The Mondragon Corporation: Structure/Model - Part 2 of 3

According to Mondragon, its business philosophy is contained in its corporate values statement: Co-operation, Participation, Social Responsibility and Innovation. “The Corporation’s Mission combines the core goals of a business organization competing on international markets with the use of democratic methods in its business organization, the creation of jobs, the human and professional development of its workers and a pledge to development with its social environment” (1,5).

Mondragon seeks to maintain worker participation in decision-making through worker-shared ownership and its “one worker one vote” system. After a probation period, workers are given the option to become members, meaning they can vote in the annual General Assembly (1,2). The membership fee is €13,400 (equal to approximately one year’s pay/profit which is the company’s income after non-labor costs) and can be borrowed from Mondragon’s co-operative bank where monthly and year-end losses are credited or debited (5).

Each worker’s vote in the general assembly carries the same weight regardless of placement or title within the coop. This is the key to democracy within the company. The general assembly controls production, income spread and elects members of the board. The elected board of directors then appoints management as well as a watchdog council to monitor management (8).

Another way in which Mondragon promotes egalitarianism is through it’s fixed ratio between upper management and workers wages which cannot exceed 70 percent of the equivalent in other companies in the market and is generally 3:1 to 5:1 before taxes (2). “For instance, the CEO of the entire Mondragon Corporation earns only 9 times as much as the lowest paid worker in the entire complex” (5). As a consequence of Mondragon’s policies, the lowest pay is generally higher than the local equivalent for similar work.

This social structure has led to a healthy and robust company, even in the face of economic downturns. Spain has gone through several troublesome periods over the last 20 years. In the 1980-83 recession the Basque country lost 20% of its jobs. Many companies in the area were forced to lay-off heavily or close. Yet there were very few layoffs at Mondragon during this time, helping to stabilize the region’s economy (8). In order to avoid lay-offs, workers voted to take an 11% pay decrease, paid time off or be reassigned to other working factories. In 2008 worker-owners at the struggling Fagor appliance co-operative elected to give up their Christmas bonuses and cut their overall pay by 8% in order to spare layoffs and secure the competitiveness of their company (6).  

What seems the most profound about Mondragon’s policies is its focus on the sustainable relationship of mutual benefit between worker and company. In contrast to most capitalist companies, whereby the measure of a successful company is almost always based on maximum profitability, the cooperative model offers an alternative approach that supports democracy in the workplace through an egalitarian voting system, while at the same time promoting job security for worker-members, social justice and community responsibility (10% of Mondragon profits go back into the community) (4,7).

1. http://www.mondragon-corporation.com/language/en-US/ENG/Who-we-are/Introduction.aspx

2.http://en.wikipedia.org/wiki/Mondragon_Corporation

3. http://www.ownershipassociates.com/mcc-intro.shtm

4. http://www.mondragon-corporation.com/ENG/Co-operativism/Co-operative-Experience/Historic-Background.aspx

5. http://participedia.net/en/cases/mondrag-n-co-operative-corporation

6. http://distributistreview.com/mag/2010/06/mondragon-and-the-global-economic-meltdown/

7. http://p2pfoundation.net/Mondragon

8. http://www.globaljusticecenter.org/2011/11/15/cooperativization-on/

The Mondragon Corporation: An alternative to traditional corporate structure? Part 1 of 3

Peter Schnall and Erin Wigger

So much is wrong with the way work is presently organized in America, you could look in almost any direction and find something terribly amiss. Part of this is surely due to the steady pressure of globalization on the world’s companies to compete as they strain against a slumping economy.  We have a serious problem in the world of today’s work.

Can a business survive/stay competitive in these volatile times without sacrificing their own worker’s health and financial security? Are there any viable alternatives to the current business model? We believe there are. These come in the form of companies and organizations which have gotten something right in terms of working out the balance between their bottom line and the health, safety and personal growth of their labor force. These companies recognize that their assets are weighed not only in gold, but also in the health, longevity and productivity of their workers.

Mondragón Co-operative Corporation (MCC) is one of these. MCC is the world’s largest worker cooperative. A multinational company based in the Basque region of Spain (7th largest company in Spain), with 256 different businesses under it’s umbrella, 80,000+ employees (each cooperative supporting anything from 6 to 2,000 workers), 43 schools, one college, and more than $4.8 billion of business annually in manufacturing, services, retail and wholesale distribution, Mondragon has become one of the world’s most successful story of a worker-owned company (1,4).

How did it become so successful and on what principles is it built? The Basque region has a long history of organized labor in the form of craftsman guilds, but it wasn’t until 1941 when a priest called José María Arizmendiarriet arrived and, seeing the need for education free and open to all began a democratically run Polytechnic School (1,2).

In 1956, the threat of unemployment in the area from the shutdown of a local factory that manufactured petrol-based heaters and cookers led José María Arizmendiarriet to encourage several students (and workers) from his school to purchase and manage it themselves. ULGOR, now called Fagor Electrodomésticos, was the result (3,4).

Mondragon’s following first cooperatives founded the Caja Laboral Popular credit co-operative bank, helping to secure the financial success and independence of the company. It was the Business Division of Caja Laboral that served as the catalyst for the evolution of MCC into what it is today. In our next blog we will describe how Mondragon’s workers relate to the company and to each other (2,3).

1. http://en.wikipedia.org/wiki/Mondragon_Corporation

2. http://www.ownershipassociates.com/mcc-intro.shtm

3. http://www.mondragon-corporation.com/ENG/Co-operativism/Co-operative-Experience/Historic-Background.aspx

4. http://participedia.net/en/cases/mondrag-n-co-operative-corporation

Strike at Foxconn Over Apple's New iPhone

Last Friday, only 12 days after the riot at Foxconn’s Taiyuan factory which involved thousands of workers, 3,000 to 4,000 workers at Foxconn’s Zhengzhou plant walked off the job when fights broke out between quality control inspectors and line workers (1,2).

Workers at the plant were reportedly being subjected to work intensification as the plant struggled to meet demand for the recently released iPhone 5. Already operating under tight deadlines and high quotas, Apple responded to iPhone consumer complaints about cosmetic defects to the phones’ outer cover by pressuring Foxconn to increase quality regulations at the plant (2,3).

This created tensions between line workers and quality control inspectors as heightened quality standards mean fewer products leave the production line and volume targets are harder to meet. Li Qiang, of China Labor Watch, points out that "they have such high expectations for these products, even if you raise the demands a little bit it makes a huge difference to the pressure on the workers”(3,4). China Labor Watch also found that lack of additional training, paired with already inadequate training, exacerbated the issue. Some workers were also reportedly upset by having to work though China’s weeklong national holiday (which began on September 30^th and ended on the 7^th of October) in order to meet production demands for the new iPhone (3).

Foxconn denies forcing people to work and points out that workers who “volunteered” to work on the holiday received additional compensation as required by the government.

This strike comes at a difficult time for Apple - having just released the iPhone 5 this September. Though Foxconn maintains that the strike did not halt production on the phone, China Labor Watch reports that several lines manufacturing the phone stopped production while workers protested (1,4).

So, here is a very straightforward example of how the needs of American consumers directly affect the quality of life of the Chinese workers assembling our products. Apple Corporation and Foxconn - as well as the American consumer - may each want to assign responsibility elsewhere, but they are all in some way profiting off of this process.

1.http://www.nytimes.com/2012/09/25/business/global/foxconn-riot-underscores-labor-rift-in-china.html?_r=0

2. http://www.reuters.com/article/2012/10/06/us-apple-foxconn-idUSBRE8941JF20121006

3. http://www.guardian.co.uk/technology/2012/oct/05/foxconn-apple-iphone-china-strike

4. http://www.chinalaborwatch.org/news/new-433.html

What it means

The following poem appeared in the Monthly Review Vol. 64 No. 4 from September 2012. We liked it so much we took the liberty of reproducing it here. 

by Marge Piercy

Unemployed: soon invisible,
after a while, unemployable,
unwanted, with your future
eroding along with confidence,
sense of self, the family
cracking along old fault lines.
And what do you do? Age.

Out of work: out of security,
out of value, out of the routine
that organizes the days, out
of health insurance, out of
the house when the mortgage
can’t be paid, out on the street,
out of society, out of luck.

Your job was shipped
overseas. Your job and two
others are being done now
by one frantic worker.
A robot replaced you.
Your company was bought
and demolished.

Somebody elected you
superfluous, a discard.
Somebody made money;
somebody bought a yacht
with your old salary. Some-
body has written you off,
somebody is killing you.

At night when you can no
longer sleep, don’t blame your-
self. What could you have
done? Nothing. Choices were
made to fatten dividends,
bloat bonuses, pay for a new
trophy wife and private plane.

You did nothing wrong
except your birth. Wrong
parents. Wrong place. Wrong
race. Wrong sex. If only
you’d had the sense to be
born to the one percent
life would be truffles today.

Proposed APA NIOSH Panel May 2013 in Los Angeles

Recent events in China involving the workforce at Foxconn facilities indicate that, despite efforts to ameliorate unhealthy working conditions, a great deal of dissatisfaction remains (1,2).

Observers of these events throughout the world are curious and concerned about what is happening.  Below you will find a proposed symposium to be held at the APA-NIOSH Work and Health Conference in Los Angeles May 16-19 2013 to which, we hope, representatives of the various organizations responsible for these conditions including Apple Corporation and Foxconn Corporation as well as the Fair Labor Association (hired by Apple to investigate events at Foxconn's Chengdu, Guanlan, and Longhua facilties), CLW and SACOM will appear and present their views on the matter.

Working Conditions in Multinational Corporations: The Case of Foxconn in China

The processes of globalization – the steadily increasing inter-dependency of world economies, production, trade, technology and culture – is having a enormous impact on work, work organizations and the health of working people. The benefits to many people in terms of opportunities for employment and consequent rising standards of living have been quite clear for a number of decades.  Recently, some negative consequences of globalization have become visible. The need for corporate profitability drives globalization, technology and workplace organizational changes resulting in more competition, restructuring and downsizing, off shoring and outsourcing, more precarious work and increased job insecurity, as well as increased intensification and time pressure at work. It appears Western corporations often outsource their manufacturing activities along with their occupational health and safety concerns resulting in having workers in countries with fewer labor production rules working in more dangerous jobs.

The consequences of these processes for the mental and physical well-being of workers have recently received considerable attention. For example, a great deal has been written about the working conditions for factory workers at various Foxconn manufacturing facilities in China during the past 3 years after a series of 14 suicides occurred during 2010 at the Shenzhen manufacturing facility in southern China - the manufacturing location for the iPhone manufactured by Apple Corporation. The reasons for the fatalities remain unclear today but they occurrence resulted in much media speculation as to the quality of the working conditions at Foxconn in general. They were described in one report as like a "labor camp".   Foxconn has initiated a number of changes at their plants including increasing wages for employees as well as requiring workers to sign a legally binding document guaranteeing that they (and their descendants) would not sue the company as a result of any unexpected death, self-injury or suicide. The attention garnered by the news of the suicide deaths appears to have prompted several customers including Apple Corporation to initiate an investigation into conditions at Foxconn plants in which they retained the services of the Fair Labor Association to conduct an extensive investigation of the plant. Long reports were issued by the FLA as well as by Chinese organizations including China Labor Watch and SACOM (Students and Scholar against corporate misbehavior).  Despite the attention and the changes introduced by Foxconn, conflict between workers, security and management at these plants appears to be increasing.   

The goals of this panel are to examine recent events at Foxconn the employer of over 1 million Chinese working people (the majority recent migrants from rural farming areas of China) as follows:

1.  To describe conditions in Foxconn factories - including factory life, hours, pay, living conditions 

2.  To increase our understanding of how and why these conditions exist at Foxconn including the connections to globalization in general

3.  To examine efforts to improve working conditions at Foxconn

4.  To understand obstacles at Foxconn to creating healthy working conditions

5.  To examine the connection between conditions in China and working conditions (changing) in the U.S. 

We will invite panel participants from the following organizations so as to obtain multiple perspectives on conditions at the Foxconn Shenzhen facility. 

1. Foxconn Corporation - Hon Hai Precision Industry Co., Ltd. (trading as Foxconn) is a Taiwanese multinational electronics manufacturing company headquartered in Tucheng, New Taipei, Taiwan. It is the world's largest maker of electronic components. It employs more than one million workers, mostly in China.  

2. Apple - The largest publicly traded corporation in the world. The company has over 60,400 permanent full time employees and more than 250,000 employees at other companies such as Foxconn.

3. Fair Labor Association - FLA - The mission of the Fair Labor Association is to combine the efforts of business, civil society organizations, and colleges and universities to promote and protect workers’ rights and to improve working conditions globally through adherence to international standards.

4. China Labor Watch (CLW) was founded in 2000. China Labor Watch is an independent not-for-profit organization. In the past ten years, CLW has collaborated with unions, labor organizations and the media to conduct a series of in-depth assessments of factories in China that produce toys, bikes, shoes, furniture, clothing, and electronics for some of the largest U.S. companies.  

5. SACOM – Students and Scholars Against Corporate Misbehavior is a nonprofit organization founded in Hong Kong in June 2005. SACOM originated from a students’ movement devoted to improving the labor conditions of cleaning workers and security guards under the outsourcing policy.

6. A voice of a Foxconn Chinese worker (if this is possible).

7. A representative American Academic researcher familiar with Foxconn and conditions there. 

The panel will use the following format. Each speaker will be given 10-15 minutes to address broadly the following similar questions.

a. Why did so many workers commit suicide in 2010 and 2011?

b. What are working conditions like at the Foxconn factory in Shenzhen, Guandong province?

c. How many hours do workers put in during an average week and what are they paid. 

d. What can be done to improve conditions at the facility? 

Each panelist will be given a maximum of 15 minutes to allow for discussion including questions and comments from the audience.

* 1. http://www.scientificamerican.com/article.cfm?id=riots-suicides-apple
   2. http://finance.yahoo.com/news/china-human-costs-built-ipad-175037829.html

Deteriorating Working Conditions in the United States

By Peter Schnall and Erin Wigger

During the past year we have devoted a number of blogs to discussing working conditions, as they currently exist in China, specifically at the Foxconn plant used to manufacture several Apple products. We’d now like to turn our attention to the rapidly deteriorating working conditions in the United States; first by enumerating briefly what we’ve already learned are contributing factors to unhealthy work in the U.S. and second by contrasting, combining, and complementing this knowledge with what is currently going on – for better or worse – in different workplaces across America.

So, what do we know contributes to or constitutes an unhealthy workplace?

For a very long time (over a hundred years now) chemical and physical exposures (e.g. heat, cold, dangerous working conditions) have been recognized as risk factors to the health of working people. This recognition resulted in a societal consensus in the passage of the OSHA Act in 1970 which regulates safety standards in U.S. workplaces and also marked the creation of our National Institute for Occupational Safety and Health which funds research into working conditions.

Despite efforts to improve the work environment from legislation like OSHA, illnesses and disability at work from many causes are on the rise. Part of this is due to the processes of globalization - the steadily increasing inter-dependency of world economics, production, trade, technology and culture – which is having an enormous impact on work, work organization and the health of working people (we have been discussing these issues in our reporting on Foxconn in earlier blogs). There is now increasing competition among nations and between corporations, as resources grow scarcer. The ongoing need for corporate profitability drives globalization, technology and changes in workplace organization resulting in more competition, restructuring and downsizing, outsourcing, more precarious labor and increased job insecurity, as well as increased time pressure and intensification of work (1).

These changes in work organization, in turn, give rise to psychosocial stressors such as job strain, effort-reward imbalance, emotional labor, threat-avoidant-vigilant work, organizational injustice, as well as increased demands in the form of long work hours, contingent work, shift work which increase stress and can lead to chronic illnesses, including mental and physical health problems. Psychosocial stressors play an important role in promoting CVD risk factors, such as obesity and hypertension. Many of these work stressors are especially prevalent among drivers (bus, taxi, and truck) as well as health workers who are exposed to noxious combinations of long work hours, intensification of work, inadequate training, lack of support and emotional labor leaving them prone to anxiety, burnout, depression and hypertension.

The psychosocial work environment has only recently begun to be acknowledged as a serious risk to worker’s health. The psychosocial work environment refers to the interaction between the individual worker and various aspects of the work environment. The primary way researchers have looked into this subject has been to examine the way work is organized – e.g., how hard one has to work (i.e., the workload), the amount of control a person has over how their work gets done, whether a person experiences injustice or unfair treatment at their workplace, has employment security, works long hours or in shifts, etc. When a worker perceives threats at work this can create a stress response which, over time research has found, can cause increasingly deleterious effects on one’s health.

For instance, Karasek’s Job Strain Model posits that employees in jobs that are high in demands and low in control (high strain) are likely to experience stress which results in deleterious health. Research has shown that jobs characterized as “high strain” over time put a physiological strain (e.g. increased blood pressure) on workers that can result in a range of serious and chronic physical health conditions such as musculoskeletal disorders, hypertension, chronic back pain, heart disease, stroke, Type II diabetes, and even death are just a few of these (3).

Other posited psychosocial models present us with a related but different picture. There appear to be a number of pathways through which the organization of work creates stress and illness in workers. While Karasek’s model referenced above has received the most research, a great deal of evidence also supports Johannes Siegrist’s Effort-Reward Imbalance model which describes the unhealthy relationship between workers and the work environment as springing from a “mismatch between high workload (high demand) and low control over long-term rewards” [58, p. 1128] (2).

Researchers have also begun to look at the affects of work involving having to maintain a high level of vigilance in order to avoid (usually life-threatening) disasters. This is referred to as Threat-Avoidant Vigilant work and is common among drivers as well as airplane pilots and air traffic controllers. There is also mounting evidence as to the noxious affects of Emotional Labor on worker health. Simply stated, emotional labor involves work that requires a person to interact emotionally with customers/others by having to suppress their true emotions or fake appropriate ones. Organizational injustice and low social support have also been shown to be of great importance to worker health (4).

These psychosocial stressors listed above are by no means a comprehensive list and for those readers as yet unacquainted with research on these very important topics, we urge you to look into it further at our website: http://www.unhealthywork.org where numerous articles can be found on these topics. There is also links to a number of related websites. Another excellent source for information on work exposures and psychosocial stressors is our new book, available for purchase here at Baywood Publishing, called Unhealthy Work: Causes, Consequences, Cures.

In subsequent blogs we will report on recent research findings and news stories that highlight the increasingly unhealthy working conditions in the U.S.

References:

1. Schnall PL, Dobson M, Rosskam E, Editors Unhealthy Work: Causes, Consequences, Cures. Moutsatsos C. Chapter 2: Economic Globalization and It’s Effects on Labor, Baywood Publishing, 2009, pgs 26-34.

(For further discussion of Globalization read Chapter 2)

2. Schnall PL, Landsbergis PA, Baker D. Job Strain and Cardiovascular Disease. Annual Review of Public Health; 15:381-411,1994. Schnall PL, Landsbergis PA, Schwartz JE, Pickering TG. Job Strain and Hypertension.

3. Karasek RA, Theorell T. 1990. Healthy Work. New York: Basic Books

4. Schnall PL, Dobson M, Rosskam E, Editors Unhealthy Work: Causes, Consequences, Cures. Chapter 6: The Workplace and Cardiovascular Disease, Baywood Publishing, 2009, pgs 89-101.