Marketing ethics has been much on the collective corporate mind in the past ten years with such high-profile cases as the one involving Prudential Insurance. In 1997, the insurance industry powerhouse was found guilty of deceptive sales practices against 10.7 million policyholders and ordered to pay more than $400 million. Marketing is notorious for being associated with unethical conduct, whether it be in the pharmaceutical industry, where critics have challenged the high prices of life-saving drugs, or in advertising, where people have attacked the appropriateness of certain campaigns.

In the paper, "Social Contracts and Marketing Ethics," Wharton’s Thomas W. Dunfee, N. Craig Smith of Georgetown School of Business and William T. Ross, Jr. of the School of Business and Management at Temple University, describe the need and the search for a normative moral foundation for marketing. The professors discuss a new social contracts based approach to business ethics which is called Integrative Social Contracts Theory (ISCT). They describe how it pertains to marketing and demonstrate how it can be applied to decision-making in marketing, particularly in cases involving bribery. They stress the implications of these findings for managers, researchers and public policymakers.

According to Dunfee and his co-authors, the literature on marketing ethics falls into two categories: descriptive and normative. The descriptive approach details the behavior of marketing researchers or salespeople, whereas the normative approach is more prescriptive. This approach identifies moral principles and methods of moral reasoning that help support judgments about what is right and what is wrong about a particular marketing decision. The normative approach to ethics, they reason, is most useful because it helps marketing managers know what to do when they are faced with an ethical dilemma.

Normative marketing ethics literature borrows from classical theories popular with business ethicists, including Kantian ethics, virtue, rights, utilitarianism, justice and social contract theory. Dunfee and his co-writers identify social contract theory as a promising normative moral foundation for marketing because of its "clear correspondence to the exchange relationships central to marketing thought and practice."

Social contract theory is much written about today, but has its roots in such social upheavals as the decline of feudalism and the rejection of the divine right of kings in seventeenth and eighteenth century Europe. It was inspired by the writings of English philosophers John Locke and Thomas Hobbes. Three elements are common to most social contract theories: consent of the individual, agreement among moral agents, and a device or method whereby an agreement is obtained. Inherent in social contract theory is a focus on societal exchange, which is what makes this model particularly relevant to marketing ethics. Under an early social contract theory of business ethics laid out by Thomas Donaldson, a Wharton legal studies professor, a company offers advantages to its customers and employees in exchange for its existence and conditions supporting its chances for prosperity. Additionally, the exchange relationship between the company and its customers is thought to be fundamental to marketing.

Within the framework of social contract theory lies a specific formulation known as Integrative Social Contracts Theory (ISCT). ISCT, Dunfee points out, offers parameters for resolving ethical issues that come up between different communities, and thus applies well to marketing, which often involves the development of boundary-spanning relationships and the crossing of cultures. ISCT provides a core set of principles to help set boundaries for marketing practitioners; it recognizes the differences in communities that can lead to conflicts and develops a process for resolving those conflicts; and it offers a process for determining the appropriateness of a particular norm. Central to this judgment is the concept of hypernorms, widely recognized universal principles of business ethics that apply to all cultures and communities. Dunfee and his co-authors go on to show how ISCT can provide important insights in judging marketing decisions that could involve bribery. With the business community’s increased focus on the global marketplace, commercial bribery has emerged as one of the most important ethical issues in marketing.

Dunfee, Smith and Ross believe that ISCT will be "intellectually comfortable" for most educated, reflective marketing practitioners. The strict utilitarian approach that managers tend to favor has its limitations, whereas ISCT seems to provide the necessary latitude and checks and balances for decision making. Among other things, ISCT emphasizes the role of professional norms that evolve on the basis of the daily experience and judgments of marketing practitioners. By emphasizing real world experience and context, ISCT help to give marketing researchers the tools to evaluate some of the more troubling ethical issues in marketing, such as privacy obligations in the cross-marketing of financial services, conflicts of interest in personal selling and the acceptability of puffery in advertising, to name a few.

Marketing research techniques combined with research on marketing’s more difficult ethical issues are potential areas of future research to advance ISCT. The more managers and practitioners begin to apply social contract theory in general and ISCT specifically to marketing, perhaps the less the chance they will act unethically. As Prudential Insurance has learned, the price a company ultimately pays for such behavior can be devastating.