Let´s co-operate!

Learning from Mondragon Corporation - the world's biggest co-operative

Do the Spanish cooperatives show the way to break the establishment? Here is an insightful article about the Mondragon Corporation by the Play the City blogger Luis Veracruz.


Urssa co-operative was the contractor of Bilbao´s Guggenheim Museum

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Can we break away from the classic capitalistic rules? Is possible to manage a company far away from that classic system? We live in capitalistic states and all the economy is based on that system. Nevertheless, some examples show us that there is not an only way to live and even to run business. Although these alternatives do not often appear in the newspapers we would like to present some of them to you in this and future posts.

Our first example is Mondragon Corporation. This company is the seventh largest in Spain in terms of asset turnover, and the leading business group in the Basque Country. Its numbers are good, but the most impressive thing is that this big Corporation consists of 256 co-operatives where the workers are the owners and take the decisions.

These co-operatives are divided into four areas of activity: Finance, including the important bank Caja Laboral and Lagun Aro insurances; Industry, the most famous cooperatives being the brands Fagor (appliances) and Orbea (bicycles); Retail, including Eroski - Spain's 2nd biggest supermarket chain; and Knowledge, with Mondragon University being the most important centre.

At the end of 2011 Mondragon Corporation was providing employment for 103.000 people, but not all of these workers have the same kind of relationship with the Corporation: the majority of them (more than 80%) are co-operativists, which makes Mondragon Corporation the biggest co-operative in the world.

Far from the running of a regular business company, Mondragon principles are related to the wellness of the whole society and not only focused on earning more benefits and growing unlimitedly. In 1985 the basic principles were stated in 10 points:

I. Open Admission
II. Democratic Organisation
III. The Sovereignty of Labour
IV. Instrumental and Subordinate Nature of Capital
V. Participatory Management
VI. Payment Solidarity
VII. Inter-cooperation
VIII. Social Transformation
IX. Universality
X. Education

To understand how MC operates and its difference from a regular company it is important to know a couple of things: First, no member of the cooperative can be dismissed from the Corporation. If the company goes badly, the worker can be moved to another co-operative of the Corporation located a maximum of 50 km from the previous place. For important reasons (always voted in assembly) some workers can be forced to reduce their shift and even to stop working some weeks or months.

The second important thing is related to the co-operative members’ salaries. At the beginning of the co-operative, it was a pay dispersion –relation between the lowest salary and highest- limited to 1:3. In the 90s it was raised to 1:6 and nowadays the pay dispersion ratio is 1:9. Although the difference has increased, MC Directors have salaries between 20 and 40% lower than in other companies and the manager of the whole corporation “only” earns 5 times the average co-operative salary. Furthermore, the average salaries in MC are definitely higher compared with regular private companies.

What can we learn about Mondragon Corporation?

One of most important things in this case is to check how the establishment can be broken and replaced by something more useful. Oppenheimer´s Law - formulated after first Big Depression, in the late 20s - predicted that in the long term co-operatives would get bankrupted or transformed into regular capitalist companies. Almost 100 years later, we can prove that this law was absolutely wrong. And this is not the only “law” broken. The hierarchy system, defended in recent years as the only possible system for a company (and more so when it is a factory) is substituted in MC for horizontality. This horizontality is not complete, but has the minimum steps possible; decisions are taken following the Strategic Plan, approved in the General Meeting by all the co-operativists.

As a friend who works in Fagor confirmed, the word “boss” is not used in MC. The worker responsible for each department is called “coordinator”, whose mission is to transfer your work or ideas to another department. It is also known that your coordinator cannot modify your job without your consent.

How does it work?

Decisions regarding the Mondragon Corporation have to be voted in the General Meeting. The subjects discussed in this assembly have already been discussed by the Leading Council, which regulates the management and the representation of the cooperative. This Leading Council is advised directly by the Social Council of each co-operative.

Any co-operative of MC has three councils: a President Council, who will be integrated in the Corporation Leading Council; a Management Council, more technical which advises and orientates towards a medium and long-term strategy; and a Social Council, integrated by people of all the departments elected once per year. As my friend told me, the representative in the Social Council is the one “who informs you about the company's plans while you have a coffee. If you do not agree with his point of view, you can choose another representative or try to be one yourself. Anyway, if you are member your vote has the same value as any other one”.

In a regular capitalist company, the Management Council would be the most important, but not in a co-operative. As social responsibility is one of the most important principles in MC, the Social Councils advise the Leading Council on the corporation and take part in important decisions in all the scales of the company, from strategy to scholarships´ budget.
The Social Council is informed about everything weekly or monthly, and it is not a 'gift' or concession: the Corporation needs to explain all their plans because they need the positive votes of all the co-operative members in order to approve the Corporation Strategic Plan.

How can we apply the co-operative principles in the city?

Our city is The Corporation and the neighborhoods are Co-operatives which are owners of something very important: Public Space. Our “Corporation” also has a Management Council (economists, planners, engineers, etc.) but the Social Council (which should be the politicians) is not working properly.

Our members will not as reachable as workers in their workplace. However, they can also choose a representative close to them: “someone who explains to them the City plans while having a coffee”. Who can be at the same time part of the Social and Management Council? Urbanists can do this work and be an important part between the citizens and the institutions. How? We are working on it…

Let´s Play the City?