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.