey

and Redd

The considered moral judgments drawn

from various international agreements and
initiatives

The conception of the multinational rm

as an economic and political agent and the
conception of the domain of international
business

It has been demonstrated that SCIBEs principles

match or appropriate extend considered moral
judgments on international business. These
principles were derived from a choice situation,
the GreyRedd negotiation, which is consistent
with the conception of the multinational rm and

the domain of international business. To avoid

charges of relativism, Daniels (1996) argues that
wide
reective
equilibrium
requires
an
independence constraint. This

123

P. Neiman
Redd negotiation accurately models restrictions

means that the set of considered moral

judgments that constrain the conceptions of the
multinational
rm
and
the
domain
of
international business must be signicantly
different from the set of considered moral
judgments that constrain SCIBEs ethical
principles. Given the varied sources used to
explicate the conceptions of the multinational
rm and domain of international business, it
seems reasonable that this independence
constraint has been met. As noted earlier, the
conceptions of the multinational rm and domain
of international business and the restrictions on
the GreyRedd negotiation are consistent with
attempts to utilize Jurgen Habermass ideal
speech conditions as the foundation of extant
social contracts, as well as corporate citizenship
theories. The considered moral judgments that
constrain theories of corporate citizenship
depend in part on the concepts of citizenship and
community, and so seem signicantly different
from the considered moral judgments used to
constrain SCIBEs ethical principles. Thus,
SCIBEs principles, background theories, and
considered moral judgments are in wide
reective
equilibrium
and
fulll
Daniels
independence constraint.

Conclusions
SCIBE addresses three important ethical issues in
international business: wages, environmental
responsibility, and respect for social and cultural
norms. One area not specically discussed is the
relationship between multinational rms and
national governments. It is important to note
that Redd represents the interests of a
community,
not
a
government.
In
the
negotiations, Redd is unwilling to accept Greys
proposal to match ethical rules with legal rules,
largely because the domain of international
business is characterized by the imbalance of
power
between
multinational
rms
and
governments. There is no need for Redd to cede
control of the negotiations to actual governments
who may be unwilling or unable to serve the
interests of the community.
Social contract theory, especially when it
utilizes a hypothetical contracting situation, is
bound to be met with some skepticism. Dworkin
(1973),
for
example,
questions
how
a
hypothetical agreement between individuals who
do not exist can generate real obligations. This
criticism is as old as social contract theory itself.
Hobbess state of nature or Rawlss original
position need not actually exist to provide
justication for the agreements reached in them.
What is important for SCIBE is that the Grey

it seems reasonable to impose on negotiations

over ethical principles for international business.
A similar objection is that Grey and Redd
would not have reached the same agreement if
they had full information about the business and
community they represented. One might imagine
that as Grey exits the conference room, he
suddenly becomes aware that he represents an
offshore drilling company that has recently been
at the center of a signicant environmental
disaster, or that Redd discovers that her
community was on the verge of landing a much
needed foreign manufacturing contract with the
lure of cheap wages and weak environmental
regulations. Both might complain that if they had
not been constrained by the lack of information
in the negotiations, they could have done a
11
better job securing benets for their clients.
This objection discounts the importance of the
constraints on the choice situation in justifying
the ethical principles. One could imagine a
choice situation, with signicantly different
constraints, which would have produced an
agreement that exempted multinational rms
from moral obligations altogether. But this choice
situation would not incorporate the commonly
shared presumptions, nor would it produce
principles that cohere with considered moral
judgments on international business in wide
reective equilibrium, and thus there would be
no justication for such an agreement. The
constraint on the knowledge of the negotiators is
a method of incorporating the commonly shared
presumptions, and hence is a necessary
component of the justication of the agreement
reached by Grey and Redd.
Unlike Palmers (2001) Hobbesian social contract,
SCIBE does not attempt to justify the
construction of international institutions to
legally constrain the behavior of multinational
rms. Instead, SCIBE accepts the absence of
such institutions as a fact about the domain of
international business and seeks to determine
what principles multinational rms have an
ethical, if not a legal or nancial, obligation to
adopt. SCIBEs ethical principles ought to be
adopted because they stem from commonly
shared beliefs about the role of multinational
rms in society and the nature of the domain of
international business, and because they cohere
with considered moral judgments. It is important
to recognize that the conception of the
multinational rm as an economic and political
agent and the conception of the domain of
international
business
developed
in
Constructing SCIBEs Choice Situation section
were supported by descriptive accounts of actual
multinational rms (Scherer et al. 2006; Matten
and Crane 2005; Crane et al. 2008; Cragg 2005).

Similarly, the
11

It might be objected that Greys duciary

responsibility prohibits him from negotiating
without full information about the company he is
representing. However, it should be noted that
the purpose of the GreyRedd negotiation is to
model the restrictions it seems reason able to

impose on arguments for ethical principles for

international business. The decision to characterize Grey
and Redd as representatives of clients is arbitrary. Grey
might instead have been characterized more vaguely as
the personication of multinational business itself, or
even as the sole owner of a multinational rm with no
duciary responsibilities to anyone else.

123

considered moral judgments on international

business were taken from initiatives, such as the
United Nations Global Compact and the Global
Sullivan Principles, which many multinational
rms have voluntarily signed. The Grey Redd
negotiation is a way of representing the
constraints that are already part of the domain of
international business to arrive at ethical
principles that match or extend considered moral
judgments that some multinational rms already
hold. The value of SCIBE is the normative justication it provides for these ethical principles.
Finally, by following the procedure for
constructing and justifying the social contract
described in Constructing and Justifying the
Social Contract section, SCIBE fullls all four of
the design criteria identied by Ben Wempe
(2008). Wempe (2008, p. 707) argues that social
contracts for business ethics must be selfdisciplined, that is, they should be restricted to
establishing general principles rather than
concrete solutions to practical problems. While
the restrictions on the knowledge of the
contractors prevent them from solving precise
problemssuch as exactly how much money a
business must devote to wagesWempe (2008)
argues that this is not a desirable function of a
social contract for business ethics anyway. SCIBE
has
produced
general
ethical
principles
governing wages, environmental obligations, and
compliance with social and cultural norms. Principles for other issues in international business
could be generated by considering what further
agreements Grey and Redd might negotiate.
Wempes
(2008)
second
criterion
is
argumentativity, which requires the social
contract to demonstrate the internal logic by
which the contractors agree to certain principles
rather than others. The logic of the negotiation
between Grey and Redd has been demonstrated
in The Negotiation: Ethical Principles for
International
Business
section,
including
exploring why the negotiators accept some
proposals and reject others. Wempes (2008,
p. 709) third criterion is task directedness, which
requires that one must establish beforehand
what function it [the social contract] should
fulll, so as to model the initial contractual
situation accordingly. SCIBEs contractual
situation, the GreyRedd negotiation, has been
constructed from commonly shared
presumptions, based on conceptions of the
multinational rm as a political and economic
agent and the domain of international business.
In this way, SCIBEs choice situation also fullls
Wempes (2008,
p. 710) fourth criterion, domain specicity.
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