Management: Tasks-Responsibilities-Practices (New York: Harper & Row, 1973), p. 40.

19 For discussion of this distinction see Jean J. Boddewyn, “Understanding and Advancing the Concept of ‘Nonmarket,’” Business & Society, September 2003.

20 In re: the Exxon Valdez, 270 F.3rd 1238 (2001).

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Mrs. Hayward
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Mrs. Hayward
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8 Chapter 1 The Study of Business, Government, and Society

use of alcohol by its crews, managers failed to monitor him. Years later, the United States Supreme Court would call this lapse “worse than negligent but less than malicious.” 21

The disaster brought acute legal, political, and image problems for the firm. It spent $2.4 billion to clean up the spill and another $2.2 billion to settle lawsuits that dragged on for 20 years, Congress passed a law barring its ship from ever again entering the area, and activists told motorists to get their gas from other companies. 22 Today ExxonMobil operates its 650 tankers with extreme care and randomly tests crews for drugs and alcohol. Remarkably, it is now so disciplined that it measures oil spills from its fleet in tablespoons per million gallons shipped. Between 2006 and 2009 it averaged fewer than five tablespoons lost per million gallons shipped. 23

Recognizing that a company operates not only within markets but also within a society is critical. If the society, or one or more powerful elements within it, fails to accept a company’s actions, that firm will be punished and constrained. Put philo- sophically, a basic agreement or social contract exists between economic institutions and other networks of power in a society. This contract establishes the general du- ties that business must fulfill to retain the support and acquiescence of the others as it organizes people, exploits nature, and moves markets. It is partly expressed in law, but it also resides in social values.

Unfortunately for managers, the social contract, while unequivocal, is not plain, fixed, precise, or concrete. It is as complex and ambiguous as the economic forces a business faces and no less difficult to comprehend. For example, the public be- lieves that business has social responsibilities beyond making profits and obeying regulations. If business does not meet them, it will suffer. But precisely what are those responsibilities? How is corporate social performance to be measured? To what extent must a business comply with unlegislated ethical values? When meet- ing social expectations beyond the law conflicts with raising profits, what is the priority? Despite these questions, the social contract codifies the expectations of society, and managers who ignore, misread, or violate it court disaster.