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. People who believe in the concept of corporate social responsibility argue that companies should receive significant benefits from society and reciprocate by acting in the common interest. Social contracts can be explicit, like laws, or implicit, like . B raise 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 contract theory states that people in society live together in accordance with an agreement that establishes moral and political rules of conduct.

Some people believe that if we live by a social contract, we can live morally by our own choice and not because a divine being demands it. The purpose of the social contract is to serve the common good or more in order to ensure the sustainability of the system in question and to protect the individuals who compose it. As such, the social contract generally guides moral behavior. For example, according to our implicit agreement, it is wrong to take actions that harm others, such as stealing, cheating, attacking or giving false testimony. Ultimately, relations between business and other civil society groups need to shift from dialogue to partnership. And the ability to summon powerful interests should be extended to those whose voices sometimes struggle to be heard, but are largely affected. If the private sector is to be seen as a leader and innovator in pursuing positive change or progress, the overall corporate agenda for a social contract must include rebuilding institutions and practices that offer sustainable growth and broader opportunities. The social contract is a concept of the philosophy of ethics and political science that has recently been applied to the study of business ethics.

According to this theory, valid and universally valid moral rules can be determined by asking what rules people would voluntarily make if there were no rules. Not everyone would agree on the best kind of music or the best books, so these cannot legitimately be the subject of universal moral rules. Everyone would agree to ban theft, fraud and murder, so that this could be the case. The social contract is an unwritten and strictly hypothetical agreement not to violate moral rules. All members of the Company must accept this Agreement by simply participating in the Company. 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. Whether social contracts are explicit or implicit, they provide a valuable framework for harmony in society.

It is in the nature of things that social contracts are somewhat fluid. While they are often formalized or legalized in one way or another, they reflect the rights, obligations, opportunities, and protections that society as a whole is willing to offer. Social contracts are often formed or changed in the midst of crises and reaction times, such as the turbulent years between the First and Second World Wars. This period included a severe global flu pandemic, the Wall Street crash that ushered in the Great Depression, and the development of many new governments, citizen-led support programs, and collective thinking. At present, as now with the coronavirus pandemic, it can be difficult to know with certainty that we have reached a new social contract and whether it will bring positive results and cohesion than to be able to overcome the current dissatisfaction and confrontations. The most important principles, benefits and implications can only be clear in hindsight. The basic assumption of social contract theory is the idea that societies and cultures evolve on the basis of a normally implicit agreement between individuals about the type of environment in which they want to live. On the basis of this assumption, the individual is obliged to behave in accordance with the rules that apply to the societies and cultures in which he lives. A partnership agreement is a mutual agreement between two parties.

Social contracts reflect the societal expectations of companies, especially in the social sector. Theories of the social contract in business state that all companies are obliged to improve the status of corporations. To achieve this, companies must keep in mind the interests of employees without having to violate the rules of justice in a particular company. Theories of the social contract in economics are derived from traditional models of a social contract. Over the centuries, philosophers up to Socrates 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 the behavior of rational people provided that others also accept them. If we accept that we live in an expanded world of stakeholders and influencers today, then we should also recognize that different groups have different experiences and needs. An iterative process that gives everyone a voice and seeks common interests should eventually lead to a balance that we recognize as a new social contract.

This would require local institutions to respond not only to the needs of their communities, but also to the growing demands and norms associated with global issues and institutions (intergovernmental, economic, technological and non-governmental). This includes the private sector which, through its activities, ensures growth and employment, finances social cohesion. The philosopher Jean-Jacques Rousseau popularized the idea of the social contract in the 1700s, but it is equally applicable today. As members of a society, we accept the social contract – we cooperate with each other and obey the laws of society. We also give up certain freedoms because we want the protection that society can offer. The founders of the United States believed that the social contract made citizens powerful and gave them a collective voice in their government. Elements of the social contract are often codified in legislation, even if they are understood implicitly and almost globally. In the United States, for example, there are anti-murder laws that further classify crime by gravity: first- and second-degree murder, murder, manslaughter, and premeditated murder. An important concept of the socio-theoretical contract in business is the follow-up or guarantee that the company respects its part of the agreement and is not content with empty words to the community.

Corporate governance structures are guidelines that a company issues in order to maintain an ethical and legal path. You can think of these structures as internal laws of the company. Corporate governance dictates the standards a company adheres to and the sanctions imposed on critics by the standards. Corporate governance is therefore important to keep corporate philanthropy, CSR and the general theory of social contracts at the forefront of a company`s strategic plan. The formation of a new social contract must integrate all the above developments and concepts and connect East and West, North and South. .