Lars Östman towards a general theory of financial control

Distance and influence of control subjects  

 

In many cases, large groups of individuals are the ultimate vertical power – either as citizens 

with voting rights in a democracy, as owners of shares in a corporation or as participants in 

collective saving. They are not organized and they are at a considerable distance from 

significant activities. Special organisations are founded to handle the interests of individuals 

in such cases. Thoroughly penetrated and common goals are difficult to find. As a result, the 

executives as well as individuals concerned have room for the interpretation of collective 

meaning. Each individual may express views about each limited side of the economic issue, 

irrespective of what other views s/he may have about this issue in other contexts.  

In addition, savings institutions may be a last vertical power in cases where they have an 

ordinary horizontal position as supplier in relation to investors and savers as customers. 

Several steps are possible. Savings institutions are in turn customers of other organisations. 

For example, an institutional investor buys shares in private-equity-funds and may proceed 

with the same type of requirements as every big customer in the financial field. Events at the 

highest levels of the vertical structure take place in horizontal processes concerning financial 

organisations. Conditions are shaped in this way for organisations that are closer to many 

material functions and experiential functions.     

Thus, organisations with allocation as a main role will have funds at their disposal, either 

through business transactions or transmittances that are determined. Such units act at a 

distance from their ultimate principals or their customers. At the same time, they act at a 

distance from many horizontal core processes that, in the end, may be affected. They are 

themselves exposed to all the general mechanisms of organisations, including the need to 

appear attractive to other parties. This is true of public administration, where leading 

representatives are also representatives of political parties. It is also true of institutional 

investors. If not in any other context, ambiguous goals in such organisations will be 

sharpened into something that is not controversial from a professional point of view, a high 

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return on capital, considering risk and expected inflation. Sometimes, a smooth return is 

talked of as a realistic aim, no matter what the uncertainties are in underlying activities. 

Financial goals do not prevent institutional investor from expressing further restrictions on 

what corporations should do – so called external governance.        

Moreover, organised examiners, surveyors and professional observers have a distance to 

horizontal down-to-earth processes. Analyses at a distance concentrate on visible and 

measurable evidence that it is possible to communicate. Many units should be dealt with and 

compared. Analytical tools, especially with quantitative approaches, are appreciated. Some 

aspects are easier to quantify than others. Interpretations of crude or complicated numbers 

have many possible pitfalls. What seems to be an indication of improved productivity may 

sometimes just as well be a sign of lowered ambitions.