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    Contractual theory, Social Responsibility and Multinationals

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    A) What are the objections to the Contractual Theory.
    B) What are the cultural differences raised for multinationals in regards to bribery and double standards.
    c) To whom do corporations have responsibilities? Discuss, with examples, how these responsibilities inevitably lead to ethical disagreement?
    D)Trust is a pillar of healthy financial markets. Discuss how insider trading, hostile takeovers, and deceptive practices by financial institutions undermine that trust.
    E) What is Corporate Social Responsibility? Discuss the four stages of the Corporate Social Responsibility continuum.
    F) What is the crux of the charges against multinational corporations? What are the two extreme positions regarding these charges.

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    A) What are the objections to the Contractual Theory?

    Contractual Theory: Views from the firm as a network of contracts, actual and implicit, which specify the roles to be played by various participants. Most participants bargain for low risk and a satisfactory return. Shareholders accept high risk in anticipation of and surplus returns after all other parties have been satisfied http://www.lse.co.uk/financeglossary.asp?searchTerm=the&iArticleID=1524&definition=contractual_theory

    Let's look at two main objectives of this theory.

    (1) Objection 1: There is no social contract. Any moral argument built on a false premise is unsound by definition. The premises for an argument must be true, and the inferences drawn from them must be valid, for the argument to count as sound. Basing any moral conclusions on the myth of the social contract, like basing moral conclusions on the myth of a benevolent God or an impartial observer, is just doomed to failure from the start.

    In response, social contract theorists would respond to this by saying something like, "Of course there is no real social contract. The social contract is a metaphor - like when your science teacher in Jr. High School asked you to think of electrons in an atom as having orbits, like planets around the sun, with each orbit representing an energy level." The opponents ask: A metaphor for what? We can't judge a metaphor to be accurate or inaccurate until we know what it is we are metaphoring. If the 'social contract' is just pedagogical tools - something we can use to help people grasp more complex concepts - then what are those more complex concepts being captured by the metaphor? Whatever they are, that is our moral theory. Then we can ask to what degree the metaphor of the social contract actually captures this truth.

    The social contract theories argue that the term 'social contract' refers to a hypothetical entity. Assume you can get everybody in the world into a room to agree to a contract. Everybody must sign. The 'social contract' is the term that refers to the hypothetical compromise social contract that you can get everybody to sign.

    (2) Objection 2: Social contract theory ignores the vital concern with how to motivate people to abide by the terms of the contract. The social contract is, ultimately, a set of rules telling agents what they may or may not do. However, people have no capacity to simply pick a rule and act on it. People always act so as to fulfill the most and strongest of their desires (given their beliefs). If an act that conforms to a social contract rule also happens to fulfill the most and strongest of the agent's desires given her beliefs, then he will obey the contract. If the two diverge, then the agent will violate the contract. This means that the contract, in order to be effective, has to define what fulfills the most and strongest desires of all agents (http://atheistethicist.blogspot.com/2008/07/desire-utilitarianism-vs-social.html).

    "No social contract is necessary - yet, the theory results in some elements that we find in social contract theory. It is still the case, in a sense, that moral principles are those that people generally have reason to support - that people generally would agree to put into a social contract, if there were one. The major difference is that desire utilitarianism also evaluates the reasons for supporting various rules (the quality of the desires that go into supporting or rejecting rules), and explains the link between the rules and motives of agents" (http://atheistethicist.blogspot.com/2008/07/desire-utilitarianism-vs-social.html).

    B) What's the cultural differences raised for multinationals in regards to bribery and double standards.

    According to Roth (2005), most multinational companies automatically oppose calls for enforceable standards of corporate social responsibility. Under growing public scrutiny of their behavior, many western companies have adopted voluntary codes of business conduct. But for most, the notion of enforceable standards remains repugnant

    Recently, however, some western companies have privately questioned this posture, recognizing it might be in their interest to operate under enforceable standards that apply to all their competitors, rather ...

    Solution Summary

    Through discussion and example, this solution overviews contractual theory, social responsibility of corporations and charges against multinationals by addressing the questions. It also discusses how trust is a pillar of healthy financial markets and how insider trading, hostile takeovers, and deceptive practices by financial institutions undermine that trust.