ISCT - Hype over Hypernorms

Integrative Social Contracts Theory: Hype over Hypernorms

ABSTRACT. Applying social contract theory to business ethics is a relatively new idea, and perhaps nobody has pursued this direction better than Thomas Donaldson and Thomas W. Dunfee. Their “Integrative Social Contracts Theory” manages to combine culturally sensitive decision making capacities with trans-cultural norms by setting up a layered system of social contracts. Lurking behind their work is a concern with the problems of relativism. They hope to alleviate these problems by introducing three concepts important to the ISCT: “authentic norms,” which clarify culturally specific norms, “priority rules,” which determine the rules of engagement when authentic norms clash, and “hypernorms,” which measure the value of authentic norms against a thin set of universally upheld values. This paper traces the genealogy of these hypernorms and challenges their value for the ISCT. It argues that well-conceived priority rules can do everything hypernorms can, and can do so more simply. KEY WORDS: Donaldson and Dunfee, hypernorms, “Integrative Social Contracts Theory”, priority rules, relativism, Taylor, Walzer

I. Introduction: New applications for an old way of thinking Social contract theory may be old to social and political philosophy, but it is relatively new to I am a fifth year doctoral candidate at the University of Virginia, working in the Department of Religion and completing my dissertation in the area of Religious Ethics. This paper was originally the product of a doctoral seminar with Prof. Patricia Werhane, who is the Ruffin Professor of Business Ethics in the Darden School at the University of Virginia.

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business ethics. Only in the advent of contemporary work by philosophers like John Rawls and David Gauthier have new areas opened up for business ethicists trying to apply social contracts to their own areas of research. While it may seem like a natural move to apply social contract theory to business given the contractual nature of many business activities, it is not necessarily an easy move to make since most social contract theories function best at a relatively high degree of abstraction while ethical problems in business demand concrete answers. Yet if the tensions between abstraction and concreteness can be resolved, social contract theory offers great hope to business ethics. Perhaps no two authors have done more to advance the cause of social contract theory in business ethics than Thomas Donaldson and Thomas W. Dunfee. Donaldson and Dunfee propose a “communitarian conception of economic morality that defines correct ethical behavior through the device of a hypothetical social contract emphasizing the moral understanding of living members of economic systems and organizations” (Donaldson and Dunfee, 1995, p. 86). In other words, they intend to create a system which neither functions at such a high level of generality that it cannot adequately account for the functioning of cultural diversity – contra consequentialism and rule-based morality – nor lacks sufficient normative foundations to resolve difficult questions about who to include in the decision-making process and the degree to which those persons and groups ought to be involved – contra stakeholder theory. Their product, the Integrative Social Contracts Theory (or, ISCT), is designed to correct the weaknesses of those other systems without losing

Journal of Business Ethics 26: 101–110, 2000. © 2000 Kluwer Academic Publishers. Printed in the Netherlands.

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their benefits. Relying on a long and rich tradition of social contract thought, they argue that all rational humans aware of the bounded nature of their own rationality would consent to a hypothetical social contract, encompassing a ‘macrosocial contract’, that would preserve for individual economic communities significant moral free space in which to generate their own norms of economic conduct, through actual ‘microsocial contracts’ (Donaldson and Dunfee, 1995, p. 89).

By layering one kind of social contract – the hypothetical macrosocial contract – on top of another – the actual microsocial contracts – Donaldson and Dunfee have attempted to create a system which is simultaneously culturally sensitive enough to account for the needs and desires of real people and abstract enough to function in the rarified air of normative ethics applied to international business. The degree to which they have succeeded depends on the answers to several questions: Do social contracts only function in certain types of societies, e.g., liberal ones? Can individual societies reach consensus on actual microsocial contracts? Is the hypothetical situation which provides the basis for the macrosocial contract an adequate and coherent description of the way societies might interact? To whom does each social contract apply? Since the goal of the ISCT is to be culturally sensitive while maintaining a cross-cultural normative bite, the answers to these questions all turn on the ability of the ISCT to balance the apparently conflicting demands of the particular and the general. Overemphasizing the former risks undercutting the cross-cultural normative power of their project, while overemphasizing the latter prevents it from making situationspecific decisions. Donaldson and Dunfee attempt to reconcile the demands of particularity and generality by developing three limiting conditions to control their interactions. First, persons in individual communities must consent to a set of culturally-generated norms determined by local, “microsocial contracts.” These contracts recognize that rationality is both constrained by and cognizant of the contexts and finite capacities of its members; that is to say, they

recognize that rationality is “bounded” (Donaldson and Dunfee, 1995, p. 89). Donaldson and Dunfee call these culturally-determined norms “authentic norms” (Donaldson and Dunfee, 1995, p. 89). Second, authentic norms are only “legitimate norms” when they do not contradict a set of hypernorms, which are defined as “fundamental moral precepts for all human beings . . . which express principles so fundamental to human existence that one would expect them to be reflected in a convergence of religious, political, and philosophical thought” (Donaldson and Dunfee, 1995, pp. 95–96). These hypernorms set boundaries on the moral free space within which the culturally-generated norms function. Finally, the third norm-providing component of their system is a set of “priority rules” which are derived from the hypothetical macrosocial contract and determine how to identify, sort, and implement conflicting local norms. The goal of each of these components is to guide persons and associations to make moral decisions which are culturally sensitive without being relativistic. This paper attempts to sort these three components out, trace their respective genealogies, critique their use, and make some recommendations towards revising them. Ultimately, I will argue that since hypernorms do not actually serve any functional role in the application of ISCT to the ethical problems of international business, they should be dropped from Donaldson and Dunfee’s discussion. In their place, Donaldson and Dunfee ought to emphasize priority rules which, by way of contrast, do serve a functional role in the application of ISCT to such problems.

II. Authentic norms, hypernorms, and priority rules In his article “International Business Ethics: The Aluminum Companies in Jamaica”, Manuel Velasquez presents the detailed case of foreign aluminum companies operating in Jamaica in order to critique three models of international business ethics, including that of Donaldson (Velasquez, 1995). The case can also be instructively used to evaluate ISCT and, especially, the

Integrative Social Contracts Theory: Hype over Hypernorms respective roles of authentic norms, priority rules, and hypernorms. In order to do this, however, a summary of Velasquez’ background information on the case is necessary. For the first half of the twentieth century, reports Velasquez, conditions on Jamaica were dreadful. “[U]nemployment was high, poverty, malnutrition, disease, and illiteracy were rampant. Workers on the sugar plantations earned a few pennies a day, and peasants barely made a subsistence living farming the island’s rocky hillsides” (Velasquez, 1995, p. 686). Then, in 1942, bauxite (the ore used to make aluminum) was discovered and by the early 1950’s, several large aluminum companies headquartered in the U.S.A. and Canada had set up mining operations in Jamaica using local labor for the mining process. However, once the ore was mined, it was shipped abroad where the last three stages in refining aluminum – the most profitable ones – took place. As a result, by 1970, Jamaica was producing 20% of the world’s bauxite but remained impoverished. When Jamaica elected Michael Manley to be the new prime minister in 1972, he vowed to address the unemployment, poverty, and radical inequalities that were endemic to Jamaica – particularly by addressing the wanton exportation of Jamaica’s natural resources. Unfortunately, a system of levies implemented on bauxite only caused the multinational aluminum companies to seek their bauxite in other countries. Combined with poor government policies, the result of this exodus is a Jamaica which is not much better off than it was in the first half of the century. (For more details, see Velasquez (1995).) With this basic information in mind, turn back to ISCT and its three central components: authentic norms, hypernorms, and priority rules. Each of these components serves a different function in ISCT, but as a whole, they are designed to reconcile the demands particularity and generality; that is, to clarify local norms without losing a basis for cross-cultural normative judgments. The first component – the requirement to consent to microsocial contracts through a system of authentic norms – reinforces the demand of particularity by orienting itself around the concrete decisions of actual communities. In the

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Jamaica case, there are at least two possible sets of authentic norms in place. The first set of authentic norms are those generated by the people of Jamaica. These norms are indigenous to the culture and might include concepts like a right to self-rule and a willingness to exchange natural resources for improved living conditions. The second set of norms are those that would exist within the transnational aluminum corporations themselves – norms like prioritizing profits for shareholders and developing manufacturing systems to make high quality aluminum inexpensively. Though authentic norms may be subject to disagreement within their respective communities, most communities will have both formal and informal procedures in place for clarifying and upholding these norms. Thus, authentic norms are highly responsive to the inclinations and demands of particular groups of people. However, they certainly do not function to bind different groups together under a single set of cross-cultural norms. Thus, left to themselves, authentic norms are not sufficient to resolve inter-cultural or international conflicts. Moreover, they, alone, cannot refute charges of relativism. While authentic norms force individuals in communities to both agree on the structure and direction of their community and also to be bound by those agreements, they do not prevent various communities from reaching different and irreconcilable norms. If only authentic norms were in place, one community’s authentic norms (such as those of the people of Jamaica) could conflict with those of other communities (such as the transnational aluminum corporations). Thus, the concept of authentic norms is designed primarily to maintain cultural sensitivity. It provides the necessary “moral free space” within which communities can act in integrity to their traditions, customs, and mores, but provides no basis by which to resolve transcommunal disputes. The second and third components – hypernorms and priority rules – are designed to provide the normative basis to resolve transcommunal disputes. Hypernorms “set the boundaries of the moral free space of communities” (Donaldson and Dunfee, 1995, p. 96),

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standing in judgment over all authentic norms, and priority rules describe the procedures by which to settle disputes between conflicting authentic norms. Both components function at more general levels, thereby balancing the particularity of authentic norms derived from microsocial contracts. Setting aside the discussion of hypernorms momentarily, I turn first to priority rules. Consonant with most social contract theory, Donaldson and Dunfee develop their list of priority rules by first enquiring about the answers “that would be given by all members of a comprehensive society when asked what rules they would want applied to them in the context of economic transactions, under the condition that they do not know the position they would occupy under the rules” (Donaldson and Dunfee, 1995, p. 93), and then setting up a series of rules that flow from the results of this hypothetical procedure. Donaldson and Dunfee suggest the following (among others) as possible priority rules: 1. Transactions solely within a single community, which do not have significant adverse effects on other humans or communities should be governed by the host community’s norms. 2. Community norms for resolving priority should be applied, so long as they do not have significant adverse effects on other humans or communities. 3. The more extensive the community which is the source of the norm, the greater the priority which should be given to the norm (Donaldson and Dunfee, 1995, p. 106). Carrying these examples of priority rules back to the case of aluminimum companies in Jamaica, we can now envision how priority rules might work. When the authentic norms of two different communities come into conflict, we would turn to priority rules to determine which community’s norms ought to be prioritized in which contexts. For example, the people of Jamaica ought to be able to control their own resources and apply profits from those resources towards ends that they choose. At the same time, the

aluminum companies ought not be prevented from seeking out bauxite ore deposits in other countries so that they can fill the world’s need for aluminum and simultaneously remain competitive with other aluminum companies. These rules, among others, would flow from a hypothetical macrosocial contract and could be agreed on by all rational persons. Thus, priority rules are both a product of a social contract (the macrocontract) and a judge over social contracts (the microcontracts). They function cross-culturally, but they do not do so by importing values which come prior to a social contract. Indeed, they cannot import values from outside a social contract, since doing so would return Donaldson and Dunfee to the very type of general ethical theory they are trying to avoid. While several questions about priority rules still need to be answered (e.g., whether a set of rules flows necessarily from the results of the macrosocial contract, how priority rules relate to each other in instances of conflict, and how to determine what all rational persons would agree to), priority rules at least fit social contract theory. Do hypernorms fit the theory? The answer to this question is less clear. As stated earlier, hypernorms “express principles so fundamental to human existence that one would expect them to be reflected in convergence of religious, political and philosophical thought” (Donaldson and Dunfee, 1995, p. 96). Donaldson and Dunfee take the concept of hypernorms from communitarians like Michael Walzer and Charles Taylor and their enquiries into the existence of a minimal set of pan-cultural morals. These hypernorms would be agreed on by “a substantial majority of humanity” (Donaldson and Dunfee, 1995, p. 95), but they aren’t derived from the hypothetical social contract. Yet if hypernorms come from neither an actual social contract nor a hypothetical one, where do they come from and how can they be a part of a social contracts approach to international business ethics? Hypernorms fit into ISCT much more awkwardly than do authentic norms or priority rules. Donaldson and Dunfee attempt to head off this problem with hypernorms by suggesting that

Integrative Social Contracts Theory: Hype over Hypernorms hypothetical contractors “would also insist that norms generated within a specific community not be so extreme that they violate fundamental conceptions of human morality or hypernorms” (Donaldson and Dunfee, 1995, p. 95). Yet their very attempt to undercut this criticism actually reinforces it. Fundamental conceptions of human morality aren’t products of a social contract, nor would they necessarily be accepted by contractors who “recognize their own bounded moral rationality” (Donaldson and Dunfee, 1995, p. 93). John Rowan and Norman Bowie reach conclusions similar to this criticism in their analyses of the ISCT and Donaldson’s book Corporations and Morality, respectively. Rowan’s solution is to ground hypernorms in social contract theory. My suggestion, on the other hand, is to do away with them altogether, for reasons that will become clear shortly (Rowan, 1997; Bowie, 1991).

III. Toward a genealogy of hypernorms The awkwardness over where hypernorms come from and how they fit into social contract theory points to a significant sticking point in the ISCT: its relation to hypernorms. To make sense of this relationship, two questions about hypernorms need to be clarified and, if possible, answered. First, if hypernorms don’t come from the social contract, where do they come from? Second, what role do hypernorms play in the Integrative Social Contracts Theory as it is applied? The first question can be pursued in a variety of ways: Does the text provide an answer and, if so, is that answer sufficient? If not, are there other writings by Donaldson and Dunfee which would shed more light on the investigation? What types of assumptions do the two scholars make, and how much weight do those assumptions carry? Since the multiple directions of pursuit lead to different, if interrelated, answers, a genealogy of the various sources of hypernorms might best clarify their origin. Then, once their origin is in view, we will be better equipped to answer the second question; that regarding the role of hypernorms when ISCT is applied to problems in international business.

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III.a. Charles Taylor and Michael Walzer: The “grandparents” of hypernorms The first part of this genealogical exploration is explicit in the text: “The notion of a ‘hypernorm’ used here tracks closely to Michael Walzer’s (1992) arguments concerning the nature of a minimal morality, and is also similar to Charles Taylor’s (1989) concept of a ‘hypergood.’ ” (Donaldson and Dunfee, 1995, p. 96) Thus in this genealogy, hypernorms trace their ancestry back to a set of “grandparents” – Michael Walzer and Charles Taylor – from whom they also receive a family name through Taylor’s concept of hypergoods. Yet what “genes” have they inherited from these grandparents? Turn first to Taylor. Hypergoods, according to Taylor, are “higherorder goods . . . which not only are incomparably more important than others but provide the standpoint from which these must be weighed, judged, decided about” (Taylor, 1989, p. 63). This sounds exactly like Donaldson and Dunfee’s hypernorms. Yet this isn’t the end of Taylor’s exploration. “Hypergoods,” he tells us, “are generally a source of conflict” (Taylor, 1989, p. 64). They are products of a “superseding [of ] earlier views . . . what Nietzsche called a ‘transvaluation of values’ ” (Taylor, 1989, p. 65). They replace older goods either by denying the validity of these goods or by incorporating them into some larger whole and they “cannot but provoke an epistemological malaise” (Taylor, 1989, p. 65) as a result. According to Taylor’s argument, hypergoods can change over time and, as such, cannot be treated as extra-historical, absolute, or a priori established. Taylor admits that this could be a problem for those persons who believe the only way to defeat the arguments of their opponents is to annihilate them through counterclaims based on absolutes. However, as Taylor points out, the fact that hypergoods cannot be treated as absolute does not mean they shouldn’t carry enormous weight. Indeed, if the moral ontology through which persons judge goods is changed from one based on opinions which are “incontrovertable among all rational persons” to a more anthropocentric “the best account of the human domain we can arrive at” (Taylor, 1989, p. 72)

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given our current position in history, then disagreements over what should count as a hypergood may occur, but they can also be resolved by offering the kinds of interpretations of what is going on which appeal to those who hear them. So understood, “[t]he most reliable moral view is not one that would be grounded quite outside our intuitions but one that is grounded on our strongest intuitions, where these have successfully met the challenge of proposed transitions away from them” (Taylor, 1989, p. 75). A hypergood like “don’t kill innocent persons” isn’t defended on the grounds that killing innocent persons is wrong per se, but on the grounds that people can be convinced that such killing doesn’t match their current best understandings of who they are and who they want to be. The significance of this difference is that it doesn’t deny the charge of relativism so much as suggest that such a charge doesn’t invite any interesting reply on the part of those who agree with the hypergood being espoused, but disagree on the basis for espousing it. This may not satisfy the Platonists or Kantians in our midst, but neither should it unnerve those whose interests in the morality of human actions begin in the human domain – which is both where social contract theory begins and also how Donaldson and Dunfee would describe their work. Two conclusions follow from this first part of a genealogical tracing of hypernorms. First, Taylor’s conception of hypergoods and Dunfee’s and Donaldson’s conception of hypernorms share a similar substructure, namely the convergence of human opinion on what values should serve as a basis for ruling some actions fundamentally immoral. Second, hypergoods serve a different purpose in Taylor’s work than hypernorms do in that of Donaldson and Dunfee, since the latter two turn to hypernorms in order to refute charges of relativism, whereas Taylor simply dismisses the importance of such charges when the only apparent alternative to relativism involves turning to “fundamental moral precepts for all human beings” (Donaldson and Dunfee, 1995, pp. 95–96). This important conclusion bears restating: Since they focus their cross-cultural concerns specifically on the thorny philosophical problems of relativism, Donaldson and Dunfee

end up with extra-historical hypernorms by default since, by Taylor’s account, the only acceptable solutions to relativism are extrahistorical. Taylor, on the other hand, views such debates about relativism as dead-ends, since they can only be resolved by those incontrovertible absolutes which don’t apply to the human domain. In effect, Taylor asks us to ignore the very problems which cause Donaldson and Dunfee to turn to hypernorms. It follows that the concept of hypernorms is not derived simply from Taylor’s hypergoods. Might hypernorms turn instead to their other “grandparent,” Michael Walzer, for a clearer sense of their origin? The answer is ambiguous. On the one hand, Walzer does distinguish between two types of moral terms: “Moral terms have minimal and maximal meanings; we can standardly give thin and thick accounts of them, and the two accounts are appropriate to different contexts, serve different purposes” (Walzer, 1992, p. 4). These “thin” accounts of morality are the types of accounts that might be described as a set of very circumscribed universal attitudes towards which everyone (or almost everyone) feels sympathetic agreement – or, to use Walzer’s language, moral attitudes which “resonate” with everyone. “Thick” accounts are those which incorporate the specific goods, goals, and practices of specific societies and groups. This sounds distinctly like the comparison of hypernorms and authentic norms in Integrative Social Contracts Theory. However, the relations between thick and thin accounts of morality are considerably different than those of hypernorms and authentic norms. Walzer argues that where philosophers have traditionally described morality in terms of thin accounts which act as the foundational set of beliefs upon which individual cultures then build their own ethical superstructures, they instead ought to think of morality as “thick from the beginning, culturally integrated, fully resonant, and revealing [sic] itself thinly only on special occasions, when moral language is turned to specific purposes” (Walzer, 1992, p. 5). For Walzer, moral minimums do not exist alone, nor can maximal morality be pared down to just the minimums, since the very act of paring down is an expression of maximal morality. Like hyper-

Integrative Social Contracts Theory: Hype over Hypernorms norms, moral minimums can serve a purpose, e.g., as the consensus on a set of standards by which all societies should abide – “negative injunctions, most likely, rules against murder, deceit, torture, oppression, and tyranny” (Walzer, 1992, p. 9) derived from common responses to a number of issues by a wide variety of cultures. Moreover, like hypernorms, such standards will only be coherent and expressible in a morally maximal language. Unlike hypernorms, however, moral minimums are constructs abstracted from thick accounts of morality and they pertain to specific examples of injustice. As Walzer describes moral minimums, they provide a way of translating “common, garden variety justice” (Walzer, 1992, p. 4), so that one group of persons can identify with another group of persons who are fighting against injustice, albeit across two vocabularies which are expressed in morally maximal terms. These groups don’t identify with each other through appeals to a shared theory or epistemology from which each group might derive common morals, however. Instead, one group appeals either to the experiences or the sympathies of the other group. So understood, an appeal to moral minimums isn’t an act of derivation from “fundamental conceptions of human morality” (Donaldson and Dunfee, 1995, p. 95), but an act of imaginative empathization on the part of one culture towards another culture. While there is a Humean quality in Walzer’s arguments which might cohere with Donaldson and Dunfee’s suggestion that their hypernorms can be understood (though do not have to be understood) as “the convergence of emotional attitudes as, say, Hegel or Hume might argue” (Donaldson and Dunfee, 1995, p. 104), hypernorms cannot be strictly identified with Walzer’s thin accounts of morality for at least who reasons. First, Walzer explicitly refuses to separate such thin accounts from their maximal settings. As such, a thin account can’t stand alone over against a thick one as a basis for judgement the way a hypernorm can stand over against an authentic norm. This distinction between Walzer’s work and that of Donaldson and Dunfee may point to nothing more than the latter pair’s skill in critically appropriating Walzer’s work, but it should

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not be ignored. Second, and more importantly, Walzer can be read as arguing that thin accounts of morality only come into play when two specific, maximal cultures come into contact with each other. The examples he uses in his essay support such a reading. For example, he suggests that when we see protesters in Prague marching for justice, we empathize with neither the concept of justice nor with humanity in general. Instead, we imaginatively empathize with those in Prague who are being mistreated by a totalitarian government. The contact is between a set of westerners with certain values and a set of marchers whose values appear to be sufficiently similar to warrant sympathy. Read this way, Walzer’s arguments about thin accounts might apply more appropriately to priority rules than to hypernorms, since priority rules are designed to provide ethical guidance when two maximal cultures encounter each other. While Walzer’s thick/thin distinctions may help us trace aspects of the genealogy of hypernorms, they also highlights tensions between Walzer and Donaldson and Dunfee. Taylor’s hypergoods and Walzer’s minimal morality turn out to be quite different from Donaldson and Dunfee’s hypernorms. Taylor suggests relativism is an interesting problem only for those whose opposition to it is sufficiently vehement to demand some type of a priori, a-historical, or obviously universal form of proof against it. Walzer suggests that crosscultural moral appeals are only coherent in terms of appeals between two specific cultures – each with its own maximal moral system – not appeals to any set of trans-cultural values. Donaldson and Dunfee may believe that the concept of hypernorms “tracks closely” with Walzer’s and Taylor’s work, but “closely” turns out not to be as close as we might hope. There is no simple or ineluctable move from Taylor and Walzer to Donaldson and Dunfee. The genealogy of hypernorms must go beyond the answer provided by Donaldson and Dunfee’s text.

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III.b. Donaldson and Dunfee: The “parents” of hypernorms If the first part of this genealogical exploration was an attempt to get at the ancestry of hypernorms – at their grandparents, so to speak – the second part is an attempt to get a feel for the parents of hypernorms. It looks briefly at the two authors from whom the Integrative Social Contracts Theory sprang and speculates on the various ways each may have contributed to it. Put differently, this part asks whether one of the two authors may have been more influential in developing the idea of hypernorms given their individual writings and how that may matter. Thus, this question is answered in part by an examination of the literature each of the two authors has produced independent of the other. Donaldson brings a philosophical ethics background and Dunfee brings a background in legal contracts to their partnership. Moreover, Donaldson’s individual work shows the clearest signs of being the source of hypernorms. Whether in 1982’s Corporations and Morality, where he argues that those affected by a corporation’s activities “will demand, in turn, that corporate activities remain within the boundaries of justice and human rights” (Donaldson, 1982, p. 54) or in 1989’s The Ethics of International Business, where he argues that “a productive organization should refrain from violating minimum standards of justice and of human rights in any society in which it operates” (Donaldson, 1989, p. 54), Donaldson has consistently turned to the language of rights as a way to express the boundaries within which a social contract may function. Indeed, it is particularly instructive that the attempts to express candidates for hypernorms in ISCT are almost exactly the same as the lists Donaldson gives in his books as candidates for universal human rights – namely, the United Nations Universal Declaration of Human Rights and Henry Shue’s four basic rights. Dunfee, on the other hand, has written about the legal aspects of working with contracts – an applied area that does not usually concern itself with theoretical investigations of moral boundaries. The conclusion that hypernorms are more closely related to Donaldson’s earlier work than

to Dunfee’s is neither surprising nor disturbing. Why, then, is it important to related Donaldson’s work to hypernorms? For this reason: as a philosopher, Donaldson carries certain distinctly philosophical interest into the development of ISCT, among them a concern with the problems of relativism – as one might note in his extended arguments against it in chapter 2 of The Ethics of International Business. Relativism does not have the same status as an issue in a discussion of legal contracts and civil law. Thus, the discussion of how hypernorms limit the relativism of social contract theory needs to be understood as a philosophical, rather than a contractual issue. Moreover, Donaldson has consistently resolved the problem of relativism pragmatically by leaving open a discussion of the epistemological sources, metaphysics, and scope of universal principles or rules, suggesting only that there seem to be good reasons for thinking that while human beings may not all agree on how to derive these universals, they at least tend to agree on some of the universals themselves. This solution to relativism does two things: it leaves hypernorms ungrounded, as discussed earlier, and it attempts to minimize their role without doing away with them altogether. So where do hypernorms come from? They may come in part from the work of Taylor and Walzer, but they don’t come directly from their work, since Taylor and Walzer reach conclusions which stand over against Donaldson and Dunfee’s. They certainly come from Donaldson and Dunfee, but more from the former than the latter. Add to this the fact that Donaldson brings certain philosophical concerns with him – primarily ones about relativism – and it becomes clear that hypernorms are meant to address a philosophical problem, not a contractual one. What’s more, Donaldson has consistently refused to locate hypernorms (or those things that are equivalent to hypernorms in his other work) epistemologically. Thus, the relation between hypernorms and ISCT is vague. Hypernorms are not grounded in either of the social contracts, nor are they meant to serve anything more than a gatekeeping role in ISCT. As conceived, they serve a minimal role in ISCT at best.

Integrative Social Contracts Theory: Hype over Hypernorms IV. Leaving hypernorms behind The results of the genealogical survey beg the question: If hypernorms fit so awkwardly into ISCT, and if they serve a minor role at best in ISCT, why not do away with them in ISCT altogether? Turning Walzer’s conclusions back against hypernorms, Donaldson and Dunfee would do well to remember that thin morality cannot be isolated from thick morality, that disputes between communities are resolved on an intercommunal rather than transcommunal levels and, thus, that the norms which resolve such disputes are the products of intercommunal, rather than universal, agreement. Moreover, since all actual disputes in international business ethics are intercommunal rather than transcommunal, then when facing such disputes, we ought to turn to those parts of ISCT which are designed to resolve them; namely, priority rules. Or, put another way, priority rules can be invoked every time two particular cultures and their maximal moralities come into conflict. Moreover, they can do so without an appeal to hypernorms, since priority rules are derived independent of hypernorms. Take two examples, one of an intracommunal dispute and one of an intercommunal dispute. If the dispute is intracommunal, then disagreement between groups of persons will either be resolved by recourse to authentic norms – provided both groups agree to these norms – or they will prove irresoluble at the authentic norm level. Yet if they are irresoluble at this level, then the two groups don’t share authentic norms and can therefore be treated as different communities. Thus, a dispute that can’t resolved at the level of authentic norms must be an intercommunal dispute. Intercommunal disputes, according to ISCT, are resolved by recourse to priority rules. Return once more to Manual Velasquez’s discussion of the activities of the aluminum companies in Jamaica as an example of a point at which two cultures – namely that of the Jamaican workers and that of a U.S. transnational corporation – meet. If there were no conflict between these two cultures, neither side would have a reason to appeal to hypernorms. Yet if there were a conflict between the two sides, they ought – at least according to Donaldson and Dunfee –

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to appeal to priority rules. To reiterate: If there is no conflict, there would be no impetus to turn to hypernorms. If there is conflict, communities would turn to priority rules, not hypernorms, to legitimate their respective positions. Hypernorms do not come into play in either example. Moreover, the system of priority rules undercuts Velasquez’ criticism of Donaldson’s theory in The Ethics of International Business. Velasquez writes, “The trouble is that Donaldson’s theory is restricted to human rights issues” . . . and therefore doesn’t address issues of monopoly profits and monopolization of markets, transfer price manipulation and tax avoidance, etc. (Velasquez, 1995, p. 871) Persons in the “original position” of the hypothetical macrosocial contract might resolve these problems with developed priority rules. The only purpose that hypernorms are left to serve is to keep Donaldson and Dunfee on one side of a set of philosophical debates about relativism. How is this valuable for ISCT? The type of social contract theory Donaldson and Dunfee espouse is constructivist, not deductivist, and hypernorms don’t have a role to play is such a theory, since they neither support anything in the theory nor are used when the theory is applied. If they can’t do either of these things, they have no use in ISCT. Turning Taylor’s work back against hypernorms, we might conclude with him that since the relativism/cultural pluralism debate isn’t an interesting conversation to get involved in (at least as it has gone on thus far), there is no real advantage of choosing a side in this argument. If Donaldson and Dunfee follow Taylor, they ought to reach the same conclusions and do away with hypernorms, since the only apparent purpose for hypernorms is to situate Donaldson and Dunfee on one side of a set of philosophical debates which ISCT need not concern itself with in the first place. Having said all this, however, several caveats are in order. First, Donaldson and Dunfee may have reasons to incorporate hypernorms into ISCT that have thus far gone unnamed. It could be, for instance, that they wish to develop a social contract theory that is philosophically grounded in a set of a priori or extra-historical conditions. This wish is not, in itself, problematic. Many

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respected social contract theories are so grounded, including John Rawls’ earlier work. Yet if they do wish to ground ISCT, they will have to make that grounding explicit, rather than choosing pragmatically to leave epistemological and metaphysical discussions open. Or, rather than ground their social contract theory in something deeper, they may wish to follow Rowan’s advice and ground hypernorms in the macrosocial contract. Yet if they choose to do this, they need to simultaneously create a space in which hypernorms actually do positive work; that is to say, they need to explain or give examples of times that persons using ISCT would either base priority rules on hypernorms or turn to hypernorms rather than priority rules to solve disputes. The second caveat is this: I have only argued that hypernorms do not fit into ISCT as Donaldson and Dunfee have designed it. It could be that substantial revisions to ISCT such as those suggested in the previous paragraph would make many of the conclusions that this paper has reached moot. If this becomes the case, then we may well carry on a set of philosophical arguments about the existence of particular hypernorms and the human capacity to recognize them, but the conclusions reached by this paper would no longer apply and I would gladly rescind them. The third caveat is this: even if Donaldson and Dunfee (or others convicted by their work) choose not to change ISCT, and, therefore, the problems I have highlighted remain, we ought not say that Integrative Social Contracts Theory isn’t valuable. Indeed, it is precisely the inclusion of social contract theory to business ethics that makes it so valuable. It is well past time that business ethicists dove into social contract theory, and ISCT is one of the best examples of where such a conversation could go. It maintains a careful and critical balance between cultural sensitivity and cross-cultural normativity. Moreover, it does so in a way that is broadly applicable to actual conflicts in the business world. However, like any theory, it is open to revision. I have suggested one such revision in this paper: that discussion of hypernorms be abolished and a more complete discussion of priority rules be undertaken. Initial appearances to the side, this

is not a particularly significant revision. Not only is there little reason to turn to hypernorms when ISCT is applied, but the arguments made by the authors from whom hypernorms are derived reach conclusions that weigh against their use. The next step is, I think, to clarify and specify the relations of priority rules to the ISCT and to each other.

References Bowie, Norman E.: 1991, ‘Moral Decision Making and Multinationals’, Business Ethics Quarterly 1.2, 224ff. Donaldson, Thomas: 1982, Corporations and Morality (Prentice-Hall, Inc., Englewood Cliffs, NJ). Donaldson, Thomas: 1989, The Ethics of International Business. The Ruffin Series in Business Ethics. 1 (Oxford U. Press, New York). Donaldson, Thomas and Thomas W. Dunfee: 1994, ‘Toward a Unified Conception of Business Ethics: Integrative Social Contracts Theory’, Academy of Management Review 19.2, 252–284. Donaldson, Thomas and Thomas W. Dunfee: 1995, ‘Integrative Social Contracts Theory’, Economics and Philosophy 11, 85–111. Dunfee, Thomas W.: 1993, ‘The Role of Ethics in International Business’, in Thomas W. Dunfee and Yukimasa Nagayasu (eds.), Business Ethics: Japan and the Global Economy. Issues in Business Ethics. 5 (Kluwer Academic Publishers, Dordrecht), pp. 63–79. Rowan, John: 1997, ‘Grounding Hypernorms: Toward a Contractarian Theory of Business Ethics’, Economics and Philosophy 13, 107–112. Taylor, Charles: 1989, Sources of the Self: The Making of the Modern Identity (Harvard U. Press, Cambridge). Velasquez, Manual: 1995, ‘International Business Ethics: The Aluminum Companies in Jamaica’, Business Ethics Quarterly 5.3, 865–882. Walzer, Michael: 1992, ‘Moral Minimalism’, in William R. Shea and Antonio Spadafora (eds.), From the Twilight of Probability: Ethics and Politics (Science History Publications, U.S.A.), pp. 3–14.

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