Mondragon Corporation

A. The main facts about the activities of the company.

Mondragon Corporation (MC) is a corporation of worker cooperatives and enterprises with four areas of activity: Finance, Industry, Distribution and Knowledge.
MC’s core values are: Co-operation, Participation, Social Responsibility and Innovation. The Corporation’s Mission combines the core goals of a business organisation competing on international markets with the use of democratic methods in its business organisation, the creation of jobs, the human and professional development of its workers and a pledge to development with its social environment.
MC was established in 1956 by a Jesuit priest named José María Arizmendiarrieta and five young men. José arrived to the Mondragon region to find great unemployment, poor education, and no vision for the future, the area had been treated poorly by the Spanish government for hundreds of years, but the area was filled with industrious people and a strong social structure. He set up the polytechnic originally, then in 1956 he and five young men from this school established ULGOR (using a combination of their names), in Mondragon.

Why this company?
MC is comprised of an integrative network of cooperatively owned enterprises. In each enterprise the cooperative members (approximately 85% of all the workers in one enterprise) own and direct the enterprise. The process is that each worker is given a probationary period before they can become a worker member, the decision is based upon his/her peers and the elected board of directors of the company. Once a person becomes a member the person pays a membership fee and is given one vote in the general assembly (equivalent to a shareholders meeting) where major policy issues are decided, rules and regulations are set in place, the workers elect members to their board of directors and retain the power to make all the decisions of the enterprise (what to produce and what to do with the profits). The governance works that each enterprise is an important part of the MC, where all members of every enterprise must decide collectively what general rules will govern the Mondragon Corporation and all of its enterprises. Thus the workers hire and fire directors (not the other way round which is true in most capitalistic companies).

B. The Ethical challenges this company is addressing.

Competing in a capitalist environment
As Richard Wolff mentioned in his article in The Guardian, Mondragon seems a welcome oasis in a capitalist desert. The Corporation is the largest industrial business group in the Basque Country and the seventh in Spain, and it is formed mainly by cooperatives.
In the era of profit maximization and competition, it seems that organizations with the values of cooperatives are just a matter of an idealistic world, or at least, are only feasible in a local scale. Mondragon is competing in many different markets with pure capitalist companies but, far from being a disadvantage, they consider their organizational structure and values a competitive advantage for them. This is a clear example of creating an opportunity from an ethical challenge.
The fact that today, labor is the main production factor in cooperatives instead of capital, can also be seen as an opportunity: knowledge and human capital are the most important resources during economic downturns, and this human capital remains in the power of workers.

Commitment with the community
The main objective of Mondragon is to satisfy the economic, cultural or social needs and ambitions of each member, and to contribute to a better world and society, with the limitation that everything has to be done from the basis of sustainability and being environmentally respectful. The best way for contributing to a better world is starting by internalizing those ethics, and this is what Mondragon does. The corporation is implanting its core values in all levels of its cooperatives and companies that form the group while, simultaneously, it is contributing to develop the city of Arrasate (or Mondragon), Gipuzkoa and Euskal Herria, as well as each of the territories where it has expanded its business. As mentioned before, Mondragon was born during the postwar when the area was suffering from poverty and unemployment. The corporation was key for the economic development of its surroundings and this commitment is still present today. Furthermore, they founded the University of Mondragon, which is a socially oriented initiative, non-profit and of common public interest, and has also served as a driver of the economy and knowledge of the area and its considered non-profit University and of common public interest.

In 2006, Mondragon enterprises employed 16% of total employment in Gipuzkoa and a 3’8% of the whole Basque Country. These figures show the importance this corporation has with the region.

Economic Cooperation
As MC operates in different industries, they can have a constant flow of labor or financial needs from companies from one sector to companies from another, avoiding layoffs and bankruptcies due to economic cycles of capitalism. This is what is known as economic cooperation. Moreover, the fact that most of the workers are actually capital participants, enforces their motivation and implication while also ensures an entrepreneurial attitude in all levels of the cooperative

C. What makes you believe this company is really ethical and why you trust it?

Why is it widely assumed that, in the majority of western countries, a system which creates vast inequalities and mostly incentives selfishness is the only choice?
We will approach this question in order to explain the reasons why Mondragon was able to go beyond this assumption and touch our hearts.

Cooperation and Democracy as main pillars of a Dream Business
Grupo Mondragon is built from cooperative values. Apart from a kind of business entity, cooperatives entail a specific ethical ideology, a way of thinking and a way of doing. There are two main aspects that characterize cooperatives: democratic management of the firm among workers and the collective property of capital between them. Contrary to what happens in traditional capitalist companies, here the rule is one member one vote.
MC is composed already of 85.000 workers, of which nearly 85% are cooperative members of the company. The group is structured in a way that information and decisions flow circularly through all the members, who collectively own and manage the enterprise. Once a year, members of MC choose a manager to direct the company according to the decisions workers have made for the enterprise.
Worker-members hold the power to hire and fire managers, being this one of the distinctions between a mere capitalist firm, in which the opposite occurs, and the Mondragon Corporation.

Creating Social Equality and wealth
One of the collectively and democratically chosen rules of the company is the maximum wage level of top-paid workers. In Mondragon Corporation, this limit has been established at a maximum of 6’5 times higher than the lowest-paid worker. It is certainly a rule that spreads wealth and equality among workers (and owners) of this enterprise.
Through the creation of such ethics, Mondragon Corporation is showing to the world its commitment with respect to society and it shows that money cannot be distributed in a way that creates strong inequalities: in US corporations, CEO’s are paid up to a 400 times an average worker’s wage.

Therefore, MC is a clear example of (1) the fact that economic and social objectives can be successfully combined, as well as being environmentally sustainable, and (2) that opportunities can be created from the belief that profit maximization should not be the mere attainment of a company’s goals.

D.The possible challenges facing the company in the future and how you think this company may improve.

Mondragon Corporation is currently very successful and has a strong presence internationally. One of the challenges that arise from such an expansion is to maintain the cooperative business model and not let the growing business and profits undermine the participative and egalitarian characteristic of the entity. The scale of the cooperative corporation can become an obstacle in the future, but if managed properly; its members will be able to turn this into a business opportunity in order to promote cooperativism.

Mondragon Corporation has nearly 300 entities in total, of which only half are actual cooperatives. This is another challenge the group will have to face if they want to keep their credibility, so they will have to turn the rest of their companies into cooperatives as well.
Currently, over 80% of Mondragon’s workers are members of the cooperative. Therefore another challenge will be to increase this percentage to 100%, achieving total democracy within the group.

MC should also improve its ‘’knowledge’’ sector because at the moment, the group’s Research and Development department is focused only on technological innovation, neglecting other important areas such as academic research on finding ways to improve cooperatives and develop new alternatives to organise companies and economic systems. The group should foster organisational creativity and innovation while promoting the international exchange of information and getting students and society as a whole involved in the process. Eventually, these ideas could be taught in other universities, inviting critical thinking among students and academics.

More generally, MC faces the challenge of surviving in a capitalist system and convincing sceptics to give cooperatives a chance.