Lars Östman towards a general theory of financial control

National and super­national levels  

 

Nations represent certain economic systems and have controlling subjects, ultimately the 

people as such, parliament, government and various authorities. Traditionally, national 

bodies are strong control subjects. They reallocate funds. They should satisfy functions, 

some of great urgency and growing, with national taxes as their main financial source. For 

nations, continuous adaptation is a key issue. Financial policy and monetary policy are two 

major tools. In the epoch around the year 2000, for some nations like Sweden, financial 

policy was based on strict expenditure limits and of strict avoidance of budgetary deficits. 

Control through monetary policy was emphasized. Strict targets, which were intensely 

applied, rather than adaptive behaviour in broad terms, were the main line.  

Pay-driven units work within an infrastructure that political bodies have strongly 

contributed to, and they cannot do without that structure.  From society´s point of view, the 

legitimacy of pay-driven units is based on how they make contributions in horizontal 

processes or vertical processes. Operational regulations are required when outcome is urgent 

for large groups of citizens. Standards for horizontal states and processes are set, for instance 

within the environmental field and the labour market. Behaviour in certain fields is checked 

with regard to societal vulnerability and potential damage by interruptions in horizontal 

processes. Protection against such interruptions is a long-term issue, and financial 

independence, roles, risks and rewards of pay-driven organisations may be judged from that 

perspective. In interconnected systems, interruptions are probable but perhaps only at long 

intervals. Thus, the availability of funds from political sources is a last resort that is used for 

some organisations on few occasions.  

At the end of the 20

th

 century and in the first years of the 21

st

 century, the structure of 

pay-driven units was transforming towards a more global and multinational system. Products 

and marketing and distribution procedures that are effective from a communication point of 

view are spread over the world. Not only pure production but also units for administrative 

work, development activities and executive functions are movable. The same happens to 

financial business activities such as trading on stock exchanges. For many large companies, 

vertical procedures extend upwards to internationally traded shares. Group managers are 

located in relatively few countries with subsidiaries in many other countries. Naturally, there 

is one perspective on these subsidiaries in the purely vertical line and another perspective 

from a national point of view. Nations have their share of horizontal flows within all 

international organisations, together with the corresponding taxable income.     

The infrastructure and restrictions for pay-driven organisation, horizontally and vertically, 

are to an increasing extent a concern of super-national or international bodies. In the public 

sphere, a super-national level is above every national level. Nations do not control subjects 

to the same extent as before; rather they too are controlled as a part of a greater collective. At 

                                                            

20

 The opposite view is apparently more common in financial accounting literature. See, for example, Barth & 

Schipper,  Financial Reporting Transparency. They propose a definition with representational and users´ 

perspectives: “the extent to which financial reports reveal an entity´s underlying economics in a way that is 

readily understandable by those using the financial reports”. Barth & Schipper do not discuss conflicts of 

interest, nor the distance problem or any contextual problems. They argue that transparency is “a worthy goal”, 

because the cost of capital tends to be reduced. 

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the super-national level, there are temporary projects and permanent, function-driven 

organisations that are exposed to general mechanisms but they have extra complexity due to 

complicated relationships between nations with various sets of problems and intra-national 

organisations.