MONDRAGON: A BETTER WAY TO GO TO WORK?
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What has 120 different companies, 42,000 worker-owners, 43 schools, one college, does more than 4.8 billion dollars of business annually in manufacturing, services, retail and wholesale distribution, administers more than $5 billion in financial assets, and has a business plan that is animated by the principles of the social doctrine of the Roman Catholic Church?
Answer: the Mondragon Cooperatives of Spain. In 1941, a bishop sent a young priest to teach in a vocational school in Spain's "Basque Country." In addition to the technical curriculum, young Father Jose Maria Arizmediarrieta taught the social doctrine of the Catholic Church to his students. Some of the students began a small cooperative that built kerosene stoves. In 1959, they started what we would today call a credit union. Today, the associated Mondragon Cooperatives manufacture automobile parts, electronic components, valves, taps, appliances. They have a full line of retail outlets (small & large) offering consumer products, food, appliances, and a wholesale food business catering to restaurants. Their bank has more than 100 branches, they offer a full range of insurance, and take care of their own social security and health insurance programs. They are not only holding their own within the "globalizing" economy, they are expanding.
This is one of the success stories of people who take the Church's social doctrine seriously, in particular, the teachings regarding (1) the dignity of the human person and his or her labor, (2) social solidarity, (3) the primacy of labor over capital. In most for profit businesses, labor is hired at the service of capital. For the Mondragon cooperatives, capital is something they rent to benefit the worker-owners.
To Americans, this sounds like an Employee Stock Ownership Plan, but the Mondragon model is not only about distribution of the profits, it is also about the control of the business. Management is elected by the workers, not hired by the money men, and the managers are part of the cooperative process in the enterprise. Each enterprise has a social committee that considers issues of health, safety, environment, and the social responsibilities of the enterprise. Capital is borrowed, stock is not sold for financing. All new employees become worker owners.
A new cooperative begins with a group of friends. Experience in starting 120 businesses over a 40 year period has taught the Mondragon cooperators that the pre-existing bonds of friendship are a good basis for building a productive working relationship. The Mondragon association provides business and marketing research and assistance; their bank provides capital. The workers themselves must invest some of their own money, either as an upfront contribution or as deductions from wages paid over a 2 year period (about $5,000). Their bank sticks with the new co-op until they can go it alone; if the business gets into trouble, interest on their loans is waived, payments may be suspended, and parts of the loans may be forgiven. The group may be assisted into another line of business or work. As a result, since 1956, they have had only one total failure of a cooperative.
Ten percent of corporate profits are donated to charity, 40% are retained by the cooperative to be used to benefit the "common good" of the cooperative (research, development, job creation, etc.), and the balance of the profits goes into capital accounts for the worker owners. These funds may be borrowed against at the cooperative's bank at very low interest rates, and are important parts of the social security arrangements.
Democracy in the workplace? Capital at the service of Labor? It all sounds idealistic I'm sure, except for the fact that it is actually working, profitable, and growing. The cooperative business model is not a stranger to Oklahoma, most rural areas have farmer's cooperatives and there are credit unions everywhere, but the Mondragon model of worker-owners is a different twist to what is typically found around here. If we are going to talk about economic development, helping people reach their full development as human persons, benefitting the common good, and enhancing the dignity of the human person, we have to talk about practical ways to implement these ideals. This is what the Mondragon Cooperatives of Spain have done, and it is a model that can be considered for implementation right here in Oklahoma -- if we ever decide to take the social doctrines of the Church as seriously as we do the other teachings of the Faith.
Basic Principles of the Mondragon Cooperatives of Spain
This summary consists of both direct quotes (in "") and our summary of the Mondragon text.
I. OPEN ADMISSION
The Cooperatives do not discriminate on the basic of religious, political, ethnic, or sex when it comes to becoming a member of the Cooperative.
II. DEMOCRATIC ORGANIZATION
All authority is vested in the "general assembly," which consists of all the worker owners of the enterprise, one person one vote. The general assembly elects the "Governing Council", which would be like the Board of Directors, which appoints (and removes) the organization's management..
III. SOVEREIGNTY OF LABOR
"In the MCC Co-operatives it is understood that Labor is the main factor for transforming nature, society and human beings themselves. As a result, Labor is granted full sovereignty in the organization of the co-operative enterprise, the wealth created is distributed in terms of the labor provided and there is a firm commitment to the creation of new jobs. As far as the wealth generated by the Co-operative is concerned, this is distributed among the members in proportion to their labor and not on the basis of their holding in Share Capital. The pay policy of MCC's co-operatives takes its inspiration from principles of Solidarity, which are materialized in sufficient remuneration for labor on the basis of solidarity."
Worker owners receive competitive and just salaries and dividends based on the profitability of the co-op.
IV. INSTRUMENTAL AND SUBORDINATE NATURE OF CAPITAL
Generally, a corporation sells shares of ownership and management to raise capital, and then hires labor. The Mondragon Cooperatives do not sell shares in order to raise capital. Here, the workers own the enterprise and the management and rent the capital.
V. PARTICIPATORY MANAGEMENT
"This Principle implies the progressive development of self-management and, consequently, of the participation of the members in business management. This requires: (1) The development of adequate mechanisms and channels for participation. (2) Transparent information with respect to the performance of the basic management variables of the Co-operative. (3) The use of methods of consultation and negotiation with the worker-members and their social representatives in those economic, organizational and labor decisions which affect them. (4) The systematic application of social and professional training plans.
(5) The establishment of internal promotion as a basic means of covering positions with greater professional responsibility."
VI. PAYMENT SOLIDARITY
" The Mondragón Co-operative Experience declares sufficient payment based on solidarity to be a basic principle of its management. Solidarity is manifest both internally and externally, as well as at the Corporate level."
VII. INTERCOOPERATION
The Cooperatives cooperate with each other, with other cooperatives in the area, and with national and international cooperative organizations.
VIII. SOCIAL TRANSFORMATION
The Cooperatives acknowledge a duty to contribute to the common good: (1) by reinvesting a high proportion of their profits, including regular investments in community funds for job creation; (2) 10% of the net profit of the Cooperatives is donated to charitable organizations; (3) taking care of their social security, unemployment, and health insurance requirements (through a cooperative owner by the other cooperatives; and (4) being active in their community.
IX. UNIVERSALITY
"The Mondragón Co-operative Experience, as an expression of its universal vocation, proclaims its solidarity with all those who work for economic democracy in the sphere of the Social Economy and supports the objectives of Peace, Justice and Development, characteristic of the International Co-operative Movement. Likewise, through OTALORA, which is our Business and Co-operative Training Centre, we try and disseminate co-operative culture on the basis of our own social-economic experience, developed over the last 40 years."
X. EDUCATION
"Education and Training have played a decisive role in the creation and development of the Mondragón Co-operative Movement. Its founder and main driving force, the priest José María Arizmendiarrieta, was always quite clear that 'education, understanding as such the complex of ideas and concepts adopted by a man, is the key to the development and progress of a people'. Insisting on this idea, Father Arizmendiarrieta liked to repeat 'that education is the natural and indispensable cornerstone for the promotion of a new humane and just social order' and that 'knowledge has to be socialised to democratise power'.
"Therefore, on the basis of this approach, the first thing he did when he came to Mondragón was to create the Polytechnic School in 1943 (today Mondragón Eskola Politeknikoa), which during all these years has been the main source of managers and skilled workers for our co-operatives."
