fort's ‘business as mediating institution’—a holistic view of corporate governance and...

Fort’s ‘Business as MediatingInstitution’FA Holistic View ofCorporate Governance and EthicsDon Mayern

I. INTRODUCTION

During the 1990s, Tim Fort’s work in ethics focused on restructuring

corporations to create and nurture ethical thinking and ethical behavior. At

various academic conferences, particularly at the Academy of Legal Studies

in Business, he presented fresh ideas in clear, seamless prose. So I was

pleased to see his thoughts collected in book form; in reviewing Fort’s

Ethics and Governance: Business as Mediating Institution, I find much in the

book worthy of praise, but balance my enthusiasm with several critical

caveats.

Ethics and Governance is published as part of the Ruffin Series in Busi-

ness Ethics, which includes titles by Pat Werhane, Bill Frederick, Ed Free-

man, Richard Nielsen, Bob Solomon, Tom Donaldson, and Ed Hartman.

Good writing about ethics dates back at least to the Athenians, so it is dif-

ficult to contribute anything new. Yet Fort does make some striking and

original pointsFpoints well worth considering by managers, business eth-

icists, and those who ponder legislative or regulatory changes to corporate

governance.

His approach is engagingly holistic; any single chapter is apt to con-

tain references to anthropologists, political theorists, theologians, biolo-

gists, evolutionary psychologists, sociologists, and philosophers. Ethics andGovernance cannot be categorized as a book on law or as a book on ethics; it

is both, and is best understood as an extended argument for restructuring

corporations to better resonate with the complex ways that human beings

live with and learn from one another.

595

American Business Law JournalVolume 41, Issue 4, 595–619, Summer 2004

nProfessor of Management, Oakland University, Rochester, Michigan.

This review first provides a short summary of Ethics and Governance,followed by a more detailed summary. It then raises questions about the

effectiveness of ‘‘business as mediating institution’’ in corporate govern-

ance.

II. ETHICS AND GOVERNANCE: THE EXECUTIVESUMMARY

The book is divided into three parts. The first sets forth the idea of busi-

ness as mediating institution (BMI): a place where values are created,

aligned, communicated, and experienced in ‘‘community’’ with others.1

The second part relates BMI to other business ethics frameworksFstake-

holder theory, social contracts, and communitarianism.2 The third partFtitled ‘‘Theology and Business’’Faims to remind readers that some kind

of transcendence must guide and inspire individuals and communities that

pursue ethical excellence.3

At the risk of oversimplification, the executive summary of Ethics andGovernance follows:

� ‘‘Ethics’’ means what we do when we think beyond immediate self-

interest; ideally, ethics involves inspired and creative compassion for

others.

� For thousands of years, families and small groups such as tribes, guilds,

and voluntary associations have created and maintained ethics and

values. These groups ‘‘mediate’’ conflicts between the individual and

society.

� Any realistic approach to corporate ethics must take seriously the need

for and potency of such mediating institutions.

� Corporations can become too large and impersonal to practice and

learn ethics and values. Corporations need to create places and spaces

where people are empowered to voice their values in community with

one another, to provide positive and negative feedback about the ac-

tions of others, and thus create shared values within that community.

1TIMOTHY L. FORT, ETHICS AND GOVERNANCE: BUSINESS AS MEDIATING INSTITUTION (2001), Part I,at 1–116.

2Id. at 117–78.

3Id. at 179–230.

596 Vol. 41 / American Business Law Journal

Corporations need to create mediating institutions in order to func-

tion as organizations that can learn and practice ethical thinking and

behavior.

� Corporations can accomplish this by a variety of means, including the

extension of employee stock ownership plans (ESOPs), representation

on company boards, and the sharing of positive stories and negative

feedback in small groups.

� Stakeholder theory is useful but overly ambitious. Corporate managers

have limited capacities, and corporations cannot capably attend to all

possible stakeholders; corporations as mediating institutions will work

best if managers pay attention to more immediate stakeholdersFsuch as

employees and shareholders.

� Social contract theory as refined by Donaldson and Dunfee is promising,

but needs to more specifically account for how mediating institutions

create and maintain values.

� Communitarianism (per Amitai Etzioni et al.) has usefully looked to

large-scale communities such as the nation-state, yet overlooks the need

for humans to experience ‘‘the moral voice’’ in smaller communities.

� All three approaches (stakeholder, social contract, and communitarian-

ism) fail to find the transcendent moral impulse that can lead us past the

self into genuine compassion and community with others. Legal and

economic reasons for being ethical do not engage the ‘‘affective spirit,’’

and are unsustainable.

None of this conveys the sensible and scholarly qualities of Fort’s

work. It does, however, show that he is not trying to create a new ethical

framework for corporate managers to apply. He does not directly chal-

lenge (or unequivocally embrace) virtue theory, Dunfee and Donaldson’s

social contract theory, Kantianism, or utilitarianism. Instead, Fort offers a

compelling account of why both business and society must reconfigure

corporate governance to make room for the better parts of human nature,

and to actively recognize the unique ways that humans live and learn eth-

ical behavior.

As a cross-disciplinary view of corporate governance, Fort helpfully

places more constricted views of corporate governanceFsuch as Milton

Friedman’sFinto a wider socio-political perspective. Although his ap-

proach does not provide detailed plans for constructing a corporation as

a ‘‘mediating institution,’’ he does set forth important guidelines and

frameworks.

2004 / Fort’s ‘Business as Mediating Institution’ 597

III. BMIFTHE EXTENDED SUMMARY

This part of the article provides a more complete sampling of Fort’s

language and logic on BMI, and will try to describe and summarize his

argument that business organizations should function as ‘‘mediating insti-

tutions.’’ Part IV provides a critique of his positions and arguments.4 While

Ethics and Governance also includes Fort’s views on how BMI fits with other

ethical frameworks (stakeholder theory, virtue theory, and communitari-

anism), as well as the potential role of theology in business, this article will

focus only on those chapters that present the basic BMI concept. This

part’s subheadings mirror those first five chapters in order.

A. Touchstones

We need business as a mediating institutionFparticularly in the United

StatesFbecause people are spending more time than ever at work. If

people do not practice ethics at work, ethical behavior and discussions

about ethics will be increasingly marginalized. It is also needed because a

large corporation can become ‘‘an alienating megastructure.’’5 Such me-

gastructures may nevertheless ‘‘foster the common good by satisfying cus-

tomers, making a return for investors, creating new wealth and jobs,

generating upward mobility,’’6 and other ‘‘goods’’ such as promoting in-

vention or even progress in the arts and sciences. But these ‘‘goods are not

goods of creating meaning and identity’’ that will ‘‘nourish solidarity, com-

passion, empathy, and respect for others.’’7 Effective ethics within a cor-

poration cannot be conjured through the creation of codes and rules, but

must be fully integrated in the right kind of corporate communityFbusi-

ness as mediating institution.

The animating impulse for BMI appears to come from Fort’s expe-

riences in lawyering and consulting. The stories he tells point to a basic

reality of human social life: in a small town or small group, some feedback

(whether positive or negative) from one’s actions is fairly certain, often

immediate, or at least inevitable. Thus people are more likely to keep

4See infra notes 46–70 and accompanying text.

5FORT, supra note 1, at 32.

6Id.

7Id.


promises, tell the truth, and demonstrate loyalty and caring to a close

group of people rather than a distant one. Mediating institutions would

include families, choirs, guilds, neighborhoods, and religious communities,

but could also include corporations.

B. Some Catholic Notions

Mahatma Gandhi’s sense of empathy and compassion for othersFeven

the BritishFsounds the keynote for the second chapter of the book. Fort

sees Gandhi’s spirituality as connected to Pope John Paul II’s vision of

‘‘solidarity.’’ Conquering sin (our separation from the Divine) means over-

coming ‘‘that desire for profit and that thirst for power . . .’’8 Fort’s prop-

osition goes right to the riddle at the heart of ethics and corporate life: if

corporations are all about the desire for power and profit, how could cor-

porations ever be truly compassionate? As Fort muses, ‘‘[o]ne hesitates to

think how ‘at home’ Gandhi would be in a multinational corporation.’’9 He

then calls upon Catholic social thinking to show that compassion and em-

pathy (‘‘solidarity’’) are part of human life at its fullest, and that such sol-

idarity can best be developed in mediating institutions.

While empathy is not the same as compassion, and ‘‘solidarity’’ may

have differing connotations than either, Fort convinces us that these no-

tions ‘‘share a sense of finding one’s self interest in the well-being of oth-

ers.’’10 In a smaller, mediating community, ‘‘one can experience solidarity

through a shared commitment to a common good or a common need.’’11

What small communities do that larger structures do not are (1) to provide amore immediate feedback mechanism for how actions affect others; (2) to en-hance the relative power of individuals vis-a-vis their community (a) by incul-cating a sense of moral identity (which rules out certain choices asunacceptable) and (b) by leaving communal decisions more amendable toindividual actions (because the number of individuals are relatively few); and(3) to reinforce a disposition about why treating others well is important anddesirable.12

8Id. at 22.

9Id.

10Id. at 24.

11Id.

12Id.


Fort links this with the stories from ‘‘Touchstones,’’ his first chapter, where

people in a family business view ‘‘others as complex persons rather than

unidimensional opponents,’’13 or where his pension client viewed employ-

ees as ‘‘friends’’ rather than ‘‘labor inputs.’’14

Core principles of Catholic social thought come into play. Subsidarity

can support the notion of decentralizing decision making; where decisions

are made within a corporation by small groups of people, they may de-

velop the ‘‘bonds and affections that inspire them to practice principles’’ of

solidarity.15 After making a strong argument that flourishing capitalism

requires individuals and institutions that ‘‘temper self-interest,’’16 he sug-

gests that business may be a meaningful place to nurture that tempera-

ment. ‘‘Mediating institutions,’’ he notes, ‘‘break down an individual’s

interaction with the rest of the world into more manageable personal in-

teractions with other human beings.’’17 In his view, seeing ‘‘tangible re-

sults’’ of your interactions with others is critical to your ability to develop

and sustain a sense of social responsibility; if it is not done in a mediating

institution, it will be ‘‘diminished’’ in the public context.18

Corporations are likely candidates to become mediating institutions.

Harvard economist Juliet Schor notes that before the age of industrial

capitalism people worked far fewer hours annually; the time available for

traditional mediating institutions such as families, guilds, and associations

13Id.

14Id.

15Id. at 27.

16Id. at 29. ‘‘Economic freedom relies upon institutions that temper self-interest.’’ Id. Fortmakes appropriate reference to Pat Werhane’s work on Adam Smith, in which she notes that‘‘Smith presupposes a foundation of government, law, and social and religious institutions inwhich he locates his political economy. Smith does not imagine that a political economy couldfunction without such support, and this crucial point is often neglected by commentators onthe Wealth of Nations.’’ Id. at 30, quoting PATRICIA WERHANE, ADAM SMITH AND HIS LEGACY FOR

MODERN CAPITALISM (1991).

17Id. at 28.

18Id. at 29. ‘‘[I]f one does not participate in a structure where normative lessons are learned insmall groups but are emphasized vis-a-vis a large megastructure (governmental or corporate),then a person may see no reason to think that her vote, her embezzlement, or her voice makesa difference.’’ Id.


‘‘may be simply less than it once was.’’19 Rather than bemoan this reality,

Fort suggests that we make the most of it by considering how business or-

ganizations may become more like traditional mediating institutions.

It seems fair to note, as Fort does, that we don’t usually think of

businesses as mediating institutions, and that large bureaucracies hide the

‘‘consequences of individual action, so that a person acts without knowl-

edge or concern of how actions affect others.’’20 Robert Jackall’s interviews

with corporate managers quickly come to mind, and Fort summarizes the

corporate cultures described in Jackall’s Moral Mazes21 as places where the

keys to advancement are ‘‘luck, fealty to the ‘king,’ milking a division and

leaving before long-term realities caught up, and such factors as appear-

ance, self-control, perception as a team player, style, and patron power.’’22

Given that ethics codes alone cannot adequately govern moral behavior in

an organization, Fort argues that ‘‘[d]ecentralization is thus necessary so

that decisions are made as close to the problem as possible.’’23 The link to

Catholic social thought is the principle of subsidiarity, ‘‘which neoconserv-

atives have used to critique the federal government.’’24 The failure in bu-

reaucraciesFboth corporate and politicalFis that of a command economy

‘‘in which all orders come from above.’’25

The rejection of command and compliance within an organization is

at the heart of Fort’s approach to ethics; that is, we cannot truly learn and

practice ethics in a context of command and compliance. We must learn

and understand ethics in the context of mediating institutionsFinstitu-

tions that link the individual to a larger social order. We should be clear,

then, that a truly mediating group does not inculcate an ‘‘us versus them’’

mentality, such as an inner city gang, a mafia family, or an Aryan suprem-

acy militia. These latter groups would be ‘‘quarantining’’ institutions rather

than mediating ones. Unlike these groups, a corporation must hearken to

19Id. at 30.

20Id. at 32.

21ROBERT JACKALL, MORAL MAZES: THE WORLD OF CORPORATE MANAGERS (1988).


23Id. at 34.

24Id.

25Id.


market and legal realities, and ‘‘has no choice but to be open to the realities

of natural forces.’’26

While the participation that could occur within the institution may be admi-rable and while the solidarity and loyalty within the organizational structuremay be profound, it is insufficient. Instead, a mediating institution both pro-motes internal goods such as participation, solidarity, and loyalty while also‘‘mediating’’; that is, interacting (not quarantining) with the outside world. Assuch, a mediating institution is an adaptive mechanism for living in the worldat large, not a survival mechanism in which the world at large is an enemy.’’27

Fort then ventures into territory where few business ethicists will go,

and links BMI to ‘‘natural law and the laws of nature,’’ the third chapter in

his book.

C. Natural Law and Laws of Nature

This chapter draws on contemporary science in making the claim that

‘‘[n]atural law helps us to define certain structures that should be present

in corporations.’’28 With ample backing, Fort claims that there is a biolog-

ical and philosophical basis for the claim that people best learn and rein-

force ethics in smaller communities. That claim, in turn, supports the

notion that large corporations must be re-engineered to create and main-

tain small-group interactions. Even with the most complete yet succinct

ethical codes, well-intentioned managers cannot lead and maintain an eth-

ical learning organization without the ‘‘feedback loops’’ found in a com-

pany where mediating institutions exist.

Fort provides empirical observations from sociologist Robin Dunbar,

who notes that ‘‘[b]usinesses with fewer than 150–200 people can be or-

ganized on entirely informal lines, relying on personal contacts between

employees to ensure the proper exchange of information.’’29 Similarly,

ideal congregations have the same numeric range, and Fort notes

that ‘‘[t]hese anthropological realities suggest that certain capacities are

26Id. at 37, with reference to William C. Frederick, Complexity, Corporation, Community:How Nature Shapes Business’s Civic Role, Address to the Midwest Division of the Academy ofManagement (Apr. 18, 1998) (on file with author).

27Id. at 38.

28Id. at 39.

29Id. at 50–51, quoting ROBIN DUNBAR, GROOMING, GOSSIP, AND THE EVOLUTION OF LANGUAGE

(1996), at 56.


universal among human beings.’’30 Behind these realities are cognitive

limits on human capacity to interact and negotiateFin short, to mediate.

‘‘If ethics has to do with how we treat others, then this cognitive limitation

makes a difference to doing ethics well.’’31 This notion of natural cognitive

limits is linked to natural ‘‘feedback loops’’ in a system of checks and bal-

ances through impartiality, communication, subsidiarity, property, and the

common good.

D. Nature and Self-Interest

Fort argues that an ideological view that the world comprises individuals

who continuously assert their ‘‘natural’’ self-interest is a view that under-

mines BMI. In the chapter titled ‘‘Nature and Self-Interest,’’ Fort address-

es the models and metaphors of individualism as reflected in the well-trod

notion that a corporation is a ‘‘nexus of contracts.’’ Fort notes that

‘‘[a]gency contractarians concentrate on a one-sided, dark notion of hu-

man nature,’’32 and fail to fully account for important features of human

choice and behavior.

Philosophically, Fort rejects the atomistic approach of Hume and the

logical positivists who assume that individuals are the basic element of

nature. His elaboration of ‘‘If P, then Q’’ is reminiscent of Hegel, or of Ber-

trand Russell’s comment that to a logical positivist a cow in a field is just

two things, while to a rationalist there are at least three things: a cow, a

field, and cow in a field. Although Fort puts it differently, the point is sim-

ilar; as he notes, ‘‘The very P that leads to Q, however, is comprised of

internal relationships that make P itself comprehensible.’’33 Nothing, in

short, stands entirely alone, or is ‘‘just’’ one ‘‘thing.’’

Fort critiques the ‘‘natural’’ evidence that has led some to posit that

individuals stand alone and make decisions solely on the basis of ‘‘self-

interest.’’ The model or metaphor of humans as self-interested rational

utility maximizers (variously called ‘‘homo economicus’’ or ‘‘Chicago

30Id. at 51.

31Id.

32Id. at 63.

33Fort sees the social contract theories of both Hobbes and Rawls as leading to ‘‘the model ofatomized individualism.’’ Id. at 81.


man’’34) has led to ‘‘contractual accounts’’ of the corporation that

‘‘emphasize arm’s-length transactions inhibiting the development of mor-

al empathy, particularly in large organizations where bureaucracy sepa-

rates consequences from actions.’’35

Fort aptly invokes Hobbes, Hayek, and Durkheim to critique ‘‘meth-

odological individualism.’’ He also questions Spenserian interpretations of

Darwin, noting the difference between biological evolution and social ev-

olution.36 He appeals to ‘‘multilevel selection theory’’ as a metaphor that

better captures evolutionary theory than ‘‘survival of the fittest.’’ Accord-

ing to Fort, ‘‘human nature depends upon solidarity, cooperation, and al-

truism as much as it does on cunning, competitiveness, and struggle.’’37

Science can just as easily study the adaptive behavior of groups as the

adaptive behavior of individuals. Human societiesFwhether family clans,

corporations, or nation-statesFdo not evolve just as cells and genetic ma-

terial evolve. Rather, a ‘‘more complex dialectic’’ is involved, a dialectic that

ties individual identity and welfare to a community, and that ties communal

welfare to the individual’s adaptations of self-interest for the benefit of the

group. In a corporationFeven one that has not become a fully mediating

institutionFthere are individuals ‘‘who value many things besides the

bottom line, but who are also not automatons at the mercy of group-

think.’’38

In this light, viewing the corporation as a ‘‘nexus of contracts’’ seems

overly simplistic. In critiquing ‘‘agency contractarianism,’’ Fort generally

finds a lack of attention to the kind of complex dialectic just described, and

an incomplete view of human nature that emphasizes only the ‘‘dark side’’

of the ‘‘force.’’39 Moreover, actual contracting is more multidimensional

than the nexus of contracts/methodological individualism view conveys.

34See Robert Prentice, Enron: A Brief Behavioral Autopsy, 40 AM. BUS. L.J. 417, 422–23 (Winter2003) (‘‘In a series of articles, I have pointed out that the foundational assumption that peoplemake decisions as if they are homo economicus (‘‘Chicago Man’’) is indisputably wrong’’).


36Id. at 71.

37Id. at 72.

38Id. at 74.

39Id. at 62. Yoda, Lucasfilm’s great Jedi master, is quoted and connected to numerous religiousand philosophical traditions. Fort’s BMI gives the ‘‘dark side’’ of human nature its due even asit encourages the ‘‘good side.’’


For example, contemporary capitalism offers abundant examples of non-

consensual agreements: coercive contracts, contracts where one party

is uninformed, or contracts where one party is lacking the ‘‘requisite

capacity.’’40 In sum, Fort finds that the values of ‘‘freedom’’ and ‘‘consent’’

are good values, and central to agency contractarianism. Apart from their

embeddedness in culture and nature, they are merely abstractions, and

can easily distort our understanding.

E. The Velvet Corporation

In his chapter on ‘‘The Velvet Corporation,’’ Fort ties the previous chap-

ters together by proposing structures that will help manifest BMI. Again,

the goal is a ‘‘balanced corporation’’ where participants within the organ-

ization ‘‘have the requisite voice and power to have economic and non-

economic concerns expressed and integrated into their business

communities.’’41 He includes a brief exegesis of the Federalist and anti-

Federalist positions in U.S. constitutional history; both positions under-

stood the need for a democracy to maintain the confidence of the people.

But Fort finds that the anti-Federalists have the more realistic prescription,

based on a more reliable view of human nature and organizational dy-

namics: people will naturally form interest groups in anthropologically fa-

miliar numbers of 150–200 or less. The question is whether those groups

will be well-integrated into the larger institution or polity, or become al-

ienated and quarantining groups. It is necessarily up to the larger entity to

find ways of channeling the energies and interests of such groups, who will

(naturally) identify and live their common conception of ‘‘the good.’’ A

‘‘Federalist’’ community that relies on command and charisma alone is far

less stable or sustainable.

Fort provides a useful tour of comparative corporate governance in

Japan, Germany, and the United States. The ‘‘Velvet Corporation’’ chapter

addresses corporate goals, ownership structure, board composition, mana-

gerial labor markets, and executive compensation. For example, Japanese

corporate governance ‘‘emphasizes the protection of employee and creditor

interests as much or more than shareholder interests.’’42 German law defines

40Id. at 85–86.


42Id. at 97.


the goals of German corporations in terms of multiple stakeholders, not just

shareholders.43 Japanese keiretsu ownership and financing differ significantly

from U.S. models, and ‘‘[i]n large German firms, employees select half the

board of directors.’’44 Fort notes the resistance to stock options as executive

compensation in Germany, as well as differences in mobility among CEOs in

either Germany or Japan relative to the United States.45

Pre-Enron assumptions and commentaries about comparative cor-

porate governance are now in question. Confident assertions (not partic-

ularly in this book, but certainly elsewhere) about the superiority of U.S.

‘‘transparency’’ ring a bit hollow after Enron, WorldCom, and other ac-

countings that successfully misled investors and creditors. Japanese cor-

porate governance is changing, even as enthusiasm diminishes in the U.S.

for stock options as an executive incentive. Changes in the makeup and

responsibilities of boards of directors mandated by the Sarbanes-Oxley Act

aim for greater transparency, but do not empower employees to bring

matters to the board or to the shareholders.46

Rightly understood, Fort’s view of mediating institutions impels us to

conclude that a corporation with functional mediating institutions would

not fall prey to the ethical and legal meltdowns that characterized Enron.

In contrast to an Enron, where talented individuals were given free

reign to create mysterious entities whose accounting eludes even the best

43Id.

44Id. at 101.

45Id. at 102–03.

46Fort mentions ‘‘feedback loops’’ in several places, suggesting the benefits of systemic, or-ganic corrections in an organization where open communication about both ‘‘goods’’ and‘‘bads’’ take place. The basic idea is a learning organization where good stories are told asexemplars, just as bad ideas and actions are discouraged, gently or otherwise, by groupnorms. For most organizations, it would help to have some lines of communication betweenemployees and directors, who are often insulated from the realities of working life within thecompany. While this may seem ‘‘unrealistic’’ because qualified Board members are excep-tionally busy and hard to find, we should address the risk that Board members make decisionsthat lack any direct feedback from employees. Policy making without ‘‘reality checks’’ fromemployees and other stakeholders or relevant communities may seem expedient but can oftenbe perilous to the company’s long-term interests. Accord THOMAS DONALDSON & THOMAS DUN-

FEE, TIES THAT BIND (1999), at 1–5 (discussing the ethical dimensions of Royal Dutch/Shell OilCompany’s strategic problems in the 1990s).

I would commend to readers a well-wrought book on the narcissistic tendencies of bu-reaucratic organizations, whether public or private. See HOWARD SCHWARTZ, NARCISSISM AND

CORPORATE DECAY: THE THEORY OF THE ORGANIZATIONAL IDEAL (1990).


forensic accountants, a corporation modeled on BMI would have ‘‘feed-

back loops’’ and ‘‘transparency’’ to maintain the checks and balances of an

organic system. An excessively bureaucratic organization lacking adequate

feedback loops makes it more likely that a CEO could make a board of

directors ‘‘captive,’’ and makes it more likely that a CFO such as Jeff Skill-

ing could operate without effective oversight, particularly where money is

the only measure of success. Post-Enron, we are reminded that people can

easily manipulate bottom lines; this should provide society and corpora-

tions with the incentive to promote corporate governance where other

values can take root and flourish.

Fort makes a few specific recommendations for achieving this.47 In

general, he looks to employees and shareholders as key stakeholders, with

particular emphasis on employees. The critique that follows will address

some of his suggestions.

IV. QUESTIONING BMI

Much of this review has been expository and congratulatory. Inevitably,

though, a reviewer feels compelled to find issues and concerns, and I have

several. First, functional groups within corporations now bear little resem-

blance to mediating institutions such as guilds, families, hunter-gatherer

tribes, or church choirs, and this difference has important implications.

Second, competitive pressures and globalization are diminishing the per-

manence and tenure of employees in major corporations, reducing the pos-

sibility that BMI will take hold. Third, if the ethical tone of an organization is

set from the top down, a CEO who wants to create a more ethical company

can most quickly do so by enforcing an ethics code and showing miscreant

managers the door rather than creating and maintaining mediating institu-

tions within the company. Fourth, the systemic legal changes necessary to

create BMI are probably more extensive than the ones Fort espouses.

A final concern is that even if BMI would create a viable and sus-

tainable business ethic in various companies by fostering virtues of soli-

darity, promise keeping, and loyalty, it is not self-evident that these

companies would be better motivated to take on larger social responsibil-

ities. Given the substantial impact of corporate activities on Earth and all

who dwell thereon, we need a convincing argument that BMI would cause

47FORT, supra note 1, at 112–14.


a corporation to also attend to wider social and environmental responsi-

bilities along with its own internal issues.

A. Faint Resemblances

The concept of mediating institutions is solid, but the reality of such in-

stitutions is primarily observable outside of corporate lifeFwithin certain

families, religious communities, bowling leagues, and the like. Fort does

not empirically examine current corporate life to demonstrate the viability

and value of their mediating institutions;48 rather, his hope is that compa-

nies that may become mediating institutions if certain systemic adjustments

are made, both internal and external. We also need to recall his caveat that

many smaller human groupings are not mediating institutions at all, but

are instead ‘‘closed’’ or ‘‘quarantining’ institutions.49 Currently, U.S. com-

panies are most apt to resemble Fort’s quarantining institutions, whose

raison d’etre is decidedly nonspiritual.50 ‘‘For profit’’ corporations are

routinely chartered for ‘‘any lawful purpose,’’ and their principal purpose

will always be to make money rather than lose it. Unlike families or ideally

sized religious congregations, the animating purpose of any corporation is

almost inevitably nonspiritual.

Money is a human artifice with no inherent value; its value is

only ‘‘instrumental’’Fone cannot meaningfully eat money, live in money,

drive money, or read money (beyond bafflement at what ‘‘Novus Ordo

48Fort does begin with an example of a client company that demonstrated caring and loyaltyto its employees, but there is a notable absence of actual exemplars in Ethics and Governance.Granted, what is now overwhelmingly typical is not what should be. The strength of his pre-scription (mediating institutions) is not necessarily diminished by this, but I believe a greateremphasis on how we might get there would be most welcome. See infra notes 66–74 andaccompanying text. We may also wonder why smaller entities such as family corporations andother closely held corporations seem especially vulnerable to fraud; Fort would respond thatsmaller companies are not automatically more like mediating institutions, which require de-liberate processes of inclusion, voice, and participation.

49See supra notes 26–27 and accompanying text.

50See, e.g., George Brenkert, The Environment, The Moralist, The Corporation and Its Culture, 5BUS. ETH. Q. 675, 681–82 (Oct. 1995). The values that Brenkert finds involve ‘‘an energeticspirit, ‘a bold front,’ a ‘can-do’ mentality, loyalty, commitment, optimism, positive thinking,self-control, self-discipline, competitiveness, team playing, growth, material success, conceal-ment of one’s strengths and intentions with regard to one’s competitors, distrust of compet-itors, self-protection, survival, willingness to exploit the psychological and financial weaknessof one’s competitors, and the importance of winning.’’ Id. at 682.


Seclorum’’ might mean). To work for a corporation whose primary aim is

to maximize profits is thus to work within an institution whose framework

and ultimate purpose is explicitly (and by design) nonspiritual. Its goal is to

avoid monetary losses, not count spiritual gains. Another goal is to ag-

grandize capital, and the history of capitalism and corporations is replete

with examples of greed and avarice that we can only view as grievous from

a spiritual perspective. Recent corporate scandals only add a contemporary

(but temporary) exclamation point to that history.

Thus, it is no accident that many people react to the notion of ‘‘busi-

ness ethics’’ as an oxymoron; they see businesses as inherently nonspirit-

ual, institutionally incapable of ‘‘doing the right thing’’ spiritually when

large sums of money are at stake. Ethicists may celebrate Ben and Jerry,

Aaron Feuerstein, and other corporate exceptions, but most ethics teachers

in business schools are inevitably tied to an approach that says ‘‘good ethics

is good business.’’ This view of business ethics advises companies to claim

the moral high ground in order to protect their reputations in the mar-

ketplace, avoid scandalous shocks to stakeholder value, develop reliable

and trustworthy suppliers, and energize loyal employees to be creative and

productive team members. As a managerial strategy, this makes sense; but

it is clearly an instrumental strategy rather than something worth doing for

its own sake. This, in turn, poses the irony that ‘‘being ethical’’ (for which

many readers of this article would ascribe inherent value) is subservient to

getting ever more money, which has no inherent value.51

To his credit, Tim Fort tries to make a case for the inherent value of

creating corporations in the image of mediating institutions. Ethics andGovernance is a plea to refashion corporate governance and corporate life

to mirror our full human natureFboth self-interested and loving, both

aggressive and empathetic. The point is not merely to avoid the moral

mazes that Robert Jackall describes,52 with their consequent drags on ef-

ficiency and profitability, but to create places that enliven employee’s spir-

itual orientation with ongoing relationships, good stories, and positive

51This is merely a reiteration of the standard ‘‘instrumental versus intrinsic value’’ argument,nicely turned on its head by the Henny Youngman quotation, ‘‘What good is happiness? Itcan’t buy money!’’

52Jackall compared CEOs in multinational corporations to kings in a feudal society, and notedvalues of fealty to the ‘king’ and appearances as key operative values in predicting the successof an individual in the organization, effectively de-linking virtues and values from outside theorganization. See FORT, supra note 1, at 33, 40, and 176.


behaviors. Implicitly, of course, this helps ‘‘the bottom line,’’ but as Fort

presents it, there is an inherent value as well.

Fort’s advice would be well taken, but the current lack of mediat-

ing institutions within large corporations means that Fort’s ideal lies

somewhere in the future. Moreover, we would have to be overly optimis-

tic to expect that current conditions in business and society will allow a shift

to BMI; the power and practicality of his recommendations for the future

seem to pale in light of global competition among leading multinational

corporations.

B. Globalization: Barren Ground for BMI?

Fort gives shareholders and employees a special place among stakeholders,

with particular emphasis on enlivening employee interactions and ethical

values formation. But for companies in constant global competition, a fixed

set of employees represents a hindrance, not a competitive advantage.

Among Detroit automakers, for example, the long-standing trend has

been to ‘‘outsource’’ as many jobs as possible.53 An ‘‘agile’’ or ‘‘nimble’’

manufacturer prefers not only just-in-time inventory, but also suppliers

that can cut current automaker payrolls and absorb the layoff problem

during lean times. Thus the suppliers must often make the tough layoff

decisions. In practical terms, this requires laying off good employees when

the manufacturer has a downturn; as a consequence, good employees are

likely to jump ship in hopes of something less temporary, and the supplier

is left with those employees whose accomplishments cannot command a

different job.

Demoralization then becomes the dominant ethos among employees;

rather than seeing the workplace as a vital, empathetic mediating institu-

tion, skilled workers (at least in Detroit) instead find transience and ongo-

ing anxieties. The greater ‘‘productivity’’ seen recently in U.S. workers

may be a sign that overtime and stress are wringing out the maximum

material and monetary output from employees who become ‘‘wrung out.’’

53This trend is not confined to Detroit. See A Global White Collar Migration, BUS. WK., Feb. 3,2003, at 118. The phenomenon of ‘‘outsourcing’’ has become a campaign issue in the 2004U.S. presidential election. See, e.g., Bob Davis & John Harwood, Kerry Targets Job OutsourcingWith Corporate-Tax Overhaul, WALL ST. J., Mar. 26, 2004, at A1 (‘‘Mr. Kerry’s proposal, besidesfeeding an election-year fight over outsourcing jobs overseas, is bound to spark a debate aboutwhether ending tax breaks for some of America’s largest corporations would strengthen orweaken the U.S. economy . . .’’). Id.


Fort wants to place increased importance on employees as stakeholders

who have a voice in the company’s direction; he correctly raises wages,

work rules, and firing as important ethical issues for business.54 But where

a company faces lower profitability and potential bankruptcy because

of health care benefits and pension funding that exceed legal require-

ments, financial pressures will eventually force cutbacks or (worse yet)

closure.

Even companies with mediating institutions cannot alter global mar-

ket realities. Downward pressure on wages and benefits has increased;

pensions and health care costs make many U.S. manufacturing companies

less competitive globally. At best, the transparency of the company through

its various mediating subgroups will mean that loyal employees can will-

ingly cut back on wages, hours, and benefits, and can trust that the com-

pany’s leadership says what it means and means what it says. But it seems

erroneous to expect that such groups within the company could look at

global market conditions and take the lead in setting wages, hours, and

benefits that will enable the company to remain competitive; they may

negotiate and settle wages, hours, and benefits in a company that manifests

transparency and good faith, but this will likely be a holding action rather

than an occasion for moral growth for employees and management.

Global competition, in short, undercuts the conditions that make

employees a special kind of stakeholder on which to build mediating in-

stitutions within the modern corporation. Moreover, global competition is

unlikely to abate.

C. Moral Mazes and the Quest for an Inspired Organization

Fort would say that the way out of the organizational morass described by

Jackall is through mediating institutions within the megastructure. Medi-

ating institutions can provide a better path than code compliance or rule

enforcement by providing the proper ethical inspiration for members of

the company or community. Fort presumably wishes to convince CEOs

to create and cultivate BMIs within megastructures that have well-

entrenched hierarchies and mazes. Yet an energetic, hands-on CEO might

be tempted to take coercive shortcuts. Why not, the CEO might muse, dust

off the ethics code and actually enforce it? Perhaps that would provide all

the ethical encouragement that the organization might need.



Consider the following hypothetical. Suppose that Hermione Long-

bottom55 is the new CEO of Quaffle, a Fortune 500 company. Quaffle has

had its ups and downs with ethics issues ‘‘inside the corporate walls.’’ Fort

identifies ‘‘discrimination, harassment, conflicts of interest, wages, work

rules, honesty, and firing’’ as important ‘‘internal’’ issues.56 Longbottom’s

team reviews the ethics code, installs a new team of ethics officers, revamps

the ethics hotline, and sends top and middle managers to various ethics

workshops. Quaffle is publicly held and incorporated in Delaware, and a

significant number of outside directors shape company policy. It has an

audit committee that is dedicated to representing the company’s financial

condition in a way that is not only compliant with Sarbanes-Oxley and re-

lated SEC regulations, but is relatively proactive in creating transparency

and trust.

This hypothetical invites us to consider why the internal ethical issues

are more effectively dealt with through a company with mediating insti-

tutions. Why not assume a hierarchical corporation where, for example,

harassment is dealt with from the top down, with company-wide policies

that conform to legal requirements and sensible HR policies? The values

behind nonharassment are not necessarily created by small communities

within the company; reported cases indicate that many harassment com-

plaints arise because there are pockets of resistance to gender or racial

equality within large organizations. A manager who refuses to discipline a

favored employee for harassment may be espousing the values of the

group, but not the company or the law.

Conflicts of interest may be effectively quashed at Quaffle from the

top down. If certain buyers for Quaffle continue to work with suppliers

that provide inferior product but also premium tickets to professional

sporting events, there is an obvious conflict of interest. But it is far from

clear why it is better for Quaffle to have a subset of mediating institutions

that discuss or elaborate conflicts issues in order for top management to set

an ethics policy on conflicts of interest and stick to it. Perhaps enforcement

becomes easier where the policy is created in a participatory way, but this is

not self-evident. If top management wants to discourage employee–buyers

from compromising corporate interests for personal gain, it can do so with

55We will assume that Longbottom manages her way to the top by consistently showing a longand strong ‘‘bottom line’’ while not ‘‘shorting’’ ethical considerations.



some efficiency. Fort is onto something important in noting that people live

and learn ethics from those closest to them. But if management demotes or

cashiers an employee for taking bribes or sabotaging the work of others on

his team, the message is heard loud and clear, even in fairly large organ-

izations.57

Arguably, then, a ‘‘top down’’ style of creating and maintaining ethical

behavior in an organization will have its adherents. Fort would probably

regard that strategy as less sustainable (what if the CEO is replaced?) and

certainly as noninspirational. But it looks as though the feedback loops of

mediating institutions are still largely coercive rather than inspirational, as

I will argue below; however, Fort would contend that an employee ‘‘who

conforms to the power of positivist coercion’’58 would be somewhat stunted

in terms of moral development, and would lack ethical inspiration.59

By contrast, an individual’s sense of ‘‘ought’’ in a mediating institu-

tion will be an internalized, ‘‘mediated’’ socially conditioned response. One

of Fort’s stories in the first chapter comes to mind. In a small, closely knit

community, you would fully disclose any problems in a car you were selling

to a nephew-in-law, but would have a clear conscience in not disclosing all

known problems to a used-car dealer you are unlikely to meet again.60 If

the dealer were also a friend, or someone you would expect to encounter

(socially or professionally) in the future, you would be more likely to make

full disclosure. Using this example, Fort notes that ‘‘the feedback

57Legal complications can easily arise if mediating subgroups are involved in reporting bribersand harassers. If the mediating institution also has an important voice in any documentation,hearing, warning, disciplinary record, demotion, or firing, there are legal issues raised towhich the larger entity must attend. Any personnel action may be triggered or demanded byan employee’s mediating institution, but she will direct her subsequent intracompany appealsor public legal action toward the company itself. Institutionally, the highest managers musteffectively supervise. Thus, even if mediating institutions within the mega structure help ar-ticulate a workable policy and provide feedback, the buck stops at the top.


59Id. In effect, Fort would say that a person’s motivation for doing morally worthwhile acts isnot only desirable, but essential to the individual’s moral development. Where a strong ethicalcode is honored throughout the organization, an individual could find herself conforming(not very inspiring!) or choosing (for her own reasons) whether to act ethically. This choosing,however, ‘‘offers no compelling reasons for describing why a person ought to be ethical.’’ Id. at169–70.

60Id. at 6.


mechanisms provided by the smaller community made dishonesty nothing

less than stupid,’’ and that honesty would have an ‘‘increased importance.’’61

A related story about a former client who was switching from a de-

fined-benefit plan to a defined-contribution plan provides another useful

example with the same lesson: in a closely knit community, the employer

who takes advantage of employees undermines their ‘‘moral sentiments’’

and ‘‘economic productivity.’’62 Fort is ‘‘inspired’’ by this example of a cli-

ent who declines to exploit employees for all possible financial gain:

The business was a place in which there was a strong sense of identity, whereindividuals often worked for forty years, and where particular virtues werecritically important. Frequently, the employees or their families were stock-holders. The annual meeting was, and remains, an anticipated communityfestival. It simply was inconceivable for anyone in the business to envision anapproach other than one that was completely transparent. Dishonesty couldnever have been remotely efficacious.63

Readers may agree with Fort that this is an ‘‘inspiring action,’’64 particu-

larly if we assume that the company’s stock is publicly held, and under-

stand that ‘‘Wall Street’’ would approve of a less employee-friendly

approach.

But allow me to raise a doubt or two. Fort has already related this

company’s honesty to the family member who fully discloses to avoid

unpleasantries from fobbing off a clunker for more than it is worth to a

relative or a used-car dealer who is also an acquaintance or friend. In each

case, the decision maker is operating in the midst of a mediating group of

people and wishes to act honestly enough to pass moral muster in that

community. The company’s defined-contribution plan decision also con-

cerns honesty and disclosure, and is resolved largely because of its deeply

held notion that misdirection and manipulation are unthinkable. Granted,

if dishonesty would be ‘‘stupid’’ (to borrow Fort’s phrase) then honesty

does have increased practical importance (‘‘what goes around comes

around’’). But Fort wants to claim that this kind of community pressure

61Id. at 7.

62Id. at 6.

63Id.

64Fort says, ‘‘I use this example not only because I personally find it an inspiring action, butalso because it demonstrates that differing ethical frameworks may provide similar solutions.’’Id. at 7.


is also a source of moral inspiration, when one can just as easily describe it

as ‘‘peer pressure.’’ The main difference between this pressure and com-

mands from above is that the pressure is applied horizontally, rather than

vertically.

On a more positive note, we could celebrate this peer pressure as

positive reinforcement. Peer pressure to perform admirably and the pos-

itive feelings that accompany a good reputation serves to motivate people

to do their best, and to celebrate right-minded acts. Yet one can also view

such positive feedback as the ‘‘flip side’’ of peer pressure not to go wrong,

either technically or morally. Pride and shame are two different directions

on the same street. Horizontal positive and negative feedback mechanisms

are vitally important as a brake on the seemingly ‘‘natural’’ urge that we

often feel to see ourselves as separate, self-interested individuals. But these

feedback mechanisms are not ‘‘inspiration’’ as such; they seem rather to

resemble the ‘‘interpersonal concordance’’ in Kohlberg’s ‘‘stage three’’

conventional level.65

D. Making BMI HappenFHow?

If leaders in a large corporate megastructure wanted to create mediating

subunits, how would they go about it? Fort suggests a mix of moves, some

of which require legal changes and others that do not: (1) creating prop-

erty rights for employees in the organization;66 (2) expansion of ESOP-like

65See JOHN W. DIENHART, ETHICS, ECONOMICS, AND LAW: AN INSTITUTIONAL APPROACH (2000), at67. ‘‘Individuals understand how institutions such as families and governments promulgaterules that bind individuals together in groups. They make moral judgments in terms of rulefollowing and the concrete consequences to their group, and so can justify self-sacrifice. . . .’’Id. Dienhart describes Stage 3 of Kohlberg as ‘‘the interpersonal concordance of the ‘good boyFnice girl’ orientation,’’ where group rules, the good of a small group, loyalty to the group,and reciprocity are dominant in the individual’s moral realm. Id. Fort’s ‘‘feedback loops’’ areno doubt effective in motivating individuals to reflect on the impact of their actions on others.But whether they also inspire ‘‘empathy and compassion’’ is not so clear.

66FORT, supra note 1, at 115. Yet the U.S. stock market will give greater ‘‘shareholder value’’ tocompanies that deliberately minimize employee compensation and rights. See, e.g., AnnZimmerman, Costco’s Dilemma: Be Kind to Its Workers, or Wall Street? WALL ST. J., Mar. 26, 2004, atB1. ‘‘But Costco’s kind-hearted philosophy toward its 100,00 cashiers, shelf-stockers andother workers is drawing criticism from Wall Street.’’ Id. Unusually high wages and benefits‘‘contribute to investor concerns that profit margins at Costco aren’t as high as they shouldbe.’’ Id. Wal-MartFoften criticized for its treatment of employeesFhas a stock that trades attwenty-four times projected per-share earnings for 2004, compared with about twenty forCostco. Id.


rights; (3) empowerment over control of one’s work product; (4) devel-

oping subcommunities within the corporation (where people can see the

consequences, both negative and positive, of their actions); (5) represen-

tation on the board of directors;67 and encouragement of (1)–(5) through

tax incentives.68

This seems like a good mix, but, as noted earlier, current incentives in

a globalized economy run counter to creating permanent employees with

property rights. This makes it all the more imperative that tax incentives at

the federal level would stimulate such rights. Fort agrees, noting that state

corporate law be preserved, yet providing federal ‘‘tax incentives for com-

panies adopting these kinds of programs.’’69 More specificity would be

helpful. The principal task for retrofitting federal tax law to BMI is to move

away from perverse subsidies70 and to tax consumption instead of labor.71

67There seems to be particular resistance to this idea in the United States. See Floyd Norris,U.S. and France Apparently at Odds Over Labor Rights, N.Y. TIMES, Mar. 27, 2004, at C3. ‘‘Thedispute . . . centers on whether the [OECD] will endorse giving workers a role in corporatemanagement, as they have by law in some European countries but do not have in the UnitedStates.’’ Id.

68FORT, supra note 1, at 115–16.

69Id. at 114.

70PAUL HAWKEN ET AL., NATURAL CAPITALISM: CREATING THE NEXT INDUSTRIAL REVOLUTION (1999),at 160. ‘‘Ideally,’’ they write, ‘‘subsidies are supposed to exert a positive outcome by helpingpeople, industries, regions, or products that need to overcome cost, pricing, or market dis-advantages. . . . Perverse subsidies do the opposite.’’ Id. They go on to detail various perversesubsidies that inflate the cost of government, confuse investors, suppress innovation andtechnological change, provide incentives for inefficiency and consumption rather than pro-ductivity and conservation. Not surprisingly, these subsidies are forms of corporate welfarethat benefit the rich and disadvantage the poor, and are not publicized; rather, ‘‘[t]hey areeuphemized, concealed, or brazenly defended as pro-growth and pro-jobs by the powerfulinterests who benefit but are seldom revealed clearly or directly to the taxpayers who financethem.’’ Id. at 160–61. (Note that employees in companies who benefit from perverse subsidiesor preferences are likely to support maintaining those subsidies or preferences, even if theyare employed in a company with mediating institutions.)

71Hawken and the Lovinses quote economist Robert Ayers with approval when he notes:

The fundamental cause of under-employment is that labor has become too productive,mostly as a result of substituting machines and energy for human labor. The underlyingbasic idea of the change would be to reduce the tax burden on labor, so as to reduce itsmarket priceFrelative to capital and resourcesFand thus encourage more employmentof labor vis-a-vis capital and especially fossil fuels and other resources.

Id. at 165, quoting from ROBERT U. AYRES, INDUSTRIAL ECOLOGY (1996).


Without meaningful systemic reform, corporations will continue to regard

employees as unduly expensive. If the federal government did not tax

wages, then employers could hire more employees who could keep a great-

er portion of their pay.

Time and space do not permit an extended argument in this review, but

I commend the reader to the Hawken and Lovins discussion of our federal

tax system in Natural Capitalism.72 The ‘‘bottom line’’ is that the U.S. tax code

discourages companies from hiring. Hawken and the Lovinses note that

(b)y taxing labor heavily in the United States (and even more in Europe), thesystem encourages businesses not to employ people. . . . German businesses areespecially adept at not employing people because German social taxationnearly doubles the cost of each worker. Taxpayers then have to pay the socialcosts for unemployment, further raising taxes. Germany has just begun to re-duce employment taxes by raising gasoline taxes.73

The U.S. federal tax system is only marginally better than Germany’s.

Social costs include unemployment benefits, Medicare, and Social Security;

society generally regards these as worthwhile, but these public goods could

be maintained without financing through payroll taxes. Consumption tax-

es would be far more preferable, but we are somewhat conditioned to think

of payroll taxes as normal and consumption taxes as abnormal. But if a

realignment of tax incentives could shift the burden from taxing labor to

taxing consumption, companies could invest more in human resources

rather than depleting natural resources, a process that is often subsidized

by governments both here and abroad.74 Until such a realignment of in-

centives occurs, corporations will continue to pressure employees to be

more productive, undermining any hope that BMI will take hold.

E. Enlivening and Extending BMI’s Ethical Resonance

Even if BMI were to create a viable and sustainable business ethic within

a corporate megastructure, there is no empirical basis for believing that

72HAWKEN ET AL., supra note 70, at 164–68.

73Id. at 164.

74Among other perversities, the authors of Natural Capitalism note the subsidization of fossilfuels, the automobile industry, agriculture that depletes aquifers, private lumbering and min-ing operations that create the need for publicly funded cleanups and restorations, sugar beetproduction, cattle-grazing, and sports venues, along with public monies donated to dyingindustries, and a wide assortment of bailouts and boondoggles. Id. at 162–63.


virtues learned in the corporation would enhance the corporation’s willing-

ness or ability to address wider areas of societal concern. The ‘‘internal is-

sues’’ of a corporation that would be the grist for BMI such as wages, hours,

and working conditions, do not necessarily transfer to a wider sense of cor-

porate social responsibility. A company with fully functional mediating in-

stitutions on internal corporate issues could easily be indifferent to the wider

concerns of environmental degradation, or global inequalities in health,

wealth, education, and nutrition. This indifference is possible even as ‘‘the

private sector’’ becomes more important relative to ‘‘the public sector,’’ and

as governments struggle with limited resources and influence. The quest for

profits in the private sector may even demand such indifference.

This does not diminish the importance of making corporations more

humane places to live and work. Doing so, however, is not likely to enhance

a wider corporate social responsibilityFone that considers stakeholders

beyond employees and shareholders, supports sound corporate govern-

ance generally, and addresses persistent problems of war and peace, hu-

man rights, social justice, and sustainable development. But to the extent

that a mediating institution models the world as it should be, it is at least, as

Fort would put it, a start.

V. CONCLUSION

Fort’s book stays within the existing framework of ‘‘corporate governance’’

by making an argument for empowering employees as a special class of

stakeholders. He makes this argument on a variety of levels, incorporating

the ideas and findings of many disparate thinkers. Ethical thinking may be

as simple as looking beyond our perceived self-interests, but acting with

regard to others is more difficult. The benefit of BMI is that people are

continually reminded that other people in the community have rights,

needs, and interests that deserve moral consideration.

It is Fort’s particular gift to remind us that human nature is grasping

at times, but at all times needing and yearning for a higher compassion. To

the extent that we could reconfigure all corporations to maximize both

negative and positive feedback loops among employees and management,

a corporate culture of self-serving overconfidence75 could not take hold.

75See Prentice, supra note 34, at 425, 429.


Corporations that listen to employees and treat them as deep resources

rather than barriers to profitability will be more attentive to quality; they

will, more vitally, be places where values are lived and learned. Even a

cursory glance at Enron’s organizational values of ‘‘rank and yank’’ and

‘‘no bad news’’ confirms numerous dysfunctions that would have little

traction in a mediating institution.76 As significant as many of Fort’s ob-

servations and arguments are, real change in corporate governance will

require a lot more attention to legal structures, especially tax incentives.

None of the changes in U.S. laws post-Enron have moved us systematically

toward valuing employees as co-creators of policies and ethical imperatives

for their companies. The political will for such changes is not evident, and

as long as people accept the taxation of labor as a primary engine for fed-

eral governmental revenues, it may never exist.

Yet if large corporate organizations are going to determine much of

our culture and values, it surely makes sense to urge that we reconstruct

corporations to function more like value-enhanced communities than

money machines. Even though corporations are largely human artifice,

and not ‘‘organic’’ or ‘‘natural,’’ they are also human institutions that both

appropriate and create values of various kinds. A corporation that has paid

attention to the need for small group interactions, feedback loops, and

employee ownership is more likely to generate sustained profits and

healthy human interactions. Rather than focus on codes or the right rules,

BMI suggests an agenda for corporate governance that reflects sociological

and anthropological realities of how humans live, love, and work.

76These would include an array of attitudes and behaviors found in many organizations.Prentice points to several, such as the avoidance of cognitive dissonance, overoptimism andoverconfidence, bounded willpower and the self-serving bias; in a smaller subgroup thatworks as Fort envisions, corporations would mediate and correct these tendencies. See alsoMalcolm Gladwell, The Talent Myth, NEW YORKER, July 22, 2002, at 28–33. Gladwell makes aninteresting observation that confirms much of what Fort is arguing: Enron assumed ‘‘that anorganization’s intelligence is simply a function of the intelligence of its employees. They be-lieve in stars, because they don’t believe in systems.’’ Id. at 32. Meaningful ranking was es-pecially difficult at Enron, where ‘‘star talent’’ had wide discretion to create new initiatives,and feedback on actual performance rather than perceived ‘‘talent’’ was all but impossible.Id. at 30. In a mediating institution, realistic feedback is the rule, not the exception.


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