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Thread: Mondragon: A Successful 70 year old $20 billion Worker-run Corporation/Coop Fed

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    Mondragon: A Successful 70 year old $20 billion Worker-run Corporation/Coop Fed

    The MONDRAGON Corporation is a corporation and federation of worker cooperatives based in the Basque region of Spain. It was founded in the town of Mondragón in 1956 by graduates of a local technical college. Their first product was paraffin heaters. Currently it is the seventh largest Spanish company in terms of asset turnover and the leading business group in the Basque Country. At the end of 2011 it was providing employment for 83,869 people working in 256 companies in four areas of activity: Finance, Industry, Retail and Knowledge.

    Mondragon cooperatives operate in accordance with Statement on the Co-operative Identity maintained by the International Co-operative Alliance. The standard Statement of Co-operative Identity largely eliminates perverse incentives that contribute to many problems of governance found in organizations with more traditional management structures.[2][3]

    Business culture

    The ties that link the MONDRAGON Co-operatives are strong, as these bonds emanate from a humanist concept of business, interrelated by a philosophy of participation and solidarity and a shared business culture rooted in a number of Basic Principles, a shared Mission and the acceptance of a set of Corporate Values and General Policies of a business nature.[13]

    Over the years these links have been embodied in a series of operating rules approved on a majority basis by the Co-operative Congresses, which
    regulate the activity of the Governing Bodies of the Corporation (Standing Committee, General Council), the Grassroots Co-operatives and the Divisions they belong to, from the organisational, institutional and economic points of view as well as in terms of assets.[14]

    This entire framework of business culture has been structured on the basis of a common culture derived from the 10 Basic Co-operative Principles, in which MONDRAGON is deeply rooted: Open Admission, Democratic Organisation, the Sovereignty of Labour, Instrumental and Subordinate Nature of Capital, Participatory Management, Payment Solidarity, Inter-cooperation, Social Transformation, Universality and Education.[15]
    This inspirational philosophy is complemented by the establishment of four Corporate Values: Co-operation, acting as owners and protagonists; Participation, which takes shape as a commitment to management; Social Responsibility, by means of the distribution of wealth based on solidarity; and Innovation, focusing on constant renewal in all areas.[16]

    This business culture translates into compliance with a number of Basic Objectives (Customer Focus, Development, Innovation, Profitability, People in Co-operation and Involvement in the Community) and General Policies approved by the Co-operative Congress, which are taken on board at all the Corporation’s organisational levels and incorporated into the four-year strategic plans and the annual business plans of the individual co-operatives, the Divisions, and the Corporation as a whole.[17]

    [edit]Wage regulation

    At Mondragon, there are agreed-upon wage ratios between the worker-owners who do executive work and those who work in the field or factory and earn a minimum wage. These ratios range from 3:1 to 9:1 in different cooperatives and average 5:1. That is, the general manager of an average Mondragon cooperative earns 5 times as much as the theoretical minimum wage paid in his/her cooperative. This ratio is in reality smaller because there are few Mondragon worker-owners that earn minimum wages, their jobs being somewhat specialized and classified at higher wage levels.[18]

    Although the ratio for each cooperative varies, it is worker-owners within that cooperative who decide through a democratic vote what these ratios should be. Thus, if a general manager of a cooperative has a ratio of 9:1, it is because its worker-owners decided it was a fair ratio to maintain.[18]

    In general, wages at Mondragon, as compared to similar jobs in local industries, are 30% or less at the management levels and equivalent at the middle management, technical and professional levels. As a result, Mondragon worker-owners at the lower wage levels earn an average of 13% higher wages than workers in similar businesses. In addition, Spain uses a progressive tax rate, so those with higher wages pay higher taxes, further diminishing the disparity in terms of disposable income.[18]...

    [edit]Areas of activity

    The Corporation’s companies operate in four different areas: Finance, Industry, Retail, and Knowledge, with the latter distinguishing Mondragon from other business groups. In 2010, the Corporation posted a Total Turnover (total revenue) of 14.8 billion euros,[19] roughly 20 billion USD, and employed 100,000 workers, making it Spain's fourth largest industrial and seventh largest financial group.[20]

    [edit]Finance

    This area includes the banking business of Caja Laboral, the insurance company Seguros Lagun Aro, and the Voluntary Social Welfare Body Lagun Aro, which had an asset fund totaling 4.2 billion euros at the end of 2009. The yield obtained from this fund is used to cover long-term retirement, widowhood, and invalidity benefits, complementary to those offered by the Spanish social security system.

    Caja Laboral, for its part, ended 2009 with 18.6 million euros of deposits in a year in which it granted loans worth 16.4 billion, mainly to household economies and small and medium-sized enterprises. Its extensive experience with the Corporation’s Co-operatives enables it to offer SMEs services typical of large companies.[21]

    [edit]Industry

    The Corporation’s companies manufacture consumer goods, capital goods, industrial components, products and systems for construction, and services to business.

    In the consumer goods sector, with sales totaling 1.5 billion euros, MONDRAGON produces white goods: refrigerators, washing machines, ovens, dishwashers, and boilers, under the brands Fagor, Brandt, and Mastercook, and maintains a leadership position in Spain and France and co-leadership in Poland and Morocco. It also produces office furniture and home furniture. In the leisure and sports area, it manufactures Orbea bicycles, exercise equipment and items for camping, the garden and the beach.[22]

    In capital goods, MONDRAGON posted a turnover of 976 million euros in 2009, and is the leading Spanish manufacturer of chip removing (DANOBATGROUP) and sheet metal forming (Fagor Arrasate Group) machine tools. These machines are complemented by automation and control products for machine tools, packaging machinery, machinery for automating assembly processes and processing wood, forklift trucks, electric transformers, integrated equipment for the catering industry, cold stores, and refrigeration equipment. Specifically focusing on the automotive sector, the Corporation also manufactures a wide variety of dies, molds and tooling for casting iron and aluminium, and occupies a leading position in machinery for the casting sector.[23]

    In Industrial Components, MONDRAGON posted a turnover of 1.5 billion euros in 2009, a sector in which it operates as an integrated supplier for the leading car manufacturers, offering from the design and development of a part to the industrialisation and supply of components and assemblies. It has different business units such as brakes, axles, suspension, transmission, engines, aluminium wheel rims, fluid conduction, and other internal and external vehicle components. It also produces components for the main domestic appliance manufacturers in three business areas: white goods, home comfort, and electronics. And it manufactures flanges and pipe accessories for processing oil-gas, petrochemical plants and power generation, copper and aluminium electrical conductors, and components for conveyors.[24]

    In construction, sales totalled 974 million euros in 2009. This is a sector in which MONDRAGON has constructed emblematic buildings and important infrastructure projects. It designs and builds large metallic (URSSA), laminated wood and prefabricated concrete structures; supplies prefabricated parts in polymer concrete; offers solutions for formwork and structures (ULMA Group) as well as public works machinery and the industrialisation of the construction process, including engineering and assembly services. It also produces elevators (ORONA Group).

    In services to business, sales totalled 248 million euros in 2008, including business consultancy services, architecture and engineering, property consulting, design and innovation (LKS Group), systems engineering for electromechanical installations, and integrated logistics engineering. It also offers a modern language service, manufactures educational equipment, and provides graphic arts services (MccGraphics).

    In 2009 59.4% of total turnover came from international sales. Sales resulting from the export of products abroad and production generated in the 75 subsidiaries located in 17 different countries: China (13), France (9), Poland (8), Czech Republic (7), Mexico (7), Brazil (5), Germany (4), Italy (4), United Kingdom (3), Romania (3), United States (2), Turkey (2), Portugal (2), Slovakia (2), India (2), Thailand (1) and Morocco (1). Overall, in 2009 these 75 plants produced goods worth 3.1 billion euros and provided work for 14,506 people. The corporate industrial park in Kunshan, close to Shanghai currently houses seven subsidiaries.[25]

    [edit]Retail

    Led by Eroski, Mondragon runs one of the leading retail groups in Spain, posting a turnover of 8.3 billion euros in 2010. It operates all over Spain and in the south of France, and maintains close contacts with the French group Les Mousquetaires and the leading German retailer Edeka, with whom it set up the Alidis international partnership in 2002. The worker-owners and consumer-members are involved in the management of Eroski, with both groups participating in the Co-operative’s decision-making bodies.

    At the end of 2009, Eroski was operating an extensive chain of almost 2,400 stores made up of 113 EROSKI hypermarkets, 1,063 EROSKI/center, Caprabo and EROSKI/city supermarkets, 224 branches of the EROSKI/viajes travel agency, 58 petrol stations, 40 Forum Sport stores, 289 IF perfume stores, 7 Abac leisure and culture outlets and 40 goods depots. In addition to this chain, there are 481 self-service franchise outlets. Moreover, in the south of France it has 4 hypermarkets, 16 supermarkets and 17 petrol stations, and it has 4 perfume stores in Andorra.[26]
    At an Assembly held In 2008, its worker-members approved by a majority vote the process to expand the transformation into co-operatively run businesses to the Group as a whole. So work started on turning the Group’s subsidiaries into co-operatives, as well as on making their salaried workers worker-members. This process will be carried out gradually over the next few years.

    The retail area is also home to the food group Erkop, which operates in the catering, cleaning, stock-breeding, and horticulture sectors and has as its leading name Auzo Lagun, a co-operative engaged in group catering and the cleaning of buildings and premises, and also offers an integrated service in the health sector.[27]

    [edit]Knowledge

    This area has a dual focus: education-training and innovation, which have both been key elements in the development of the Corporation. Training-education is mainly linked to the dynamism of the University of Mondragón, the significant role that Politeknika Ikastegia Txorierri, Arizmendi Ikastola and Lea Artibai Ikastetxea play in their respective areas and the activity of the Management and Co-operative Development Centre Otalora.
    The University of Mondragon is a university of a co-operative nature, which combines the development of knowledge, skills, and values, and maintains close relations with business, especially the Co-operatives. Technological innovation is generated by through the Co-operatives’ own R&D departments, the Corporate Science and Technology Plan, the work of the Corporation’s 12 technology centres and the Garaia Innovation Park.[28]
    For their part, the 12 technology centres, with a workforce totalling 742 people and an overall budget of 53.7 million euros in 2009, continue to play a fundamental role in the development of the sectors in which they focus their activity.[29]
    http://en.wikipedia.org/wiki/Mondrag...as_of_activity

    Current ICA version of co-operative principles

    The Rochdale Principles according to the 1995 ICA revision are detailed below.[2]
    NOTE: The subcategories listed below are of an editorial nature, in that they are an explanation of the author's understanding of these principles. They are not expounded upon in that much detail in the actual ICA principles. See: http://ica.coop/en/what-co-op/co-ope...ues-principles .

    [edit]Voluntary and open membership

    The first of the Rochdale Principles states that co-operative societies must have an open and voluntary membership. According to the ICA's Statement on the Co-operative Identity, "Co-operatives are voluntary organisations, open to all persons able to use their services and willing to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination."
    [edit]Anti-discrimination

    To discriminate socially is to make a distinction between people on the basis of class or category. Examples of social discrimination include racial, religious, sexual, sexual orientation, disability and ethnic discrimination. To fulfil the first Rochdale Principle, a Co-operative society should not prevent anyone willing to participate from doing so on any of these grounds. However, this does not prohibit the co-operative from setting ground rules for membership, such as residing in a specific geographic area or payment of a membership fee to join, so long as all persons meeting such criteria are able to participate if they so choose.

    [edit]Motivations and rewards

    Given the voluntary nature of co-operatives, it requires a motivation to encourage people to participate. Each person's motivations will be unique, and will vary from one co-operative to another, but will often be a combination of the following:
    Financial - Some co-operatives are able to provide members with financial benefits.
    Quality of life – serving the community through a co-operative because doing service makes one's own life better - is perhaps the most significant motivation for volunteering. Included here would be the benefits people get from being with other people, staying active, and above all having a sense of the value of ourselves in society that may not be as clear in other areas of life.
    Giving Back – many people have in some way benefited from the work of a co-operative, or more generally, and volunteer to give back.
    Altruism – volunteering for the benefit of others.
    A sense of duty – some see participation in community as a responsibility that comes with citizenship – in this case they may not describe themselves as volunteers
    Career Experience - Volunteering offers experiences that can add to career prospects.

    [edit]Democratic member control

    The second of the Rochdale Principles states that co-operative societies must have democratic member control. According to the ICA's Statement on the Co-operative Identity, “Co-operatives are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions. Men and women serving as elected representatives are accountable to the membership. In primary co-operatives members have equal voting rights (one member, one vote) and co-operatives at other levels are also organised in a democratic manner.”

    [edit]Member economic participation

    Member economic participation is one of the defining features of co-operative societies, and constitutes the third Rochdale Principle in the ICA's Statement on the Co-operative Identity. According to the ICA, co-operatives are enterprises in which “Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative. Members usually receive limited compensation, if any, on capital subscribed as a condition of membership. Members allocate surpluses for any or all of the following purposes: developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible; benefiting members in proportion to their transactions with the co-operative; and supporting other activities approved by the membership.” This principle, in turn, can be broken down into a number of constituent parts.

    [edit]Democratic control

    The first part of this principle states that “Members contribute equitably to, and democratically control, the capital of their co-operative. At least part of that capital is usually the common property of the co-operative.” This enshrines democratic control over the co-operative, and how its capital is used.

    [edit]Limitations on member compensation and appropriate use of surpluses

    The second part of the principle deals with how members are compensated for funds invested in a Co-operative, and how surpluses should be used. Unlike for profit corporations, co-operatives are a form of social enterprise. Given this, there are at least three purposes for which surplus funds can be used, or distributed, by a Co-operative.
    “Members usually receive limited compensation, if any, on capital subscribed as a condition of membership.”
    “Developing their co-operative, possibly by setting up reserves, part of which at least would be indivisible;” in other words, the surplus can be reinvested in the co-operative.
    Benefiting members in proportion to their transactions with the co-operative;” for example, a Consumers' Co-operative may decide to pay dividends based on purchases (or a 'divvi').
    “Supporting other activities approved by the membership.”

    [edit]Autonomy and independence

    The fourth of the Rochdale Principles states that co-operative societies must be autonomous and independent. According to the ICA's Statement on the Co-operative Identity, “Co-operatives are autonomous, self-help organizations controlled by their members. If they enter into agreements with other organizations, including governments, or raise capital from external sources, they do so on terms that ensure democratic control by their members and maintain their co-operative autonomy.”

    [edit]Education, training, and information

    The fifth of the Rochdale Principles states that co-operative societies must provide education and training to their members and the public. According to the ICA's Statement on the Co-operative Identity, “Co-operatives provide education and training for their members, elected representatives, managers and employees so they can contribute effectively to the development of their co-operatives. They inform the general public – particularly young people and opinion leaders – about the nature and benefits of co-operation.”

    [edit]Cooperation among cooperatives

    The sixth of the Rochdale Principles states that co-operatives cooperate with each other. According to the ICA's Statement on the Co-operative Identity, “Co-operatives serve their members most effectively and strengthen the co-operative movement by working together through local, national, regional and international structures.”

    [edit]Concern for community

    The seventh of the Rochdale Principles states that co-operative societies must have concern for their communities. According to the ICA's Statement on the Co-operative Identity, “Co-operatives work for the sustainable development of their communities through policies approved by their members.”
    http://en.wikipedia.org/wiki/Cooperative_principles

    Given that Mondragon has lasted since the 40s, that its core region is outperforming the rest of Spain in the midst of the economic crisis, and that it has grown to become a very large corporation, it follows that its way of doing things, coupled with the culture the sustains it, is competitive in terms of efficiency with the traditional capitalist model or perhaps even outperforms it on average, at least in society governed the way Spain is. Yet the fact it is run by workers makes it a truer form of democracy, or represents a different layer of democracy, than our own. In turn, income inequality is greatly reduced and job security is enhanced. Meaning that in several tangible ways, it represent superior outcomes than the present capitalist model.

    Does Mondragon represent a post-capitalist system or only a different sort of capitalism? Should it be emulated? And what does it say in general about the worthiness trying to find alternatives to the present capitalism system?

    One final tid bit:
    On the international stage, the aim was to respond to the growing globalisation process, strongly promoting expansion abroad by setting up production plants in a number of countries. The first, the Copreci plant in Mexico in 1990 was followed by many others taking the total to 73 by the end of 2008. This was part of a strategy aimed at: increasing competitiveness and market share, bringing component supply closer to important customers’ plants, especially in the automotive and domestic appliance sectors; and strengthening employment in the Basque Country, by promoting the export of products manufactured by the Co-operatives by means of the new platforms.[10]

    In October 2009, the United Steelworkers announced an agreement with Mondragon to create worker cooperatives in the United States.[11] On March 26, 2012, the USW, Mondragon, and the Ohio Employee Ownership Center (OEOC) announced its detailed union co-op model.[12]

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    Stephen Best barts's Avatar
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    In my view, capitalism is a highly destructive system with adverse consequences for most people, the environment on which we all depend, and democracy.

    It does seem to me that worker-managed cooperatives are a viable alternative to capitalism.

    Moreover, not only has capitalism shown that it is antithetical to human progress and environmental sustainability, it has also been shown to be antithetical to freedom, liberty, good governance, and democracy.

    I agree that cooperatives are likely a way forward. There are, of course, highly successful cooperatives functioning in North America right now in the form of credit unions.

    It would be good if the remnants of union movement in North America and progressive groups put pressure on governments to give cooperatives the same benefits as corporations. There should be no legal or political preference given to shareholder ownership over worker and customer ownership. Indeed, because worker/customer ownership is more democratic and more socially responsible it should be encouraged.

    Doubt is not a pleasant condition, but certainty is absurd - Voltaire

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    blasphemer grandpa's Avatar
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    Quote Quote by: barts View Post
    In my view, capitalism is a highly destructive system with
    adverse consequences for most people, the environment on which we
    all depend, and democracy.
    It does seem to me that worker-managed
    cooperatives are a viable alternative to capitalism.
    I have a case of deja vu! I could swear I've heard that before.

    And, you know, it's time we see poverty as one of its consequences, and stop only attributing to it "wealth creation." Also, the non-racists should ponder the merits of a system that exaggerates social stratification in society.

    There's not necessarily something wrong with saying something's wrong. Capitalism alone isn't the problem, either. Any system will surely have its failings, and it's simply mature to realize this.

    Grandpa h.
    Post by post, building his arguments by smashing a couple of theirs -- for America.

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    Brett Nortje Charlatan's Avatar
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    Quote Quote by: grandpa View Post
    I have a case of deja vu! I could swear I've heard that before.

    And, you know, it's time we see poverty as one of its consequences, and stop only attributing to it "wealth creation." Also, the non-racists should ponder the merits of a system that exaggerates social stratification in society.

    There's not necessarily something wrong with saying something's wrong. Capitalism alone isn't the problem, either. Any system will surely have its failings, and it's simply mature to realize this.

    Grandpa h.
    Are you sure that capitalism creates more wealth quicker? let me take a quick skittle through the creation of wealth and see if i think you are right?

    If a billion is in worker owned shares, and a billion is in the pocket of one person, where does it grow faster? If the workers were to invest like one percent of their total wages or whatever into the market, and let's say there are a million workers, that would mean like 10 dollars from each worker go into various shares. let's say they are all investing in different stocks, does that help anyone? does it help the company buy pencils or what? If you were to on the other hand invest like half you fortune into one company, then it helps. this company grows and employs more workers. Not to mention the prices of one percent or less stocks, people won't be able to afford it!

    So, what are we to do? if it grows simply on one side and not on the other, then how does it help people? how does it benefit the world? If the atual wealth is owned by the workers, then they get the benefits. they decide what to pay each other and what goes back into the business. This is cooperative, so needs decision makers, and time. If the world were to plough into this, i suggest letting people work for the company to gain shares in it as part of the payment. i am sure after twenty years they might have a stake in it.
    !! Don't fear the reaper !!

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    An Analyst& A Gadfly Yarn's Avatar
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    Quote Quote by: grandpa View Post
    Any system will surely have its failings, and it's simply mature to realize this.
    Exactly.

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