Social Contract and the Case for Business and Human Rights
“Social contracts” have defined the life in the industrial world. The concept has established the modern-day relationship between citizen and state, church and state and it even began to influence nonpolitical institutions such as marriage. According to this theory, there is an actual or hypothetical compact, or agreement, between the ruler and its subjects, defining the rights and duties of each. These agreements can be explicit such a legislations and laws, or implicit such as the ability to question in a group. Although this theory has existed since ancient times, it has recently gained momentum thanks to its proponent Thomas Hobbes.[1] With its all its shortcomings and criticisms, this theory offers an insight into the complex relationship between induvial and institution.
One might wonder how a political theory can justify the responsibility of businesses towards Human Rights. This is not an uncommon assessment. For centuries now, both international law and domestic laws of various nations, considered business and corporations as domestic affairs of a state and not subjects of Public International law. This argument however falls short, as it does not consider the nature of business organizations and their role in the modern society.
Nature of Business
Trade and commerce have been the cornerstones of civilization. Individuals traded not just for rare commodities but also for profit. This desire of profit and the will to take risks, led to the creation of the modern corporations in the medieval age.[1] Soon the ability to not risks one’s personal property as well as the ability to trade the shares of a business have made corporations crucial to a state’s economic progress. The primary reason for the success of the modern corporation is its inherent ability survive beyond the life of its members, and to have a separate legal personhood.
With these crucial abilities and sole aim of profits, corporations were able to streamline supply chains, cut off loses and protect investors. With such scalable abilities, governments started to delegate essential duties of state from maintenance of prisons to healthcare.[2] However, that delegation seldom came with the social contracts that a state had with its citizens. This explains why the largest beneficiaries of globalization have been businesses. Today corporations have varying degree of influence on public life of an individual. This creates a social contract between individuals and businesses that goes beyond the spectrum of a commercial transaction.
A Valid Social Contract?
Businesses have legal obligations and regulations to conform to, this happened both in the ancient and modern times. Apart from conforming to these, businesses could self-regulate for the sole purpose of profits. So how are they bound by a social contract that is not just a recent phenomenon but one that is not defined by law (explicit)? To understand the validity of a social contract one must understand the impact businesses have had on Human Rights throughout history. From Colonization to Slavery the foundations of many modern-day problems were all laid by private businesses enterprises.[3]
While modern popular history barely mentions their role, businesses paved the way for imperialism and mercantilism of the 18th and 19th century. However, the increased state interventions and the Human Rights violations during the World Wars have put the focus of businesses and their impact on individual rights, on the backseat.[4] The Human Rights regime that followed also emphasized on the Social Responsibility of the state based on the social contract with all human beings. So, the emerging theory is not a new concept that burdens businesses but one that corrects the shortcoming of the current Private International Law based Human Rights regime. And this contract is not just explicit, but also implicit as seen by the growing awareness of Human Rights in the general public and even impacting business practices.
Limiting Enterprises?
One of the major criticisms of the Human Rights regime has been that the stemming obligations curtail the characteristic that are fundamental to any for-profit business, which has the aim of generating profits. This argument does not consider two major aspects: one from a business perspective and one from a legal perspective. For any business to succeed resources, capital, labor are essential, and depleted resources and capital are harmful to the busines and a demotivated labor and consumer will only kill the demand in the market. Therefore, the welfare of the larger stakeholders is also in the best interest in the long-term sustainability of the business.
While short term costs and perception may not encourage businesses to adapt a more Human Rights-centric business model, it has not prevented companies from benefitting from them. With the legality of personhood, corporations and businesses have benefitted and accorded certain Human Rights to varying degrees. This protection offered by the Human Rights regime has helped New York Times, publish the “Pentagon Papers” through the United States Supreme Court judgement in New York Times Co. v. United States (1971),[5] recognizing the corporations’ first amendment of the Right to Free speech, which is also a declared Human Right. Further in the case of Burwell v. Hobby Lobby Stores, Inc. (2014),[6] The American Supreme Court even recognized the Right to Religion of corporations based on the owner’s religious beliefs.
Therefore, the Social Contract does not limit the entrepreneurship of businesses, rather it engages them with the society and develops a new relationship between individuals and businesses in an era that would require more private engagement in challenging the threat posed by the modern world and respecting every Human Rights. It is essential for businesses to not just benefit from Human Rights but also promote them and foster them for the sustainability of their stakeholders and protecting its corporate personhood.
[1] Laskar, Manzoor, Summary of Social Contract Theory by Hobbes, Locke and Rousseau (April 4, 2013). Available at SSRN: https://ssrn.com/abstract=2410525 or http://dx.doi.org/10.2139/ssrn.2410525
[2] Williston, S. (1888). History of the Law of Business Corporations before 1800. I. Harvard Law Review, 2(3), 105–124. doi:10.2307/1322201
[3] Shichor, D. The corporate context of private prisons. Crime Law Soc Change 20, 113–138 (1993). https://doi.org/10.1007/BF01418437
[4] Stuard, S.M. (2000). [Review of the book A History of Business in Medieval Europe, 1200–1550]. Journal of Interdisciplinary History 31(1), 86–88. https://www.muse.jhu.edu/article/16019.
[5] Ratner, S. (2001). Corporations and Human Rights: A Theory of Legal Responsibility. The Yale Law Journal, 111(3), 443–545. doi:10.2307/797542
[6] 403 U.S. 713 (1971)
[7] 573 U.S. 682 (2014)
