Monday, December 17, 2012

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).

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