¹ Thomas Donaldson, Corporations and Morality (Englewood Cliffs, N. J.: Prentice Hall, 1982), p. 37.

² Ibid., 2.

³ Ibid., 3.

⁴ For the rest of the paper then, assume that is the kind of institution I am referring to, and seeking justification for, when I use the term corporation.

⁵ The two most extensive treatments on this topic are to be found in The Ethics of International Business (Oxford: Oxford University Press, 1989), chapter 4; and Corporations and Morality (Englewood Cliffs, N. J.: Prentice Hall, 1982), chapter 3.

⁶ Corporations and Morality, 41.

⁷ Ibid., 42. Some may worry that there is a leap from justifying the co-operative effort of productive organizations to (thereby) justifying the existence of the corporation. This is a move made by Donaldson, so I simply follow his lead here. However, the move does not strike me as altogether worrisome since the key ingredients focused on are the ones without which an adequate justification for corporations will not have been provided. So, this reduction (if it is one) is at least a first necessary step to providing the sort of defense we need.

⁸ For Donaldson, having economic interests simply means one finds it desirable to have some things or services produced by human labor (ibid., 44).

⁹ It is now difficult to isolate an individual who is responsible if a product is faulty. In the SIP, by contrast, if shoes fall apart, the consumer can go back to the craftsperson who made them in order to remedy the matter.

¹⁰ Ibid., 51.

¹¹ Ibid., 51.

¹² In fact, he says more strongly: “And if the benefits outweigh the drawbacks, it follows that in order maximally to enhance welfare, productive organizations should both pursue positive goals and minimize negative ones” (ibid., 51). It is not clear why they should be committed to maximal welfare enhancement, from what has been said so far.

¹³ Ibid., 52.

¹⁴ Ibid., 52.

¹⁵ Ibid., 52.

¹⁶ Ibid., 52.

¹⁷ Ibid., 52.

¹⁸ Ibid., 57.

¹⁹ The main reason why I talk in terms of social contract theory is that the best defense of corporations offered thus far is offered using this framework. But I think there are good, independent reasons for proceeding in contractarian terms (which I sketch below).

Many people raise questions of the following form when talk of social contracts is introduced: Is the contract supposed to be actual or hypothetical? If only hypothetical then why does a purely hypothetical contract have any binding force anyway? And if it has no binding force, then why adhere to it?

I see talking in terms of social contracts as a way to specify what expectations various parties to the contract may reasonably have of one another: it is simply a way of fleshing out what those reasonable expectations might be. So, in answer to the questions listed: no, the contract developed in this paper is neither an actual contract nor a purely hypothetical one. It is a way to sift through what (actual) parties might reasonably expect of one another, by imagining a certain (hypothetical) choosing situation.

Talking about social contracts is a way to talk about, and so uncover, the reasonable expectations people might have of one another in ongoing cooperation.

²⁰ Furthermore, as we know more about those effects we may want to revise the specific terms of the contract. The contract’s legitimacy may constantly be subject to revision.

²¹ Consider how, if you knew in advance that you will not join a productive organization and you will continue to be an individual producer, you might find it perfectly acceptable to agree to a contract that systematically sacrifices worker interests to consumer interests. Knowledge of our likely position in the new arrangements might influence how to weigh these interests.

²² In fact, in his later work we are told that productive organizations must strive for higher and higher levels of relative welfare enhancement, in order to be morally justified (The Ethics of International Business, 54).

²³ Corporations and Morality, 52.

²⁴ Ibid., 52.

²⁵ Donaldson has this to say about introducing the assumption of self-interest when talking about Hobbes’s and Rawls’s contracts: “in the present instance, no compelling reasons exist for representing people as worse than they are, and one good reason does exist for representing them as they are: the presence of even ordinary (i.e., non-self-interested) motives can help clarify the conditions of the social contract” (ibid., 45). In my view, it is not a question of representing people worse than they are: the tendency towards moral myopia seems real enough to me. Also, compelling reason can be found for introducing the assumption: it may yield fairer outcomes and better contracts.

²⁶ It seems prudence dictates that some sort of threshold view be adopted such as that articulated. Whether they would also go for a maximin strategy seems less obvious.

²⁷ It is important to note that although I think it is valuable to adopt Rawls’s apparatus for the purposes at hand, I will not argue that we are committed to all the principles Rawls endorses as the chosen ones. (In particular, I will not argue here that the Difference Principle would be chosen.)

²⁸ For those who are skeptical of the Rawlsian apparatus, I suggest that there is another way to look at this. As I see it, the Rawlsian apparatus is just a way to make more vivid at least two central ideas of ethics: (1) We should try to respect everyone, or respect everyone equally; and (2) We should try to be impartial in our ethical judgments. The Rawlsian apparatus is just a way to try to operationalize some of those insights. It is hard to be impartial when we have so much knowledge of our position in society, our interests and other biases that sometimes obscure discussion.

Others may have problems with the fact that for Rawls, choice is for the ideal world. How far away from the ideal world may we be and still have our corporations’ activities and existence be justified? What if we measure up to the ideal but get there by unjust means? In other words, what can this ideal contract tell us about how we should carry on in our actual world? A number of important things, in my view, but importantly, it provides a yardstick by which we can measure ethical defensibility. Of course, these other questions are important, but just as important is providing a story about how—under any circumstances—corporations’ existence and activities may be defensible. There is one kind of skeptic who doubts even that is possible and the paper tries to show the conditions that need to obtain for corporations to be morally defensible. There are other questions that need answers, but this paper provides a start at least.

For the “How far away” kinds of questions, see footnote 34 for a case where we would be too far away.

The history of how we might get to an ideal state is clearly not irrelevant either. But Principles 1 and 2 outlined above would prohibit certain kinds of ways of moving to the ideal state, such as those involving genocide.

²⁹ Would it really be rational to protect against harm? Why not gamble slightly, especially if the odds given are favorable? When we are talking about very fundamental harms, I believe that it is most rational to ensure we are protected at least to some minimal level. So, for instance, consider this: what are the odds something really medically bad will happen to us (say) between the ages of thirty to thirty five? Probably less than five percent. So, we are at least 95 percent sure our health will be fine during that time. Yet most of us—something approaching 100 percent of people reading this article—will have health insurance to protect against such possibilities. We could spend our premiums on trips to Fiji or ensuring other benefits, but we don’t in such cases. I take this as strong evidence that ensuring against very grave harms is typically more rational than gambling to get other benefits, even ones we judge to be fairly desirable.

³⁰ Other harms that can arise from cumulative effects include: (i) Narrowing opportunities: only those things that have commercial payoffs come to be seen as worthwhile. This can undermine other projects which have benefits to all, e.g., public goods, aesthetic and cultural goods. (ii) Harms to values: we get used to being lied to and deceived by the constant exposure to the doublespeak and deception that is the mainstay of advertizing. This may make us more duplicitous, skeptical and distrustful.

³¹ Is this an ad hoc list? I don’t believe so. All elements on the list have in common that they seek to protect against grave harm. I simply mean to indicate the sorts of things that would qualify. No doubt there are other categories of obligations that should be added to the list in virtue of the same considerations. The list does not pretend to be complete.

³² If the state is not adequately providing the necessary protections, and corporations are benefiting from citizens, the obligation might fairly fall on corporations to do the protecting, perhaps in proportion to how much they benefit.

³³ Members of society will clearly be required to do other things to be responsible consumers and employees (for instance). I do not, however, analyze their side of the agreement in this paper.

³⁴ Consider for a moment the well known case of Nestle selling Infant Care Formula in less developed countries (such as India). Are Nestle’s operations justified in such countries? It seems to me they are not, since consumers, indeed citizens, are not adequately protected from exactly the sort of harms from which rational contractors will want protection. Furthermore, the conditions of the vast majority of people being what they are (inadequate sanitation, drinkable water, literacy and so forth), consumers will be unable to read or follow instructions about how to prepare the formula in a safe way. The corporations’ activities are not defensible in such contexts as (importantly) consumers are not adequately protected from real harms to which they are exposed.

³⁵ We could, after all, distribute employment opportunity, e, according to who is most efficient at e, or who has worked hardest for e, or who enjoys e the most, and so forth. It is a separate question as to what sort of remuneration someone should get for performing e. We could decide to pool all the fruits of co-operative labor and distribute these in an entirely different way, for instance, according to need, effort, social contribution and so forth.

³⁶ I am grateful for discussions with Mark Alfino, Brian Steverson and Martin Wilkinson about the sorts of issues presented here. I am also grateful for comments and suggestions received from Patricia Werhane, two anonymous reviewers of this journal and three anonymous referees for the 1997 annual meetings of the Society for Business Ethics.