ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Business and Employment»
  • Cooperatives

Mondragon: The Most Successful Co-operative in the World

Updated on July 2, 2016
TessSchlesinger profile image

Growing up in a political family, Tessa joined her first political party at 14. Her interest in progressive politics & economics continues.

 
 
 
Pays staff according to ratio
CEO earns 5 times minimum
owned by workers
educates workers at own university
has enormous welfare fund
richest area in Europe
 
Microsoft numbers one of its clients
 

Worlds most successful worker owned co-operative

Mondragon is the name of the single most successful group of co-ops in the world. The company is situated in Basque, Spain, and has been going for nearly 60 years. According to the pope, a priest founded it and, according to wiki, it was founded by graduates of a local technical college in 1956 in Mondragon (a town). The truth is that a priest started teaching people about co-ops and then took five students from a local technical college and taught them how to do it. They founded the first co-op.

Today Mondragon employs close to 75,000 people, has a revenue of £12 billion ($16 billion) per annum, 15 technology centres when it trains its staff, and owns 260 businesses or co-operatives. Consequently, the area is vastly prosperous with little poverty. It’s also indicative of how successful the system the Basque region is seldom affected by the ups and downs of the economic cycle.

The co-operative business model transformed the Basque region from the poorest area of Spain to the wealthiest area in less than 50 years. A reporter with WSJ noted that today the Basque region of Spain was probably the wealthiest in the Europe Union
The co-operative business model transformed the Basque region from the poorest area of Spain to the wealthiest area in less than 50 years. A reporter with WSJ noted that today the Basque region of Spain was probably the wealthiest in the Europe Union | Source

Business structure of Mondragon

Of the 260 businesses that comprises Mondragon, 110 are cooperatives and 147 are companies in the traditional sense. These 147, however, are not situated in Basque but either further afield in Spain, or in other countries. Mexico has a high number of Mondragon subsidiaries. There are also eight foundations and a benefit society to assist those with in need. The eight foundations, together with the benefit society, have assets of £27 billion ($22 billion) and a £10 billion ($15 billion) annual income. Mondragon also has 15 research centres where approximately 2000 researchers and scientists work. In addition, it funds and runs the University of Mondragon. They run a Cooperative Training Program in which they teach some 3000 people annually about the structure and importance of cooperatives. Another 400 people are selected each year to go through their leadership training program.

The group of cooperatives are based on ten basic principles:

  1. Democratic organisation

  2. Open admission

  3. Subordinate and instrumental nature of capital

  4. Value and importance of Labour

  5. Participation in management decisions
  6. Fair payment
  7. Cooperation

  8. Social transformation

  9. Education

  10. Universality

    In addition,Mondragon values co-operation between all staff regardless of whether senior or junior positions, participation of all staff to do their best for all concerned, social responsibility which means that some of the money made goes to those in need,and lastly innovation which means the company is always looking to improve.

Worker owned co-operatives

Pay structure of co-operative

The people within the cooperatives agree (they vote) to the payment structure which in based on a ratio rather than arbitrary figures at the discretion of management. The salary of the head honcho or CEO is somewhere between three times and nine times the salary of the person at the very bottom of the hierarchical structure. This means that CEOs at Mondragon do not earn salaries that are as high in the profit-making corporations. However, there is little poverty in the region (if any), and people are educated, rested, and the province of Basque is prosperous in comparison to other areas.

International subsidiaries.

In 1990, Mondragon started its international expansion with the Copreci factory in Mexico. By 2013, it had some 125 different businesses in different countries. These included 15 in China, 17 in France, 8 in Mexico, 8 in Poland, 7 in Czech Republic, 4 in Germany, 2 in Portugal, 5 in Brazil, 4 in Italy, 3 in the UK, 3 in Romania, 4 in the United States, 2 in India, 1 in Thailand, 2 in Turkey, 2 in Portugal, 2 in Slovakia and 1 in Morocco. America received its first taste of Mondragon in 2009 when it came to an agreement with the United Steelworkers Union to invest in worker-cooperatives.

While the series of co-operatives always flourished in its home area, international expansion has brought vast profits with more than 70% of its sales from its international arm. Most of the subsidiaries tend to be conventionally run companies (not co-operatives). However, a few years ago, one of the companies voted to convert to worker ownership.

Pope says that constantly expanding business is not good for people or the planet
Pope says that constantly expanding business is not good for people or the planet | Source

Fagor bankruptcy

As a result of poor financial management and the market crash in 2008/9, Fagor, the founding co-op of Mondragon, found itself with debts of £1.2 billion ($1.7 billion). Consequently, because it couldn’t negotiate a rescue package, it declared bankruptcy. Most of its 5,600 members of staff found jobs with the other co-ops as it is co-operative policy to absorb workers that lose their jobs as a result of companies closing. Fagor is the only Mondragon co-operative to go bankrupt in its more than 60 year history.

Seven months after it declared bankruptcy, Fagor was bought by Cata, a Catalonian company in Spain for £31.5 ($48.7) million. It guaranteed to create 705 direct jobs and 1250 indirect jobs and to maintain the famous brand names - Fagor, Edesa, Aspes, and Splendid.

Mondragon: Finance. Industry. Retail. Knowledge

Mondragon teaches its students how to run a co-operative - an incredibly successful one!
Mondragon teaches its students how to run a co-operative - an incredibly successful one! | Source

What sort of company would you prefer to work for?

See results

Humanism in business

The workers of Eroski voted in 2008 to convert the conventionally run businesses outside the Basque area into co-operatives. Eroski, part of the Mondragon stable, comprises some 2100 stores throughout Spain and France. They run the full spectrum from hypermarkets through sport stores and perfume shops to petrol/gas stations and travel agencies. While the process of converting these businesses into worked-owned co-operatives, progress has been steady.

The worker owned co-operative has put aside billions for its social welfare arm – Lagun Aro – so that nobody goes hungry, homeless, or sick. It provides income for retirement, widowhood, and disability. These come in addition to what the State (Spain) provides.

Mondragon is an alternative to capitalism

Some eighty five percent of the workers have an ownership share in the running of the many companies that comprise the parent company. Each year, these 'owners' vote who will be their Managing Director (CEO). These worker/owners also decide what to produce, where and when to sell, what to charge, what to pay workers, and where any profit goes. This is the direct opposite to the way capitalism works. The point is that as this company has now been operating with these rules for some sixty years, it is ridiculous to claim that there are no alternatives to capitalism. Mondragon clearly shows that there are.

© 2015 Tessa Schlesinger

Comments

    0 of 8192 characters used
    Post Comment

    • profile image

      FAHY1 15 months ago

      Dear Tessa,

      While I think, as you do, that Mondragon does make very important contributions to possible alternatives to conventional capitalism, I might add a few of corrections to your piece here.

      -- First, since industrialization in the late 19th century, the Basque Country has been one of the wealthiest parts of Spain, not one of the poorest. This very industrialization was an important factor in Mondragon success in its first generation as, mainly, a group of worker-owned, manufacturing co-ops. ... The ups and downs of the business cycle have, in fact, had very serious effects on the Basque region. A generation of intense industrial restructuring left the Basque Country with over 20% unemployment for several years in the 1980s and early 1990s. Unemployment reached 15% in the current crisis. Poverty and other measures of hardship also grew significantly. Mondragon, while it is large in comparison to most worker cooperatives, is much too small to affect the overall well-being of the Basque econony overall. It certainly has made a serious positive difference on unemployment, poverty and other indicators of well-being in the town of Mondragon and six surrounding towns in the the Alto Deba County.

      -- Second, a Mondragon co-op's CEO is not elected by its worker-members and not every year; rather, it is the members of its Board of Directors (also called Governing Council) who are elected by worker-members and it is every two to four years. The Board appoints the CEO who can serve in that post indefinitely.

      -- Third, Eroski's cooperativization plans have been largely on hold for several years. It is projected to return to profitability this year after a number of very difficult years which forced this pause in cooperativization. It remains to be seen what Eroski will do in this regard, though, hopefully it will move ahead with cooperativization. Eroski stores are all in Spain; it has not had stores in France for several years.

      -- Fouth, subsidiaries of manufacturing co-ops, which are not co-ops themselves, pose a serious dilemma for the Mondragon cooperative group, and one that seems likely to grow over time as more and and more manufacturing activity is carried out overseas. I am not aware of any subsidiaries that "voted" to become a cooperative as you say in your article. Many followers of Mondragon would be very interested in more information about this example if you have it.

      - Fifth, only roughly 1800 of Fagor Home Appliance workers were worker-members when it went into bankruptcy in 2013. About two-thirds of Fagor workers were non-member employees in plants in France and Poland. These foreign workers' (and their unions') may not have had any interest in becoming members back when Fagor bought their companies several years before the Crisis -- detailed documentation about this is not avaailable -- but, in any case, these workers were not members and did not have rights to relocation to other co-ops when banruptcy struck, as the 1800 worker-members did. Their is little readily available information about these foreign workers' fate. The Polish and French governments were involved in trying to support them and their plants, looking for outside investors, providing some subsidies for re-tooling, etc., but, as I say, not much is known.

      -- Sixth, Fagor Home Appliances is not the only Mondragon co-op to have failed in Mondragon's history. While Mondragon's record seems to be very good in terms of firm survival relative to averages in industrialized economies, several other co-ops have failed, a few as a result of the recent crisis and a number of others in earlier periods.

      Hope this information is helpful.