Chapter 12.5.

👉The table of contents so far is here.

Chapter 12: Planned Economy and Corporate Management

12.5. Three types of audit systems

Corporate audits in a capitalist market economy often tend to be subordinate and lukewarm to profit-driven management bodies, and it is difficult to say that they, including external audits, are fully effective in preventing corporate scandals. Furthermore, there is currently little thought of making environmental audits independent.

Audit work in corporations under a sustainable planned economy can be broadly divided into three types. One is operational audits, which audit the overall status of business operations and compliance with laws and regulations; the other is accounting audits; and the third is environmental audits, which audit the compatibility of business activities with environmental sustainability.

Of these, the second type, accounting audits, are commissioned to external accountants and conducted neutrally. Strictly speaking, accounting audits are divided into general accounting audits and environmental accounting audits, but external accountants handle general accounting audits. Environmental accounting audits will be conducted by a newly established external environmental accountant (a publicly certified professional who quantitatively evaluates business activities with environmental sustainability in mind). 

The first type of audit, operational audits, and the third type of audit, environmental audits, are conducted by an internal organization of the corporation. The nature of the auditing organization of a corporation differs depending on the type of corporation. This was already covered in the previous chapter when discussing the internal structure of corporations, but we will summarize it here:

First, in a production business organization, which is public enterprise subject to a planned economy, separate operational and environmental audit committees are established, each consisting of a large number of auditors. A large private  production business corporation also has parallel operational and environmental audit committees.

The operational audit body is also responsible for auditing the work of the accounting auditor. The environmental audit body audits the work of environmental accountant and also audits daily operations to ensure they are environmentally sustainable. At least two members of the environmental audit body must hold ecolonomist qualifications.

Such audit bodies are loosely collegial bodies, and unlike management organizations, they do not have a chief position. Instead, each audit committee member performs overlapping duties. However, they can make joint audit recommendations to the management organization as needed and can also file lawsuits seeking injunctions against operations.

On the other hand, a small or medium-sized production cooperative is required to have a minimum of three auditors, at least one of whom must be an environmental auditor. In addition, a small cooperative labor group must appoint at least one external auditor, but no distinction is made between operational and environmental audits.

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

Chapter 12.4.

👉The table of contents so far is here.

Chapter 12: Planned Economy and Corporate Management

12.4. Two types of corporate accounting

In a little-known passage in Volume II of Capital, Marx argued that the more socialized the production process, the greater the need for bookkeeping. He pointed out that "communal production" requires more bookkeeping than capitalist production, but that bookkeeping costs are reduced.

The capitalist market economy developed corporate accounting techniques and systems as a tool for recording corporate revenue activities and further increasing profits. Corporate accounting in a capitalist economy serves as a public record of revenue and expenditures related to revenue-generating activities and as reference data for formulating profit-generating business plans. In other words, whether financial accounting or management accounting, the greatest emphasis is on the calculation of revenue-generating activities, which is accounting in monetary units.

From another perspective, because corporate accounting under capitalism is an indirect calculation record that evaluates production activities in monetary terms, it is extremely complex and systematized. This not only requires costly bookkeeping but also makes it prone to fraud, such as window dressing, that often deviates from reality.

In contrast, because a sustainable planned economy is based on the premise of the abolition of a monetary exchange economy, corporate accounting eliminates the element of monetary calculation and becomes a direct record of production activities themselves, which are not evaluated in monetary terms.

For this reason, corporate accounting under a sustainable planned economy basically relies on asset tables, which record the state of inventory, and material receipts, which simply record the input and output of materials in physical units, thereby reducing the effort required for bookkeeping.

However, there are differences between the accounting of public enterprises that are subject to planned economy and the accounting of private enterprises that are not. In the case of public enterprises, the emphasis is on their significance as publicly certified records of production activities within the scope of economic plans, which form the broad framework for production activities, whereas private enterprises engage to a certain extent in barter, and to that extent they also engage in profit-making activities and a calculative element is recognized.

However, the most distinctive feature of corporate accounting under a sustainable planned economy is the highly developed technology and systems of environmental accounting. Environmental accounting has also been introduced in market economies that take environmental sustainability into consideration, but as long as the emphasis remains on profit-making activities, it is given a lower priority than calculation accounting and only plays a complementary role.

In contrast, environmental accounting in a sustainable planned economy is a form of accounting that takes precedence over production accounting, providing an environmental framework, and the two together form a record of environmentally sustainable production activities.

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

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