Social Contract Theory

Chapter Summary

This chapter discusses a theme that has had a profound impact on European and American political thought; that is, the social contract. Social contract theory considers ethical responsibilities in relation to contractual agreements. It thus provides a basis for exploring contractual obligations that prevail in business contexts that goes beyond consideration of explicit, written agreements. Social contract theorists have also offered contrasting ways of thinking about the relationship between human nature and social organization. These contrasting analyses are drawn on to suggest contrasting ways of explaining unethical business conduct. The chapter also explores some insights that the more recent contractual theory of John Rawls offers to ethical evaluation of distribution of the benefits and burdens associated with business activity.

Self-test Questions

Social Contract Theory: Some Key Themes

1.      Give three reasons offered by social contract theorists to explain why people choose to live in society rather than in a state of nature. 

2.      What is the main disadvantage that social contract theorists associated with living in society?

3.      Give an example of how the notion of voluntarism might justify a specific business obligation.

4.      Give an example of an explicit obligation and a tacit obligation that a company might have towards its employees.

5.      How might the notion of a hypothetical construction be used to justify business obligations?

Do Bad People Make Businesses Bad, or do Bad Businesses Make People Bad?

6.      What is the main difference between Hobbes’ and Rousseau’s depictions of the state of nature?

7.      Did Rousseau believe that an excess of amour-propre (that is, excessive pride and vanity) comes naturally to people, or did he believe it to be caused by certain types of social situation?

8.      How, according to Rousseau, might certain types of ‘morality’ suppress people’s compassion?

9.      Describe at least two ways in which a Hobbes-inspired, person-focused account of business ethics might differ from a Rousseau-inspired, culture-focused account.

John Rawls’ Theory of Justice

10.  How does Rawls’ notion of the original position embrace the ideals of human freedom and human rationality?

11.  How does a veil of ignorance ensure that the principles of justice we choose when we imagine ourselves to be in an original position conform to the ideal of equality?

12.  Name two principles of justice that Rawls believed people would choose if placed in an original position whilst wearing a veil of ignorance.

13.  How might the first condition of Rawls’ difference principle call for equal opportunities in recruitment practices?

14.  How might the second condition of Rawls difference principle be used to evaluate the fairness of pay differentials between junior employees and senior executives?

Web Links

UK Uncut is a ‘grassroots movement taking action to highlight alternatives to the government's spending cuts’. It most high-profile activities have involved protest against large corporations, which it accuses of evading the tax obligations to which they voluntarily, tacitly commit themselves by trading in the UK. The UK Uncut website carries discussion and information about this issue and about the activities it has taken in response to it. provides information about what it calls a ‘systems approach’ to ethical business management. You might like to consider the relevance of ideas presented here to both the person-focused and culture-focused approaches discussed in the second section of this chapter.

The High Pay Centre proclaims itself to be ‘an independent non-party think tank established to monitor pay at the top of the income distribution and set out a road map towards better business and economic success’. Its website carries information and discussion about distributions of the benefits and burdens of economic activity, which you might like to consider from the perspective of Rawls’ principles of just distribution.