Critique of “Workers Control” and More: On Management Principles and Frameworks

  1. Die Neue Zeit
    Die Neue Zeit
    Critique of “Workers Control” and More: On Management Principles and Frameworks

    “No one disputes the importance of keeping reliable records but Lenin's identification of workers' control in a 'workers' state', with the function of accountancy (i.e. checking the implementation of decisions taken by others) is extremely revealing. Nowhere in Lenin's writings is workers' control ever equated with fundamental decision-taking (i.e. with the initiation of decisions) relating to production (how much to produce, how to produce it, at what cost, at whose cost, etc.).” (Maurice Brinton)

    In Russian the two words used for “control” and uchot and vedeniye. The latter is used to describe full operations management, while the former is used to describe less obvious forms of control like account oversight and checking roles. Maurice Brinton failed to mention in his critique of the Russian approach to “workers control” that it was the former term and not the latter that was used. Regardless, this problematic difference has led class-strugglist anarchists, pareconists, and others to use terms like “industrial democracy,” “workers’ self-management,” and so on, each of which has its own problems.

    However, even the English words to describe both situations and more are inadequate. To illustrate this inadequacy, varying business and professional frameworks will be used. As mentioned in the beginning, the first framework is supposed to be the very basis for all principles of management: the functions of management. These four functions are: planning, organizing, leading or directing, and controlling. Planning is the determination of an organization’s goals and how to achieve them. Organizing is inclusive of staffing and forms the basis of accountability relationships within an organization. Leading or directing is inclusive of motivating subordinates to contribute towards meeting the organization’s goals. Controlling here refers to setting standards, measuring performance and comparing it with them, evaluating deviations, and both taking and following up on corrective action. Controlling is a process – a continuous and forward-looking management process – embedded in each level of the organization, and closely linked with planning.

    The next framework, or rather, group of frameworks, deals with quality control and the broader quality assurance. There are many standards for quality control and the broader quality assurance, depending on the industry or professional association, and perhaps just as many frameworks. Like the management function of controlling, quality control and the broader quality assurance are processes. The former, however, is one by which organizations merely review every component involved in the production process for quality. Across the multiple quality control frameworks, the qualitative aspects range from performance and integrity criteria to competencies to organizational culture and other soft elements.

    This next framework is closely tied to Lenin’s emphasis on accounting and uchot as one of the many means of achieving social labour. Consider these remarks in 1917:

    The chief difficulty facing the proletarian revolution is the establishment on a countrywide scale of the most precise and most conscientious accounting and control, of workers' control of the production and distribution of goods.

    […]

    If we are speaking of a proletarian state, that is, of the proletarian dictatorship, then workers' control can become the country-wide, all-embracing, omnipresent, most precise and most conscientious accounting of the production and distribution of goods.

    […]

    We can "lay hold of" and "set in motion" this "state apparatus" (which is not fully a state apparatus under capitalism, but which will be so with us, under socialism) at one stroke, by a single decree, because the actual work of book-keeping, control, registering, accounting and counting is performed by employees, the majority of whom themselves lead a proletarian or semi-proletarian existence.


    One of the technical areas where he was wrong, of course, was the assertion that “capitalism has simplified the work of accounting and control, has reduced it to a comparatively simple system of bookkeeping, which any literate person can do.” In 1985, the National Commission on Fraudulent Financial Reporting was formed in the US and, under James C. Treadway, Jr., recommended that the organization’s sponsoring professional associations provide integrated guidance on a practice dating back to Mesopotamian and Egyptian times: internal control. The recommendations of this “Treadway Commission” were fulfilled in 1992, when the Committee of Sponsoring Organizations of the Treadway Commission (COSO) released a framework for internal control:

    Internal control is broadly defined as a process, effected by an entity's board of directors, management and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

    1) Effectiveness and efficiency of operations.
    2) Reliability of financial reporting.
    3) Compliance with applicable laws and regulations.

    […]

    Internal control consists of five interrelated components.
    These are derived from the way management runs a business, and are integrated with the management process. Although the components apply to all entities, small and mid-size companies may implement them differently than large ones. Its controls may be less formal and less structured, yet a small company can still have effective internal control. The components are:

    Control Environment […] It is the foundation for all other components of internal control, providing discipline and structure. Control environment factors include the integrity, ethical values and competence of the entity's people; management's philosophy and operating style […]

    Risk Assessment […] Risk assessment is the identification and analysis of relevant risks to achievement of the objectives, forming a basis for determining how the risks should be managed […]

    Control Activities […] They include a range of activities as diverse as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties.

    Information and Communication […] Effective communication also must occur in a broader sense, flowing down, across and up the organization […]

    Monitoring […] This is accomplished through ongoing monitoring activities, separate evaluations or a combination of the two […]

    An internal control system, no matter how well conceived and operated, can provide only reasonable – not absolute – assurance to management and the board regarding achievement of an entity's objectives. The likelihood of achievement is affected by limitations inherent in all internal control systems. These include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the collusion of two or more people, and management has the ability to override the system. Another limiting factor is that the design of an internal control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

    Thus, while internal control can help an entity achieve its objectives, it is not a panacea.


    From these frameworks, one can easily conclude that, even with less empowering interpretations of “control,” the fourth function of management – in which more than mere standards are established – is not defined uniformly, even after all these years! Moreover, another complicating factor has arisen since the early 2000s. According to the COSO framework of internal control above, risk assessment is a component of internal control. It has been suggested, however, and not least by COSO itself, that internal control itself is part of a broader enterprise risk management framework, a separate framework from the fundamental management framework described earlier. Risk management entails identifying, assessing, and mitigating risks (prioritizing risks being part of this or being separate, depending on the academic source) – where mitigating ranges from avoidance to sharing and insurance to controlling itself. So now, the varying business and professional frameworks on control are all jammed into their places within two or more independent frameworks on management!

    Now that illusions about the potential for “workers control” have been dispelled, attention should be turned to the main alternatives. The mainstream solution is an organizational culture of empowerment, which is key for organizations that rely on employee ingenuity and initiative. On an individual or small team basis, this gives non-management employees a high degree of freedom in how they perform their jobs, and also gives them significant decision responsibilities. Workplace democracy is an extension of this, albeit a significant one. An older solution, “industrial democracy,” was initially equated with the meager process of collective bargaining, but it has retained its flexible interpretation ever since. Some truly revolutionary interpretations emerged like during the Spanish Civil War, while less revolutionary ones emerged during the immediate post-WWII period (most notably the market-socialist “workers self-management” model in the former Socialist Federal Republic of Yugoslavia under Josip Broz Tito), and while more reformist interpretations emerged after.

    The most notable reformist interpretation of “industrial democracy” was implemented in Germany during the 1970s, called “co-determination” or Mitbestimmung – with a lesser form of this co-determination being implemented in Sweden. Co-determination in Germany affects all private and publicly traded companies with 500 or more employees. Starting at the top is a two-board corporate governance system, which at the present time is exceptional. The management board, or Vorstand, is akin to a typical board of directors in all other countries, but among its members is a labour representative director, or Arbeitsdirektor. It is in the supervisory board, or Aufsichtsrat, where co-determination has a greater effect, but it should be noted that the functions of oversight, a key feature of corporate governance, differ from the functions of management. At least one-third of the supervisory board consists of trade union and other labour representatives, half where the company has over 2,000 employees. Further down the organization, co-determination allows workers to form organizations at the shop floor level. These organizations elect their representative to the management board and other representatives to the supervisory board, and also communicate with the company’s trade union on working conditions, insurance, economic assistance, and other labour issues.

    Co-determination is not without its problems. The most obvious one is the high level of remuneration given to labour representatives, which tends to align their interests with corporate interests and not labour interests. There are, of course, the odd scandals of travel and entertainment benefits given to such labour representatives. Co-determination tends to lower strike activity in times of economic growth and, in worse times, leads to trade union consent towards job losses, nominal and real wage cuts, and other negative effects on workers. Then again, every open class struggle is a political struggle, and co-determination, for all its class-conciliationist intentions, could be supported as a means of emphasizing that basic political struggles rarely grow out of more basic economic struggles at the “point of production.

    In February 2010, Paul Cockshott, Allin Cottrell, and Heinz Dietrich attempted to give a new but revolutionary interpretation of “industrial democracy” in a Berlin conference, which would accompany their directional measure of extending litigation rights to include class-action lawsuits and speedy judgements against all private employers who extract any sort of surplus value and related surplus labour from their workers:

    If unions won court actions giving employees the full value that they created, then there is a danger that some firms would attempt to close down and fire workers rather than continue in business. Thus legislation aimed at protecting the rights of labour would have to include the right, after a suitable ballot of employees, for employees to elect the majority of the board of any company.

    There are at least three concerns with this “right to industrial democracy.” First, considering that they advocate the replacement of all elections to all political and related administrative offices with random selections, it is surprising that elections have been suggested for “industrial democracy” according to this new interpretation (though it should be mentioned that the problems with elections are secondary to the more immediate problem of prioritizing stakeholder interests). Second, it should be noted that boards of directors are charged with mere oversight and some monitoring, which again are different from the functions of management, the latter of which include decisions on outsourcing and layoffs. Third, regarding the limitation of the discussion to the level of the board, this ignores issues like more grassroots-level “enforcement of the veto of the workforce against the closure of establishments which are not threatened by insolvency” – to quote the March 2010 draft party program of Die Linke (The Left party in Germany) on expanding co-determination.

    Discussed elsewhere were these immediate reforms that are the most relevant to the problems of “control,” “workers control,” “industrial democracy,” and so on, all of which point to something less than systemic collective worker management (i.e., planning, organizing, leading or directing, and the fourth function mislabelled “control”) and related oversight inclusive of auditing:

    1) The ecological reduction of the normal workweek even for working multiple jobs – including time for workplace democracy, workers’ self-management, broader industrial democracy, etc. through workplace committees and assemblies – to a participatory-democratic maximum of 32 hours or less without loss of pay or benefits but with further reductions corresponding to increased labour productivity, the minimum provision of double-time pay or salary/contract equivalent for all hours worked over the normal workweek and over 8 hours a day, and the prohibition of compulsory overtime;
    2) Full, lawsuit-enforced freedom of class-strugglist assembly and association for people of the dispossessed classes, even within the military, free especially from anti-employment reprisals, police interference such as from agents provocateurs, and formal political disenfranchisement;
    3) Direct guarantees of a real livelihood to all workers, including unemployment provisions, voluntary workfare without means testing, and work incapacitation provisions – all based on a participatory-democratic normal workweek, all well beyond bare subsistence minimums, and all before any indirect considerations like public health insurance – and including the universalization of annual, non-deflationary adjustments for all non-executive and non-celebrity remunerations, pensions, and insurance benefits to at least match rising costs of living (not notorious government underestimations due to faulty measures like chain weighting, or even underhanded selections of the lower of core inflation and general inflation);
    4) The wholesale absorption of all private-sector collective bargaining representation into free and universal legal services by independent government agencies acting in good faith and subjecting their employees to full-time compensation being at or slightly lower than the median equivalent for professional and other skilled workers; and
    5) Workplace democracy over mandated balance of content in news and media production.

    The first point calls for time allotted within the normal workweek for some form of workers management that is both functionally complete and separate from time spent outside that normal workweek on civic participation, heightened political activism, and so on. Next, if one were generous enough to consider unionization rights as being the lowest form of class-strugglist assembly and association, despite this being a position of narrow economism, then the formation of workplace committees and assemblies responsible for some form of workers management could be at least one step ahead (and again basic political struggles rarely grow out of more basic economic struggles at the “point of production”). The subsequent two points, starting with the different emphasis on government underestimations of rising costs of living, point to a form of workers economic organization apart from strike activity and from all forms of workers management: the workers’ statistical commission.

    First called for by Marx and one Jules Guesde in their joint 1880 work known otherwise as the Programme of the French Workers Party, workers’ statistical commissions should have three primary responsibilities to perform with independence, proficiency, due diligence, and other professional standards. First, they should be responsible for independently gathering and providing statistics on costs of living, workplace accident rates, turnover rates, and more. Second, they should be responsible for performing independent audits of sufficient scope on the business figures and processes of employers – thus primarily financial and compliance audits, but also other types of audits – and providing reasonable but positive assurance on the reported results and on sufficient, appropriate audit evidence supporting these results to a working-class audience. Third and similarly, they should be charged with the unsung responsibility of providing independent assurance and consulting services to other workers’ economic organizations – namely, workplace committees, workplace assemblies, other organizations responsible for some form of workers management, and “orange” or “red” unions – by evaluating the effectiveness of and recommending improvements to their self-governance processes and to their control and other self-management processes.

    All in all, what best describes workers economic organization, based on worker-aligned remuneration and other principles, that is less than systemic collective worker management and related oversight inclusive of auditing, but is nevertheless comprised of a functionally complete form of workers management (covering all four functions of management and well beyond terms like “workers control,” “industrial democracy,” and so on), systemic board oversight beyond the limitations of even the recent revolutionary interpretations of “industrial democracy,” and systemic use of workers’ statistical (and audit) commissions as described above? Part of the term may be found, out of all places, in the bourgeois literature on “corporate social responsibility.” At the present time, the application of agency theory to corporate business law defines senior management and their subordinates as “agents” and investors (whether shareholders or stockholders) as “principals,” whereby agents are legally obligated to act in the interests of their principals. However, the feel-good advocacy of “corporate social responsibility” came up with a word to describe all business parties that can affect or be affected by the actions of the business as a whole: stakeholders.

    Within stakeholder theory proper, stakeholders can be divided into two groups. The first group includes: customers, non-management and management employees, suppliers, joint venture partners and other associated businesses, creditors, and investors. The second group is broader, and includes: prospective customers, government agencies for regulation and taxation, former employees, activist groups, local and higher-level communities, the general public, and sometimes industry competitors. When combined with what Michael Lebowitz called “a partnership between the workers of an enterprise and society” to describe the application of “co-management” in places like Venezuela, and with the option of adding “worker” or “working-class” as an adjective for a decisively worker-class emphasis, one arrives at the term “stakeholder co-management” and its key benefits:

    1) Redefining the “principal,” eventually even in legal terms, away from investors (whether shareholders or stockholders) and to stakeholders;
    2) Posing, within a class-strugglist framework, the need to prioritize stakeholder interests appropriately (i.e., working-class stakeholders vs. other stakeholders, but not one group of working-class stakeholders at the expense of another); and
    3) Scaling up and down the scope of stakeholders beyond the inherent limitations of “workers control,” “workplace democracy,” “industrial democracy,” and “workers self-management” (at the individual level, at the workplace level, at the business level, at the industry level, and so on).



    REFERENCES



    The Bolsheviks and Workers' Control: The State and Counter-Revolution by Maurice Brinton [http://libcom.org/library/bolsheviks...olidarity-1917]

    What is Workers Control? [http://www.revleft.com/vb/workers-co...527/index.html]

    Can the Bolsheviks Retain State Power? by Vladimir Lenin [http://www.marxists.org/archive/leni...917/oct/01.htm]

    Internal Control – Integrated Framework Executive Summary by the Committee of Sponsoring Organizations of the Treadway Commission [http://www.coso.org/IC-IntegratedFramework-summary.htm]

    Enterprise Risk Management – Integrated Framework Executive Summary by the Committee of Sponsoring Organizations of the Treadway Commission [http://www.coso.org/documents/COSO_E...iveSummary.pdf]

    Workers Control and Nationalization – Part One by Rob Lyon [http://www.marxist.com/workers-contr...tion-part1.htm]

    Workers’ control and the fight against business secrecy by the League for the Fifth International [http://www.fifthinternational.org/co...siness-secrecy]

    Transition to 21st Century Socialism in the European Union by Paul Cockshott, Allin Cottrell, and Heinz Dietrich [http://reality.gn.apc.org/econ/Berlinpaper.pdf]

    Program of the Left Party (First Draft) by Oskar Lafontaine and Lothar Bisky [http://die-linke.de/fileadmin/downlo...ogramme_en.pdf]

    Programme of the French Workers’ Party by Karl Marx and Jules Guesde [http://www.marxists.org/archive/marx...ti-ouvrier.htm]

    Constructing Co-Management in Venezuela: Contradictions along the Path by Michael Lebowitz [http://mrzine.monthlyreview.org/2005...itz241005.html]
  2. Noa Rodman
    Noa Rodman
    Thus immediately before Lenin seized the reins of power, he imagined that the functions of society had been so simplified by capitalist civilization, by the posts and the telephone, that they could be performed by anyone who could read and write. The State officials would have nothing to do but to control and register – whom and what are not stated. Perhaps one would merely have to check the registration of the other, and the other would have to register the result of checking the former. And in this fine business everybody could immediately participate one after the other.
    http://www.marxists.org/archive/kaut...our/ch02_c.htm

    No, a social apparatus of production which is of so simple a nature that anybody who can read and write can organize and direct it, and in which the manager has nothing to do except supervise work and pay everybody an equal wage – that is a prison, not a factory. Even the simplest factory places greater demands upon its manager, to say nothing of the collective social work.
    http://marxists.org/archive/kautsky/...our/ch03_c.htm

    Great organizers are as rare as great artists. For the large business they are all the more indispensable, the more extensive the undertaking, and the more various and intricate its ramifications into the total economic processes of society. This fact has long been recognized by capital, and consequently the separate businesses seek to attract qualified organizers by offering them enormous advantages and great freedom of movement.
    The State bureaucracy requires eminent organizers not less than the capitalist, but rather more so. ....
    Now a socialized undertaking will be obliged to embark upon this competition with capital. It will not be able to thrive without competent organizers, and must offer them at least the same advantages as the capitalist business.
    For this reason it is impossible to give effect to the demand put forward by Marx, and adopted by Lenin, that nobody employed in the State service should receive a salary in excess of workers’ wages. This principle may be in harmony with Labour sensibilities and our socialist conceptions, but it is incompatible with economic requirements, which always enforce themselves. We shall do well to recognize this fact from the start and allow it to guide our actions, instead of becoming wise after bitter experience.
    http://marxists.org/archive/kautsky/...our/ch03_f.htm