What Is a Corporate Social Contract

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Whether social contracts are explicit or implicit, they provide a valuable framework for harmony in society. Social contract theory is an old philosophical idea that asserts that an individual`s ethical and political obligations relate to an agreement he has with all other individuals within a society. The agreement may be in writing, as in the form of laws, or it may be an implied agreement, a tacit or unwritten agreement of social norms and customs. In economics, social contract theory encompasses the obligations that companies of all sizes owe to the communities in which they operate and to the world as a whole. This includes corporate philanthropy, corporate social responsibility and corporate governance. One of the most important goals in companies is the importance of giving back to society, a role that has become known as social responsibility. Companies have an ethical obligation to the members of a particular society. The theory of business ethics creates and anchors mutual agreement between members of corporations and established enterprises. Members of a society allow the establishment of companies in these institutions for certain specified benefits that improve the well-being of companies. These benefits include economic efficiency, improved decision-making, and improved ability to acquire and use modern technologies and resources.

This social authorization is assimilated to the acquisition of legal recognition and the authorization to use natural and human social resources. However, all this must be achieved within the limits of the laws established in these societies. To turn groups of employees into large teams, an important first step is to form a social contract – an explicit agreement that sets out the basic rules for team members` behavior. A contract can cover a domain, . B such as how members work together, make decisions, communicate, share information and support each other. Social contracts clearly outline the norms on how members will and should interact with each other. Social contracts can be a powerful tool for a team, but a leader can`t dictate them. All team members must form and share the contract together. If the leader and team members don`t believe in the deal or choose to do so, it won`t work. And just as importantly, the leader models the desired behavior in the social contract.

Ultimately, the leader and all members must take care of each other and the success of the team so that the social contract has the power to help a team take a winning path. A social contract is an implicit or explicit agreement that governs the behavior of individuals and organizations in a particular context, such as a workplace, culture, nation, or social media site. In 2012, McKinsey & Co. conducted a study on the changing face of business in the United States. The study found that 84% of small business leaders and owners believe that society as a whole expects companies to play an active role in social, political and environmental issues. Consumers not only expect businesses to comply with the law, but they also expect businesses to reinvest in their communities and help struggling individuals and nonprofits meet their needs. Social contracts can also try to reduce negative behaviors. In a recent team-building session, one executive pointed to dysfunctional behavior: « When a team member speaks openly and negatively about another employee, they simply suck up the team`s life. We all wonder who will be the next target. When writing their social contract, a team can mitigate this type of harmful behavior by simply including phrases such as « Don`t talk negatively about other employees in their absence. » The concepts behind the theory of social contracts come from ancient Greek philosophers: Socrates used a theoretical argument to explain to Krito why he must submit to prison and the death penalty in accordance with the law.

The philosopher Thomas Hobbes expanded the theory of social contracts during the Enlightenment; Since then, philosophers from different perspectives have contributed to our understanding of the theory. Behaviors described in social contracts can include positive behaviors that the team wants to encourage, such as: Be honest and transparent without hidden agendas; help each other and do not hesitate to ask for help; have forums to discuss difficult topics; cooperate instead of competing with team members. A management team of a large financial services company recently benefited from its articles of association due to the significant decline in revenue. Instead of pointing the finger at the poor results, they worked together to find solutions to reverse the decline. To meet the demand for greater engagement in the local community, companies can use social contract theory to interact with society. While it`s no secret that companies must comply with laws and regulations, they must also meet implicit non-legal expectations. These expectations are contained in the idea of corporate philanthropy or do-gooding. Businesses can show that they care about their communities and value the revenue streams they provide by providing resources for community projects, volunteering with local charities or schools, donating products, and running environmentally friendly advertising campaigns. These things illustrate that a company is serious about its social contract and recognizes the value of giving back.

Social contracts can be explicit, like laws, or implicit, like raising your hand in class to speak. The U.S. Constitution is often cited as an explicit example of part of the American social contract. It determines what the government can and cannot do. People who choose to live in America accept to be governed by the moral and political obligations set forth in the social contract of the Constitution. Social contracts have their roots in social capital theory (PDF), which emphasizes information exchange and reciprocity among employees, mutual trust and fairness, and shared values and expectations. DaVita, a leading kidney dialysis company based in Denver, Colorado, is known for its goal of creating a « village » where teammates take care of each other, patients, and the company. Everyone understands the social contract – in a village that you pay attention to, support and help each other. The company fosters this family mentality by emphasizing shared values, norms and identity. Their social song, which reflects the three musketeers, reads: « One for all and all for one! » This sense of common purpose has led to remarkable growth for the company.

The theory of existing social contracts illustrates how commercial enterprises are represented on the basis of several existing social agreements that incorporate real standards of conduct derived from common beliefs and goals with social attitudes. These contracts present the companies` views on the proper conduct as established by existing communities. This implies that companies are obliged to comply with these agreements as long as the agreements are ethically justifiable. According to social contract theory, moral and ethical codes are the principles that all rational people would adopt as rules of life if they could rely on others to do the same. Social contract theory can be used to study issues of business ethics. The social contract is an essential element of democracy. In a democratic nation, government is supposed to be organized to serve the will of its citizens and, therefore, citizens are obliged to follow the laws and customs of the nation as long as the government fulfills its mandate and the legislation is considered to be in conformity with the social contract. Ethical decisions in business can be strongly influenced by the theory of business ethics that influences the decision-making process.

For example, if a small business owner receives an offer to buy a large company, shareholder theory would support the most profitable decision for the owner. Stakeholder theory would require the owner to consider the impact of the sale of the business on employees and the community. The theory of articles of association would require the owner to take into account the impact of the decision on the company as a whole, and not only on the persons directly concerned. At the time of publication, there are three dominant theories of business ethics. The shareholder theory states that a company has no ethical obligation to the company other than to make the greatest possible profit to its shareholders or owners within the limits of business ethics and the law. Stakeholder theory states that a company is morally committed to all parties involved in the outcome of its business, including employees, the community and the environment, and shareholders. Social contract theory states that all companies operate under an unwritten contract with the company as a whole, in which the company allows the company to conduct activities on the condition that its actions benefit the company. Over the centuries, philosophers like Socrates have tried to describe the ideal social contract and explain how existing social contracts evolved. The philosopher Stuart Rachels suggests that morality is the set of rules that govern behavior that rational people accept, provided that others accept them as well. Social contract theory is a controversial concept in the study of business ethics because it is associated with broader political issues that many people disagree with. People who strongly believe in capitalism`s laissez-faire model generally argue that corporations benefit society by creating wealth, providing services, and employing people. According to this view, companies can do the most good when they focus on making profits and not on difficult and subjective ethical concerns.