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Tylerdurden
09-06-2009, 05:50 AM
by Georgia Kelly, Shaula Massena
http://www.yesmagazine.org//images/1x1trans.gif

http://www.yesmagazine.org//images/1x1trans.gif The Mondragón Cooperative Corporation (MCC), the largest consortium of worker-owned companies, has developed a different way of doing business (http://www.yesmagazine.org/article.asp?id=3510)—a way that puts workers, not shareholders, first.
Here’s how it played out when one of the Mondragón cooperatives fell on hard times. The worker/owners and the managers met to review their options. After three days of meetings, the worker/owners agreed that 20 percent of the workforce would leave their jobs for a year, during which they would continue to receive 80 percent of their pay and, if they wished, free training for other work. This group would be chosen by lottery, and if the company was still in trouble a year later, the first group would return to work and a second would take a year off.
The result? The solution worked and the company thrives to this day.
The central importance of workers permeates every aspect of the Mondragón Cooperatives. Even though the MCC businesses are affected by the global financial crisis, there is no unemployment within the MCC businesses. People are moved around to other jobs, or hours are cut without cutting pay. The wages for unworked hours are to be repaid through extra hours worked later in the year.
Contrary to what some advocates of top-down management say, this worker-centered focus hasn’t been an obstacle to growth. Founded in 1956 by Father Don Jose Arizmendi, a Basque Catholic priest, the Mondragón cooperatives today comprise more than 100 cooperatives, as well as more than 100 subsidiaries that MCC has purchased and hopes to convert. Altogether, MCC companies employ more than 100,000 worker/owners and in 2007 generated revenues of more than $24 billion.
This empire of egalitarianism grew from humble roots. Father Arizmendi brought together the residents of this Basque community through study circles and workshops. His aim was to confront high levels of unemployment that kept the region in poverty and isolation. The philosophy that emerged from those meetings put the rights and well-being of workers first, with growth mainly aimed at providing additional jobs and job security to employees.
These principles drive everyday practice at MCC companies. For instance, while most businesses determine voting power based on how many company shares a person owns, MCC cooperatives allocate each worker one vote. They also stick to an egalitarian pay scale—top management is rarely paid more than six times the lowest-paid worker. Profits and losses are distributed among all the members equitably because their efforts together determine the success of the company.

http://www.yesmagazine.org//images/1x1trans.gif http://www.yesmagazine.org//images/1x1trans.gif http://www.yesmagazine.org//images/1x1trans.gif Co-op Entrepreneurs
At the same time, the MCC has never lost sight of the fact that it can’t generate high-quality well-paying jobs, without innovation and creativity.
To that end, MCC managers in 1981 founded SAIOLAN, an incubator program that aims to create new companies and products by bringing together would-be entrepreneurs with identified needs, and helping out with feasibility studies and prototypes.
The result has been rates of innovation that challenge those of the world’s most successful corporations. A Mondragón firm manufactured Spain’s first computer chips, for example. Others are producing wind, solar, and hydrogen power. New business opportunities in health and food, communications, and alternative energy are now being researched, as well as shared housing for elders and furniture convenient for older people. The company estimates that fully a quarter of the products its cooperatives will make in 2012 are not yet in production.
SAIOLAN also offers budding entrepreneurs coaching, technical resources, funding, and help with business plans. To date, it has helped 285 entrepreneurs create their own companies and many others to develop their ideas within existing co-ops.
Capital & Globalization
Not surprisingly, running a huge cooperative involves a host of challenges. One that has been with MCC from the start is the difficulty of raising capital to start new businesses. Without capitalists to own the companies, there’s no obvious source for the big money required to get a business off the ground. Worker-members do buy into their jobs, but it doesn’t generate enough capital to start up a brick-and-mortar business like manufacturing.
The MCC developed a unique solution: Starting with the first affiliated cooperative 50 years ago, workers’ shares of company profits have been paid into capital accounts that stay within the company until the workers retire.
The funds were originally pooled in the Caja Laboral bank, owned by MCC member businesses. These accounts are now managed by MCC, and the bank operates as another member cooperative, with 389 branches located in all parts of Spain. The bank’s entrepreneurial division creates new businesses and offers microcredit to young people in the Basque region to assist them in developing businesses.
As the co-ops have spread to other parts of Spain and abroad, the percentage of workers who are also owners has fallen. Approximately 9 percent of employees are not worker/owners—most from outside of the Basque region. Many of them work in Eroski, the largest supermarket chain in Spain. These workers will soon have an opportunity to become owners, however. At the January 2009 General Assembly of the MCC, the decision was made to open membership to non-Basques in other regions of Spain, and these workers are now being invited to join as worker/owners.
To keep supplier contracts with global partners and avoid import tariffs, Mondragón has purchased local subsidiaries in countries such as China and Brazil. These relationships have strengthened local employment but created a new problem: a growing body of international non-member workers. Cooperatives with foreign subsidiaries are experimenting with ways to ensure good working conditions and extend the principles of employee participation in management, profits, and ownership. But to date, the co-ops have not found a way to offer full membership to the workers in the international subsidiaries.
A New Way of Life?
One of the first things you notice while driving from the Bilbao Airport toward the town of Mondragón is the unspoiled beauty of the countryside—rolling green hills uninterrupted by billboards, and smooth roads untarnished by potholes.
The town of Mondragón, population 23,000, is solidly middle class. There were neither mansions on the hill nor poverty in the streets. We didn’t see wealth but everyone had a comfortable place to live, healthy food to eat, and the comfort of modern conveniences. Equally noticeable was their convivial, even joyful sense of community. The people we met were friendly, conversational, and trusting.
Mondragón is proof that a commitment to the common good (http://www.yesmagazine.org/article.asp?id=868) is not an obstacle to commercial success. Instead, a dedication to innovation and training at all levels can bring forward the best of the community. That quality of life continues outside the workplace, multiplying the benefits for those who choose a cooperative path.
http://www.energybulletin.net/node/50035

Sam F
09-06-2009, 09:24 AM
Thanks - it's good to have folk reminded that there actually are alternatives to Capitalism and Socialism.

As it happens I spoke to a young lady from Spain the other day and asked her if she'd ever heard of Mondragon and she hadn't. Perhaps she'll investigate it when she return home... But she did teach me how to pronounce it!

Milo Christensen
09-06-2009, 09:46 AM
Good post TD, we should have a great many more discussions about the benefits to be derived from enabling labor to hire capital instead of capital hiring labor. I've been a proponent of employee owned companies for a long time. Capital hiring labor represents the last vestiges of feudalism in the developed economies. Capital hiring labor also results in a total lack of democracy in the work place. Employee owned companies, organized into small cooperatives, self regulated by associations of similar cooperatives would also go a long way to curbing the need for excessive government regulation and intervention.

You should read Kim Stanley Robinson's Mars Trilogy - probably the second book - Green Mars is the best to read for the way to setup an alternative to capital hiring labor.

Sam F
09-06-2009, 09:55 AM
Good post TD, we should have a great many more discussions about the benefits to be derived from enabling labor to hire capital instead of capital hiring labor. I've been a proponent of employee owned companies for a long time.

Me too but there's a caveat... I've worked for employee owned companies, but they weren't employee controlled... that little detail explains how our company was sold to a huge corporation and 6 managers became millionaires*.
The rest of us got the shaft.


You should read Kim Stanley Robinson's Mars Trilogy - probably the second book - Green Mars is the best to read for the way to setup an alternative to capital hiring labor.

Never heard of it Milo. I'll check it out.

By the way, have you read Jobs of our Own by Race Matthews?
It might be worth a look.


*Oh and I forgot to mention how the managers took our retirement fund and invested it in building factories in foreign countries thus having us fund the export of our own jobs. Was that scheeet or what?

Milo Christensen
09-06-2009, 10:15 AM
Dr. Mathews looks like he's written some papers on topics near and dear to me. Enabling credit unions to survive, the looting of the mutual insurance companies, particularly the mutual health insurance companies. I'll be reading some of his papers available on line (http://www.australia.coop/race_mathews.htm). Perhaps his Australian perspective would be useful, but I'd like to find someone, more, shall we say, American?

Sam F
09-06-2009, 10:19 AM
...Perhaps his Australian perspective would be useful, but I'd like to find someone, more, shall we say, American?

Have you tried Wendell Berry?
He's much more agrarian than some... but I don't think that's necessarily a bad thing.

Milo Christensen
09-06-2009, 10:32 AM
You're a lot more knowledgeable on this topic than I am. I've got some catchng up to do.

I know a bit about Berry as a poet and a proponent of sustainable life styles.



Ask the questions that have no answers.
Invest in the millenium. Plant sequoias.
Say that your main crop is the forest
that you did not plant,
that you will not live to harvest.
Say that the leaves are harvested
when they have rotted into the mold.
Call that profit. Prophesy such returns.


I'll be harvesting the profit from my trees for as long as I live, anyway. Nothing quite as satisfying as spreading rich dark leaf humus on the garden.

Too bad I can't plant Sequoias here though.

Sam F
09-06-2009, 10:39 AM
...Too bad I can't plant Sequoias here though.

It sort of defies belief, but my father-in-law (who is something of a tree nut) outdid even the Sequoia*. He planted a Bristlecone pine! Surprisingly, it's been doing well in hot humid Virginia - though maybe that's because it's planted in a well drained hillside. If some fool doesn't cut it down, it may be still growing there long after English is a dead language.




*He planted one of those too, but it didn't like Virginia

skuthorp
09-06-2009, 10:46 AM
Race Mathews. How strange to read my parents good friend and political colleague's name here.

Milo Christensen
09-06-2009, 10:50 AM
I took my daughter to see the "family" farm, the 400 acres of which is now part of a 900 acre nature preserve. Looking at the thousands of pine trees my dad and I planted in row after row after long, long row, she looked at me and said, Dad, how did you ever become so conservative?

Sam F
09-06-2009, 11:30 AM
Race Mathews. How strange to read my parents good friend and political colleague's name here.

Nah... it's just a small world. :)

Sam F
09-06-2009, 11:38 AM
I took my daughter to see the "family" farm, the 400 acres of which is now part of a 900 acre nature preserve. Looking at the thousands of pine trees my dad and I planted in row after row after long, long row, she looked at me and said, Dad, how did you ever become so conservative?

There has long been an often unacknowledged cross over between environmentalism and conservativism. If you'll pardon the pun, it's only natural.

David G
09-06-2009, 11:49 AM
td,

Nice article. In grad school my focii were economic history, and economic development. I was particularly interested in the potential for worker owned and managed firms as an economic development tool. I grew up in such a firm - a plywood mill on the Oregon coast. Therefore I studied the Mondragon system... and was hugely impressed.

I think that from a political economy standpoint, this little-known Basque enclave in the Pyranees may just be the next "shining beacon upon a hill."

Thanks for adding a bit of light.

George Roberts
09-06-2009, 11:56 AM
Good post TD, we should have a great many more discussions about the benefits to be derived from enabling labor to hire capital instead of capital hiring labor. I've been a proponent of employee owned companies for a long time. Capital hiring labor represents the last vestiges of feudalism in the developed economies. Capital hiring labor also results in a total lack of democracy in the work place. Employee owned companies, organized into small cooperatives, self regulated by associations of similar cooperatives would also go a long way to curbing the need for excessive government regulation and intervention.

Feudalism. Dreamer. Reality.

I am all for local ownership of businesses. But having employees tied to a job because of ownership issues is something few employees would want.

If you want the effect of labor hiring capital - put up your capital, hire employees, let the employees run everything and let the employees profit from the business. The price of capital is about 10%. Take your 10% out each year.

I expect whatever business you set up in that fashion will have a short life.

Tylerdurden
09-06-2009, 12:00 PM
I expect whatever business you set up in that fashion will have a short life.

1956 -2009 and beyond. Short life? ;)

Tylerdurden
09-06-2009, 12:05 PM
You should read Kim Stanley Robinson's Mars Trilogy - probably the second book - Green Mars is the best to read for the way to setup an alternative to capital hiring labor.


Working on it. Thanks.

David G
09-06-2009, 12:39 PM
1956 -2009 and beyond. Short life? ;)

Actually, there are issues.

Many of the worker owned & managed (WOM) firms that have sprung up over the years have failed or gone private. I'm familiar with quite a few. The West Coast plywood mills are a good example, one that I'm intimately familiar with. They had some structural issues that led to their eventually fading away. However... they lasted a good long time, and provided good jobs for many families, and a boost to small-town economies that were often otherwise fragile. The one my family was involved in lasted about 40 years.

Another that I was involved in lasted a shorter time. Burley Design makes bike stuff. They started as a private firm. As they grew, the owners decided they'd like to remake it as a WOM firm. They hired me as their first GM, and I helped - along with a very good management team - make that transition... and shepherd them through some very difficult financial times. Growth requires capital, and banks weren't comfortable lending to a WOM. We survived, but just barely... then went on to prosper. Many years later, after I'd moved on, they seemed to go through some of the same growth/capital issues, and ended up selling to a private investor.

So... simply converting things to WOM is not any kind of panacea.

And yet, Mondragon is seemingly stronger than ever. I think they achieved critical mass long ago. I think the good father foresaw some of the issues and addressed them early. What I was studying was the transferability to the U.S. - on one hand - and third world economies - on the other hand. I think it can be done, but it'll take some careful crafting of the organization to both retain the key components, and to fit the culture, legal structure, etc. that you're transplanting it into.

Cheers,

Sam F
09-07-2009, 09:16 AM
Actually, there are issues.... simply converting things to WOM is not any kind of panacea.

True enough. Distributism is a pretty good system not the gateway to a Utopia.

Privately owned companies sometimes do stupid things and fail.
Publicly owned companies do the same
Government run entities do the same but seldom are allowed to actually fail.
WOM's can fail in the same ways.
And sometimes... events just overtake a product line or process causing failure.
Still, which would I rather work for?
As a working class person, that's basically a no brainer... ;)

Rigadog
09-07-2009, 10:42 AM
Shoes for Industry!

Tylerdurden
09-08-2009, 07:28 AM
Most of the issues I see here are the labor laws and related work laws. Adjustments would have to be made on that front but the culture is against it also. Lots of programming to overcome.

TomF
09-08-2009, 07:52 AM
There has long been an often unacknowledged cross over between environmentalism and conservativism. If you'll pardon the pun, it's only natural.I think the crossover happens when the brand of conservatism reflects the word's own etymology; the notion of recognizing and conserving something of value.

That concept is actually pretty radical, whether the thing being conserved is environmental habitat or diversity, human dignity, or specific forms of human relationships that have been codified into traditions. The idea that there is something of value beyond individual preferences, individual benefits is strikingly radical ... and can lead to very interesting alliances between environmentalists, conservatives ... and "progressives." Each of whom, when they're thinking clearly, are basing their actions on firmly held commitments to things they see of enduring value.

Keith Wilson
09-08-2009, 10:39 AM
Holy flaming @#*$! Something on which Mark, Milo, SamF, TomF, and I mostly agree???? :eek::eek: Mondragón is indeed worthy of study and imitation, I think. Excellent post, Mark.

Interesting points, David. The bicycle shop I was involved with years ago was a WOM outfit; it had its characteristic problems, mainly due to being a bunch of argumentative hippies, but it lasted quite a long time. After more than 20 years they sold out to a private investor, which upset me more than I would have thought. I didn't know Burley was run that way.