CC BY
14ISI 2019 - 0.172 UDC 005.336:658.562
STATE, SOCIETY AND BUSINESS-CORPORATIONS: INTERACTION, METHODS, TOOLS
ARSENYEV YURJI NIKOLAEVICH
Doctor of Technical Sciences, professor, Tula Branch of the RANEPA
MINAEV VLADIMIR SERGEEVICH
PhD in Engineering, associate professor, Tula Branch of the RANEPA
DAVYDOVA TATYANA YURYEVNA
PhD in Pedagogic Sciences, associate Professor, Tula state university L.N. Tolstoy's
MORENOVA KSENIJA ANATOLJEVNA
graduate student, Tula state university L.N. Tolstoy's
Annotation. The features of interaction, methods and tools used in communications between business-corporations, the state and society are investigated. Scientific approaches to the economics of business corporations, their organizational architecture, the specifics of corporate cognition and methods of managing human resources and cognitive assets are discussed.
Keywords: management, cognition, organization architecture, methods, models, profit, relationships of corporate components.
In the last 30 years, the top management of most production and commercial firms acted in the interests of shareholders, and hired staff served as a tool to achieve maximum value of shares. Modern business corporations are considered to be joint cognitive systems in which shareholders are "cognitive tools" that monitor their use, although top management and the staff of these corporations conduct real cognitive actions there. The analysis of the relationship between shareholders, management and hired personnel (hereinafter referred to as workers for simplicity of presentation) allowed us to identify the types of organizational architecture models (OA) that consider the interests of the top management of business corporations regulating their activities. This approach is different from the theory of corporate law and finance, the neoclassical theory of the firm: it considers the achievements of game theories, cognition and cognitive sciences, the foundations of the historical genesis of corporations, their interaction with other agents in the fields of economic, political and social exchanges and forms the institutional context of society as its independently evolving system [1-8].
Scientific approaches to the economics of business corporations. Nowadays, the global corporate landscape is conditioned by the synthesis of architectures and structures of business-corporations (BC). There are two economic approaches to the analysis of BC with the focus of the researcher's attention on the aspects of:
a) financial activity and its ability to: attract significant amounts of capital for large-scale investments; conduct risky transactions that give risk-averse investors the opportunity to diversify investments in shares with different risk parameters; limit investors' exposure to risk by taking into account the responsibility and interests of shareholders as priority providers of financial capital (while the goal of the top management of a business corporation is to maximize income from investments and securities portfolio;
b) organizational activities that provide savings from the specialization of employees, updating their knowledge, special skills, practical experience in the production of new knowledge useful both in the economic activities of the corporation and the implementation of the priority needs of the company. A lot of publications on these approaches reveal alternatives to saving on costs from market transactions, ways of internal structuring of the organization of BC activities, employee incentives, development and implementation of corporate strategies, cognitive management, etc.
With the desire of the top management of the BC to maximize the total profit for investors, its internal organization after paying all contractual payments to staff and other interested parties contradicts the model with a focus on shareholders [1]. With the desire of the corporation's management for higher monetary
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remuneration, additional benefits, significant social prestige, etc. its decisions should be constantly monitored, and the board of directors should maintain a balance of interests of shareholders, workers and external actors in obtaining benefits for the whole company.
When integrating external finance and internal organization, corporations usually single out investors, managers and workers, excluding top management. Then the management of the corporation should concentrate on the expansion of tangible assets, the joint system of cognition of their cognitive resources, the distribution of rights and obligations of all asset holders. Such a logic of balance of business corporations becomes transparent with a different combination of architecture and management processes. In this case, the management of business corporations acts as an agent of investors, and the staff itself acts as an agent of management. Then the means of organizational communications are constructed considering the limitation, disclosure by each subject of the corporation of its condition, adequate to its hidden motives. Organizational design is essentially determined by motivational factors of individuals, and cognition and motivation are not always completely private and hidden. Employees of the corporation communicate on the basis of formal languages, observe the behavior of others, their intentions and thoughts, mistakes in collaborative actions taking into account common goals, the forecast of socio-exchange consequences of their actions, behavioral acts, etc.
If the process of cognition in BC is organized systematically, then the execution of collective actions is carried out intelligently and consistently. Purposeful design of structures, application of standard approaches and procedures, considering the evolution in the change of generations of employees of the corporation ensure the systematic distribution and expansion of acquired knowledge among the management and workers of the corporation, their constant argumentation and evaluation. Collective memory and information storage in the interests of the future development of a business corporation make it possible to overcome the limitation of the terms of activity of its members, to detect distortion of actions (deliberate concealment, lies, misleading, etc.). The ideal of organizing collaborative cognition and full control over the opportunistic behavior of its members is impossible in the BC. However, it is possible to organize the staff so that its associative efforts provide results that far exceed the efforts of individuals and their groups. At the same time, an element of incompetence in choosing the organization of the best structure, the consequence of which is the presence of moral risk, errors of interpretation, manifestations of opportunism. The choice of the method of organization is due to obtaining benefits from the joint work of the corporation's staff, and not establishing control over their opportunistic behavior.
Voluntary labor participation of the staff in the BC should take into account the personal interests of each individual. Then the organization of cognitive (intellectual, mental) and physical efforts of members of a business corporation can be considered as a game in which actions and consequences are important for each of the subjects, whatever their interests may be. If the BC is not able to systematically and expectedly organize the cognitive and physical actions of its subjects as a game, then the stability of the game is threatened by the chaotic actions of the staff. If the labor process management model is known to all BC members, then it is possible to form an organizational collective game structure in which each employee receives a sufficient amount of information about the intentions, goals and attitudes of each of its members, as well as about stable clear expectations from the actions and reactions of other team members. Then corporate cognition is a system of collaborative cognitive activity of management and the staff of the corporation in various architectural forms. Hayek F., who studied the application of knowledge in society, showed [2] :
a) BC cannot completely centralize useful information and perform all functions;
b) macroscopic knowledge of management about the world and BC's place in it, on the one hand, and. on the other hand, microscopic knowledge of the staff can be hierarchically built as mutually necessary and reciprocally assimilable;
c) such a distinction allows you to identify elementary units for classifying typical forms of OA.
Different forms of the BC associative cognition architecture foresee limitations in the availability of
the required type of human resources, their cognitive predisposition and attitudes, the type and level of integrated skills of collective cognition and actions. This accessibility is thought to be due to the strategic decisions of the top management of the business corporation to invest in cognitive assets of various types in their education, professional and industrial training. In general, we can talk about the collaborative evolution of the prevailing form of corporate architecture and the type of human cognitive assets adequate
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to it, the essence and quality of which depend on external or internal control influences in corporations. Each national economy must find its optimal portfolio of organizational architectural solutions.
Individual and collaborative cognition in BC includes physical actions, the use of material resources, tools, the anthropogenic environment with its social rules. Commercial and industrial corporations use complexes of tangible assets and cognitive tools (computers, robots, networks, machines, software systems, etc.) in various relationships between their management and the staff. If we consider tangible assets as investors (capitalists, owners, material means of production), then the relationship between managers, staff and investors serves as the basis of the OA BC. In neoclassical theory, a firm implements a production function. Capital and labor are symmetrical input resources characterized by constant returns, while it does not matter whether "labor is hired by capital or labor hires capital" [2]. The orthodox theory of corporate governance holds that investors hiring management use it to maximize the value of their stock portfolios, and management hiring staff ensures the implementation of their own strategies.
The basic structural model of the OA BC is transformed into the general knowledge of its agents, each of whom knows and observes the basic rules. Potential conflicts of interests of the participants of collaborative cognition, the owners of cognitive tools should be limited to the adoption of a "binding agreement" that forms the cognitive frame of the game in collective cognition - the main self-governing essence of the BC. OA BC is complex and diverse, but we will make an attempt to formalize it. It is known thar the relationship of cognition of two agents (management, personnel) cooperating in the interests of achieving their common goal F BC:
F(xi, x2, ci, c2, c),
where xi, x2 - agent action levels; ci, C2, - probabilistic parameters (estimates of observations by each of the agents) that reflect the state of the external environment affecting the agents' actions to achieve their goals; с - a common probabilistic parameter that both agents can observe together or separately.
Decision-making on the actions of each agent depends on the value of the parameters of the external environment for them, and their cognitive competencies are measured by the expected (normalized) deviations of observations from the actual values or the inverse of the error of studying of the observed parameter.
From the point of view of achieving goal F, the tasks of these agents can be:
a) mutually complementary in cooperation (the best option is to coordinate decisions in collaborative cognitive processes ci = C2 = C12);
b) competing in the use of cognitive resources from their common fund (then it is better that the processes of cognition of agents differ and are encapsulated);
c) more communication between agents is not better for the corporation.
There are two methods to observe the common variable C:
a) collaborative cognition (agents combine their observations in agreement to make a decision on the cost of time and intellectual efforts in the implementation of communications);
b) hierarchical cognition (costs arise from incorrect encoding of transmitted information - noises during transmission, recipient errors in the decoding process, omission of weakly expressed information, etc.).
Each of these methods depends on external conditions, the behavior of agents, their differences or similarities, the level of competence in assessing their actions. Recommendations for collaborative cognition of corporate agents in achieving their goals in different types of external environment are
given in Table 1 [1]:
Table 1
Comparative advantages of units of collaborative cognition
Agents Different types of external environment
Aims Deterministic Промежуточная Similar
Complementary Encapsulated - E Collaborative - S Hierarchical - Н
Competitive Encapsulated - E Encapsulated - E Encapsulated - E
1) the tasks of agents solved in the external environment can be clearly defined, intermediate or similar to the situation that existed before;
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2) the complementary relations of the external environment are: a) encapsulated; b) collaborative; c) hierarchical;
3) the competitive relations of the external environment provide the situation with encapsulation in all cases.
It was entrusted to two weakly functionally connected business units to develop an innovative project. At the initial stage groups of these units conduct independent (encapsulated) research (cognition) in order to save costs, then their close coordination is needed for a collaborative solution (cognitive socialization) in case of inconsistencies in the external environment. If there is a computer network in the corporation, it is possible to organize centralized design and maintenance with operational decentralization at the terminal level. Then the solution of relevant (important, significant to the system) cognitive tasks will require much less complexity.
Any BC is characterized by mental work (perception, comprehension, evaluation, theorizing, decision-making, etc.) and physical (operations using machines, making speeches, electronic correspondence, etc.) with varying degrees of tension. Physical or mental actions of people are inseparable, and physical activity is generally impossible without mental activity and provides the most important resources for mental activity. Clark E., a proponent of a broad approach to types of work and states of consciousness, studied them as a complex long-term interaction of the brain, body and the external environment, including social and institutional aspects. Distinguishing two types of agents of collaborative cognition (management and the staff), their different cognitive skills, specific orientation, attributes, inclinations, abilities, etc., affecting the effectiveness of solving cognitive tasks, it can be noted:
a) management is responsible for the knowledge of the systemic and external environment (the world) and the position of the corporation in this world;
b) the staff is responsible for the local external environment in which it implements real tasks.
As carriers of specific skills and abilities, they serve as a resource for obtaining their shares in the overall benefit of the corporation, therefore they are referred to as cognitive assets, in contrast to the use of the standard term "human capital". Cognitive skills are inherent in individuals, the qualities and value of which can be assessed in the context of the relevant skills of management and workers of the corporation, ways of their joint cognition. The attributes and value of the cognitive assets of management and workers are determined not only through their mutual cognitive relationships. Individual and collective instruments of collaborative cognition in a corporation can be tangible assets (administrative buildings, computer networks, software, etc.), to which the operations of supply and withdrawal (ownership), the right to extract income (the right to income), the right to decide on a specific method of using assets in collaborative cognition (the right to use control) are applicable. Then the integrated holders of the first and second (and sometimes third) types of rights are investors. Property rights and income rights have priority in determining the basic parameters of any form of corporate governance. Ownership of the rights to use control, accumulating, acquire high relevance regarding the nature of joint knowledge in business corporations, especially in relation to labor productivity, incentives and negotiating positions of management and workers with the owners of tangible assets.
The significance of cognitive assets for a business corporation is great. In the scientific literature, the specifics of workers are often considered a priority in determining the nature of OA (organizational architecture) or corporate governance at the highest level (corporate governance - CG). M. Blair and L. Stout [3] proposed to consider on this basis "the board of directors as proxies of interested groups". A number of scientists have identified complementary relations between management and personnel as the most important factor in the form of communication OA-CG. L. Zingales [4] rejected the supremacy of ownership of tangible assets (physicalassets - PHA), or the residual rights of investors to control. Then the economic results of the joint cognitive efforts of management (management's cognitive assets - MCA), workers (workers' cognitive assets - WCA) represent individual and collective bargaining. M. Aoki highlighted the relationship of cognitive assets of investors (RNA), managers (MCA), workers (WCA).
If the source of the increase in the marginal product of the MCA or WCA is considered to be the assignment of the first or second rights of control over the PHA, then the PHA is called a relationship that complements the MCA or WCA. Among the MCA and WCA, or for both of them, only the partner of the MCA is necessary or essential for joint cognition. Note that the term "materiality of human assets" was
Impact Factor: SJIF 2019 - 5.11 2020 - 5.497 ISI 2019 - 0.172
introduced by O. Hart, considering management as a determinant of the boundaries of a particular corporation [5].
If the BC production function according to Hart have the form:
F(M, W, P, Rm, Rw),
where M, W, P - input levels MCA, WCA, PHA; Rm = 1 (0), Rw = 1 (0), the rights to use the control belong to (do not belong to) MCA or WCA.
There are u(M, Rm) and u(W, Rw) - rewards received by the MCA and WCA in case of absence of mutual cognitive cooperation, with reliance on external opportunities. The joint net profit of the corporation is expressed as F(M, W, P, Rm, Rw) - u(M, Rm) - v(W, Rw) - N, where N - the rate of return of the PHA required by the investor, which is considered to be set from the outside. If we have a Nash solution, then the remaining profit is divided equally between the MCA and the WCA, while the benefits they receive will be:
[F(M, W, P, Rm, Rw) - u(M, Rm) - v(W, Rw) - N]/2 + u(M, Rm) - c(M), and [F(M, W, P, Rm, Rw) - u(M, Rm) - v(W, Rw) - N]/2 + u(M, Rm) - d(W), where c(M) and d(W) -expenses related to investment in M and W.
Then maximizing M and W, respectively, will require
[F(M, W, P, Rm, Rw) + um(M, Rm)]/2 = c'(M), and [F(M, W, P, Rm, Rw) + vw(M, Rw)]/2 = d'(W), where c'(M), d'(W) - specified derivatives of the specified variables.
There is um(M, 1) > um(M, 0) and vw(W, 1) = vw(W, 0). Then the MCAs are one-sidedly essential, and the WCA are non-essential. Since u(M, Rm) displays the point of disagreement for the MCA in the Nash negotiation task, granting the MCA the rights to use control over the PHA (Rm = 1) will strengthen the negotiating position of the MCA, as well as incentives for management to invest in its own cognitive assets (point shift M* to M**, pic. 1).
\
Pic. 1. The case of the essentiality of WCA: um(M, 1) > um(M, 0). F - the purpose of the task; u - rewards.
In relation to the WCA, the following could be done: if um(M, 1) = um(M, 0) and vw(W, 1) = vw(W, 0), then the ISA and WCA are mutually significant, and the assignment of the rights to use control will not affect the negotiating positions of the parties, although it may affect the value of F (M, W, P, Rm, Rw).
Models of corporate governance and cognition. The BC model is represented by a two-level hierarchy: middle-level management - the rest of the staff (workers) of the lower level. Discrete forms of organizational architecture (OA) include ways to: a) vertical cognitive association of management assets (MCA) and cognitive assets of workers (WCA) in two forms - hierarchical (H) or assimilative (S); b) horizontal cognitive association in assimilative (S) or encapsulated (E) form within the framework of cognitive assets of workers (WCA).
It is known [1] that MCA is important (essential) in any OA, because without a strategy set by the management of the corporation, workers will not be able to achieve the growth of marginal products by simply controlling the use of PHA. However, the degree of materiality of the MCA varies depending on the form of the OA. OA is rather weak with a form called quasi-essential. But there are quite significant
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cases of MCA and WCA, which affects the positions of their negotiations on rights, distribution of benefits and incentives for investing in their cognitive assets (Table 2 shows five typical forms of OA when combining MCA and WCA).
Table 2
Typical forms of organizational architecture (OA)*
Cognitive assets of management MCA Cognitive assets of WCA workers
Essential Quasi - essential Non-essential
Essential RE: (H-S/E) H:(H - E) H: (H - E)
Quasi - essential SV: (S - E) G: (S - E/S) S: (S - S) -
* - in each cell, the first and second elements in parentheses mean the forms of vertical and horizontal cognitive associations. The letters mean: H - hierarchical specialization; S (E) - generalized (encapsulated) cognition.
The agreement on the rights to use control increases:
a) incentives for one of the parties to invest in its cognitive assets;
b) its relative share in organizational benefits;
c) their absolute values. However, this is beneficial to the other party even if its relative share decreases (otherwise it has the right to refuse cooperation).
Competition and the equity factor lead to the integration of the rights to use control over the PHA with significant cognitive assets. If the cognitive assets of the MCA or WCA are bilaterally significant, then the assignment of the rights to use control over the PHA by either party is not significant both in the distribution of the relative strength of the negotiating positions and in mutual stimulation.
The study of these aspects allowed to reveal a number of features [1].
1. If the source of the increase in the marginal product of the MCA or WCA is the assignment by the first or second agent of the rights to use control over the RNA, then the PHA is called complementary MCA or WCA.
2. XCA (X = M or W) is considered essential if its participation in collaborative cognition is necessary so that YCA (Y ^ X) and the rights to use control over RNA become complementary.
3. MCAs are essential in any OA, because workers will not be able to achieve an increase in marginal products through simple control of the use of PHA in the absence of a strategy set by management.
4. The degrees of relevance of the MCA and WCA depend on the negotiating positions in the distribution of benefits and incentives for investing in their cognitive assets.
5. If only one type of assets is significant, then their owner can improve his negotiating position by acquiring the rights to use control over the PHA, even without cooperation with the other party (if the danger point shifts in the direction preferred by the owners of assets of this type).
6. When an agreement is reached on the rights to use control over PHA, the incentives of one of the parties to invest in their cognitive assets increase, causing an increase in its relative share and absolute value in organizational benefits. This is also good for the other side, even if its relative share decreases (otherwise it will refuse to cooperate).
7. Investments in specific professional WCAs enhance the ultimate satisfaction or productivity of the staff with the participation and partial control over the PHA, even in the absence of relational association with individual MCAs, the possibility of moving this staff W in corporations.
8. The benefits derived by the MCA in controlling the use of PHA are invariant with respect to WCA movements of certain qualifications, but are limited by the need for further intra-corporate training of workers.
9. The cognitive contributions of MCA and WCF to the achievement of a given corporate goal are inseparable due to cognitive assimilation, in which their marginal products are individually indistinguishable and indefinite.
10. MCA and WCA are symmetrically and mutually quasi-essential, because the marginal products cannot be increased by unilateral control over the PHA without their mutual cooperation in observations.
11. Potentially significant cognitive assets can be encapsulated in start-up entrepreneurial ES firms, but their potential is realized by winning the directed vc-competition.
Impact Factor: SJIF 2019 - 5.11 2020 - 5.497 ISI 2019 - 0.172
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