Mondragon Corporation

January 31, 2013

While technically a corporation, Mondragon is actually federation of worker cooperatives operating mainly in the Basque country. Quite different from the typical capitalist corporation, it is one of the most promising developments in area of business management. It was founded in 1956 by a progressive Catholic priest named José María Arizmendiarrieta, who had a mission to spread a form of humanist teaching emphasizing solidarity and participation. From the outset, the purpose of Mondragon was not simply to earn profits, but to provide employment and other social benefits to the local community. It is now the largest business group in the Basque country and the seventh largest in Spain. It has factory subsidiaries on five continents and has one won numerous awards for excellence in business management and social responsibility.

The key innovation with Mondragon cooperatives is that they are worker owned. Workers elect their managers, and strict limits are set by the workers on the pay differentials that may exist between management and workers (these vary from 3-to-1 to 9-to-1). The result is that while managers at Mondragon companies earn about 30% less than managers at comparable capitalist-owned companies, Mondragon workers earn up to 13% more than workers at comparable companies.

By allowing workers to own their companies, Mondragon has been able to avoid the  typical management-labour disputes that plague other companies. One of the few strikes that ever took place at a Mondragon corporation was quickly resolved at taught workers there an important lesson about how big a company can grow before communication deteriorates. Following that event a limit was placed on the number of employees any one cooperative could employ.

The Mondragon federation now includes not only factories that produce consumer goods, but also banks, schools, stores, and a university. And the innovative worker-owner model appears to be catching on elsewhere. In 2009, United Steelworkers announced an agreement with Mondragon to create worker cooperatives in the US. 

The Mondragon Experiment is one of the few documentaries on the corporation. Made in 1980 by the BBC program Horizons, it is a dated but nevertheless excellent introduction to the history of the Mondragon corporation and the development of its unique business management model.

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