Chapter 12.3.

👉The table of contents so far is here.

Chapter 12: Planned Economy and Corporate Management

12.3. Autonomous labor management

As we saw, worker self-management or co-determination is the basis of corporate management under a planned economy. This means that labor management is carried out autonomously by the workers themselves.

Labor management in corporate activities under a market economy is essentially commanding and controlling, since it is based on the separation of labor and management and is a management policy allowing management to use workers as human resources to generate profits for the company.

To counter this, democratic countries allow workers to form labor unions. However, labor unions are merely external labor organizations and cannot directly participate in internal company decision-making. Furthermore, there are various legal and practical restrictions on union activities, limiting their ability to counter corporate labor management.

In contrast, self-management and co-determination under a planned economy are systems in which workers directly participate in corporate management through internal labor organizations, making labor management essentially autonomous. On the other hand, since the need for external organizations such as labor unions is diminishing, there is no problem with abolishing the labor union system. If "abolishing labor unions" is not the right term, it can also be understood as meaning that in communist companies, the capitalist labor union system is gradually dissolved in the form of a general employees' meeting, an internal body that acts as the company's overall supervisory body.

In regards to individual labor disputes that may still arise despite this type of autonomous labor management, one possibility is to deal with them individually, such as by establishing an internal labor arbitration committee composed of external experts.

Incidentally, labor management in a broad sense also extends to personnel management, including junior executive-level workers, but the treatment of such executive-level personnel management requires separate consideration. In principle, personnel matters are included within the scope of autonomous labor management, and at least executive personnel matters are considered to be subject to self-management or co-determination.

However, in the case of a large-scale production business organization and a production business corporation, taking into consideration the efficiency of personnel management, it may be permissible to delegate the authority of executive personnel matters below a certain level to the responsible management body in the articles of incorporation.

👉The papers published on this blog are meant to expand upon my On Communism

Chapter 12.2.

👉The table of contents so far is here.

Chapter 12: Planned Economy and Corporate Management

12.2. Democratic corporate governance

Corporate governance in planned economies sees significant progress in the democratization of corporate governance. As the saying goes, "Democracy ends at the factory gates" in market economies, market-based corporate management, including joint-stock companies, tends to be top-down, led by the CEO or through consensus among a small number of executives.

This is because profit generation is the primary goal of market-based corporate management, and competitive relationships with competitors necessitate quick decision-making.

In contrast, as discussed last time, decision-making based on democratic deliberation—democratic corporate governance—is both possible and necessary in planned-economy corporate management, which aims to promote the public interest.

While this approach can vary depending on the various corporate structures discussed in the previous chapter, what they all have in common is that employee organizations serve as the primary decision-making body. In this respect, there are similarities to the general shareholders' meeting system in joint-stock companies. However, the general shareholders' meeting is merely a management oversight body for investors. Employee organizations in joint-stock companies are not sufficiently internalized, with labor unions as external organizations effectively substituting for it. 

The ultimate form of democratic corporate governance based on employee organizations is self-management, in which the workers themselves are directly involved in management. In this respect, a production cooperative, as self-managed enterprise equivalent to communist private enterprise, is model company for democratic corporate governance.

However, this is a company outside the scope of a planned economy, and for a production business organization as a public enterprise subject to a planned economy, literal self-management is not possible given the company's size. Therefore, in this case, a labor-management co-determination system is appropriate.

The details of this were already mentioned in the previous chapter when discussing corporate forms, but to reiterate, it is a system of co-determination between a management committee and a workers' representative committee. In particular, matters related to working conditions and benefits cannot be decided without the consent of the workers' representative committee.

Furthermore, another key to democratic corporate governance is the consensus system of the management body. In either corporate form, there is no top person given great authority. Whether it is the chairperson of the management committee of a production organization or the president of a production cooperative, they are merely chaipersons who bring together the management bodies, and there is no room for so-called one-man management.

In order to thoroughly implement this type of consensus system, it may be worth considering a system in which the management body does not have a chairman of the board of directors, chairman of the board, or other representative positions, but rather each member of the management body shares their respective duties and shoulders management responsibilities on a completely equal basis.

👉The papers published on this blog are meant to expand upon my On Communism

Chapter 12.1.

👉The table of contents so far is here.

Chapter 12: Planned Economy and Corporate Management

12.1 Public interest-oriented management decisions

Corporate management in a planned economy naturally differs significantly from that in a market economy. As already mentioned, a true planned economy does not presuppose monetary exchange, and therefore corporate activities are not intended to generate monetary revenue. For public enterprises, which are subject to a planned economy, serving the public interest is essential to their business activities.

Since such public enterprises are managed in accordance with the common plan formulated by the Economic Planning Conference, the discretion of the management body is limited. Business decisions are made within the common plan, focusing on how to produce environmentally sustainable, safe, and high-quality products and services and contribute to the promotion of the public interest.

This does not mean that management decisions are simply based on a "central plan," as occurred under the Soviet-style planned economy, and are therefore mechanical and bureaucratic. In a sustainable planned economy, voluntary "joint planning" (not "central planning") by enterprises themselves through the Economic Planning Conference, serves as the common management guideline, and therefore foresight and preparation for the formulation of this joint plan (three-year plan) also become important management decisions.

Such non-profit-making management decisions can be called public interest management decisions. However, such management decisions are primarily applicable to public enterprises (Production Business Organizations) that are subject to a planned economy, and are not entirely applicable to private enterprises that are outside the scope of a planned economy.

However, private enterprises are similar to public enterprises in that, unlike in a market economy, they do not earn revenue through monetary exchange. And to the extent that they receive products, services, etc. from public enterprises, given that economic planning extends to them indirectly, their management decisions will likely take on a public interest nature to a considerable extent.

However, private enterprises are permitted to engage in certain exchange transactions in the form of barter, and in that respect they have the freedom to engage in profit-making activities. To that extent, private companies are required to make profit-oriented business decisions, but these will naturally be different from the profit-making decisions made in a monetary economy where financial profit is the supreme goal.

Generally speaking, business decisions in a planned economy are not based on "how to make a profit" but on the public interest of "how to contribute to society." In this sense, "corporate social responsibility (CSR)," which in a market economy is at best a secondary responsibility of companies and is ultimately nothing more than an aid to PR, is thought to be embedded so much in the essence of corporate management that there is no need for such a specialized term.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 11.5.

👉The table of contents so far is here.

Chapter 11: Planned Economy and Corporate Forms

11.5. Corporate internal structure -part 3-

The corporate forms we have looked at in the previous article were all examples of production organizations for general production activities. This time, we will overview special corporate structures in other fields.

First, primary industries such as agriculture and fisheries, which operate under a planned economy and based on production plan Divison B, are managed by socially owned production enterprises (Agricultural Production Organization and Fishery Production Organization). However, their internal structure differs from that of ordinary production organizations.

Because primary industries are highly regional, it makes sense to adopt a decentralized, regionally-based structure. The level of this structure is a matter of policy discretion, but to achieve a higher degree of intensiveness, a fairly extensive regional subsidiary structure would likely be required. 

While each of these local branches of production organizations has its own production organization structure, the central headquarters also has a management committee and a workers' representative committee composed of members elected from each branch.

Meanwhile, consumer business cooperatives are responsible for consumer activities based on local consumption plans. Unlike self-managed production cooperatives, these are a type of consumer cooperative organization in which all residents of each region are automatically enrolled.

As a result, their operations are based on a members' general meeting made up of member representatives, with joint decisions made by a board of directors responsible for management and a workers' representative committee made up of union employee representatives.

Another issue is the nature of public utility organizations involved in public services such as welfare, medical care, and education. Under capitalism, such public utility organizations are often given special legal personality as non-profit entities, but in a communist economy, since profit-making businesses disappear altogether, the distinction between profit and non-profit becomes unclear.

Therefore, it may be possible to consider that such public utility organizations could also be self-managed production cooperatives, but because they are different from simple production activities, they should be organized as special public utility associations/corporations, and in order to ensure the public interest in particular, in addition to a board of directors that is responsible for day-to-day operations, a permanent board of supervisors should be established as a supervisory and advisory body made up of external experts and citizens.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 11.4.

👉The table of contents so far is here.

Chapter 11: Planned Economy and Corporate Forms

11.4. Corporate internal structure -part 2-

In contrast to socially owned production enterprise, where management and labor are separated, self-managed production cooperative is structured so that workers themselves are involved in management. For this reason, in a production cooperative, the general meeting of members, made up of all members, is the highest management body.

One question is what size of company is possible for such self-management, and the maximum is thought to be less than 1,000 members. It could also be more limited to a level of 500, but this is left to a policy decision.

For a production cooperative with more than 500 members, if it is not realistic to regularly hold general meetings with full participation, it should be allowed to establish a member representative council similar to the worker representative committee of a production business organization. Even in cases with fewer than 500 members, proxy participation by power of delegate should be permitted.

In any case, in a production cooperative, members are directly involved in management through general meeting, but since it is larger than small business, it needs a board of directors as the body responsible for management. Directors are elected by and are subject to supervision by the general member assembly. Regarding the audit system, even in a production cooperative, a distinction is made between operational audits and environmental audits, with permanent operational auditors and environmental auditors appointed to correspond to each.

However, for large enterprises with more than 1,000 members, the production cooperative model is no longer sufficient to govern them effectively, and it is necessary to recognize a production business corporation model similar to a socially owned enterprise. Therefore, as the number of members increases, a production cooperative may be converted into a production business corporation.

In this large enterprise format, management and labor are separated, similar to a production business organization, and a permanent management committe and a workers' representative committee are established. The rest of the internal structure will also be similar to that of a production business organization.

On the other hand, for micro-enterprises with fewer than 20 members (the required number of members is determined by policy), the production cooperative model may not be flexible enough. In such cases, a system such as a cooperative labor group would be more appropriate to allow for more flexible cooperative relationships. In this case, apart from having at least one auditor (there is no need to distinguish between an operational auditor and an environmental auditor), the internal structure of the company is left to the discretion of the members, and management can be decided by consensus of all members or by consensus of several secretaries.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter 11.3.

👉The table of contents so far is here.

Chapter 11: Planned Economy and Corporate Forms

11.3. Corporate internal structure -part 1-

In the previous article, we looked at two main types of communist enterprises: a socially owned public enterprise (production business organization) and a self-managed private enterprise (production cooperative). From here, we'll delve deeper into the internal structure of these enterprises.

First, a socially owned enterprises, which also form the core of planned economy, is the largest in terms of corporate scale, comparable in size to the combined efforts of all the major companies in a single "industry" in a capitalist economy.

In running a such large-scale enterprise, it is practically impossible to integrate labor and management in a self-managed enterprise where the workers themselves are in charge of management. Therefore, as with joint-stock companies, management and labor must be separated.

As a result, a management committee, equivalent to the board of directors of a joint-stock company, is established as the body responsible for management. However, due to the large scale of the enterprise and to ensure democratic corporate governance, they do not have a single-person top executive such as a CEO; instead, they use a consensus-based system centered around a management chairperson.

When we talk about the separation of management and labor, we do not mean the capitalist command-and-control relationship between labor and management, but rather the establishment of a system of co-determination between management and labor. Such co-determination systems have long been introduced in progressive capitalist countries, even in joint-stock companies, but the reality is that such co-determination has effectively become a mere formality due to the hierarchical relationship between labor and management.

In contrast, in communist public enterprises, to make co-determination a substantive system, a permanent workers' representative committee made up of worker representatives is established, and in areas related to working conditions and benefits in particular, a joint resolution by the management committee and the workers' representative committee is required for a proposal to be valid. For other proposals, the management committee must also disclose them in advance to the workers' representative committee, guaranteeing the opportunity to request that they be co-determined insofar as they relate to working conditions.

Incidentally, communist enterprises generally do not have an owner's body equivalent to the general shareholders' meeting, which is the general supervisory body of a joint-stock company. However, in the case of socially owned production business organization, the ultimate owner is the people, so the people's representative body becomes the ultimate owner's body, but this is largely merely political and symbolic, and in practice the general staff assembly is the general supervisory body. Therefore, the members of the management committee and workers' representative committee are both elected by the general staff assembly, and the activities of both bodies are overseen by the general staff assembly.

However, because a production business organization is large, it is technically impossible to hold a general meeting with everyone's participation, so a representative system based on general assembly delegates will likely be used. The method of election of these delegates may be by lottery or voting, with each company being able to choose.

Finally, an operational audit committee will be established as an auditing body equivalent to the board of auditors of a joint-stock company, but this will primarily act from the perspective of compliance with laws and regulations.

In addition, under the sustainable planned economy, it is also necessary to establish an internal audit system for corporate activities from the perspective of environmental sustainability, so an environmental audit committee will be established as a permanent entity separate from the operational audit committee. The members of both audit committees are also elected at the general staff meeting.

👉The papers published on this blog are meant to expand upon my On Communism.

Chapter11.2.

👉The table of contents so far is here.

Chapter 11: Planned Economy and Corporate Forms

11.2. Self-managed enterprise

Sectors other than environmentally-burdened industries subject to sustainable planned economies shall be left to the free market. However, even though it is called a free economy, it does not presuppose a monetary economy; thus, it is “free” in the sense that it is not a monetary exchange economy and is not subject to the discipline of economic planning.

Production activities in the free economy, which are not subject to the planned economy, are carried out by private enterprises. In this respect, it should be noted that this differs from the Soviet-style socialist system, which did not tolerate the existence of private enterprises in their pure form.

A private enterprise means that it can be freely established, its activities are not bound by economic plans, and are free as long as it complies with relevant laws and regulations. However, when we say private enterprises, they are of course not joint-stock corporations, but private enterprises unique to communist societies.

First, "unique to communist societies" means that they are non-profit enterprises, rather than for-profit enterprises that aim to distribute profits like joint-stock corporations. Second, they are self-managed enterprises where labor and management are integrated, unlike joint-stock corporations where management and labor are separated and managers direct workers to engage in production activities. Instead, the workers themselves, who engage in production activities, autonomously manage the enterprises.

This type of enterprise form is more like a cooperative than a company, and the legal name for such communist private enterprises is a "production cooperative." While the name overlaps with the production cooperative envisioned by Marx, they differ in that while Marx's production cooperative was positioned as the operating entities of a planned economy, production cooperative here is free private enterprise that operates outside of the planned economy.

Thus, the core of production activity under the communist mode of production is two-pronged: a production business organization that serves as public enterprise and the subject of the planned economy (establishment must be approved), and a production cooperative that serves as private enterprise in the free economy (establishment must be registered). In terms of size, the former is large enterprise, and the latter is small and medium-sized enterprise. 

However, there can be a intermediate private corporate form with internal structures similar to socially owned enterprise, because of its large scale which makes it difficult to literally implement self-management. Conversely, there can be a cooperative labor group specialized for micro-enterprise that are smaller than a production cooperative. The legal names and internal structures of these modified corporate forms will be discussed in detail later.

👉The papers published on this blog are meant to expand upon my On Communism.