Citizen Action Monitor

Even the world-famous Mondragon workers’ cooperative can’t escape labor-relations problems

Sense of solidarity and identity strained as growing numbers of employees waive stake in company ownership

No 1047 Posted by fw, May 7, 2014

As the following brief article illustrates, worker-owned coops are not a panacean alternative to corporate-dominated capitalist enterprises. For instance, labor relations can be as much a sticky challenge in worker-owned cooperatives as they are in privately and publicly owned companies. As it turns out, not all co-op employees want to be co-owners or to be actively engaged in a democratic, managerial decision-making process. Many just want to put in their hours, collect their paychecks, and forget about work at quitting time.

Here’s how one scholar put it in the conclusion of her study of the myth vs. reality of the Mondragon experiment:

Another lesson to be learned from the case of Mondragon is that of the importance of politics, the necessary role of organization, and the continuing value of syndicates and unions for transforming the workplace. It is clear that syndicates and unions have to respond to the growing criticism that they are “outmoded.” Union structures have to be transformed to accommodate new work forces (which in many cases will require legal change), and they have to make room for part-time and temporary workers as well as worker owners. Perhaps the new syndical forms and strategies developed in Mondragon can provide examples of how to organize and represent these increasingly diverse working classes. Moreover, as unions struggle with the effects of the management ideologies of cooperation and participation on working classes, they will have to confront their own lack of internal democracy and the inactivism of their members; unions must promote rank-and-file participation in governance (something democratic union reform movements in the United States are trying to do). Dr. Sharyn Kasmir [Source: The myth of Mondragon: Cooperatives, politics, and working class life in a Basque town (pp 199-200). Click on the above linked title to access a free PDF download of the complete work].

What about Cooperatives as a Solution? The Case of Mondragon  by Vincent Navarro, Counterpunch, April 30, 2014

Solidarity, an elusive aspiration

Solidarity, an elusive aspiration at Mondragon?

About the founder — Father José María Arizmendiarrieta Madariaga (22 April 1915 – 29 November 1976) 

Mondragon [founded in 1955] is a cooperative that has 147 companies employing 80,000 workers. It was established by a Catholic priest, Jose Maria Arizmendiarrieta (JMA), in the Basque country in Spain. As did many priests in that country, JMA sided with the popular classes against the fascists, who—supported by Hitler and Mussolini—came to power in Spain, overthrowing an elected government in 1936. The leadership of the Spanish church hierarchy supported the fascist coup, and JMA was jailed because of his support for the republican democratic forces, as well as his opposition to the coup and to the dictatorship that it established. For many years JMA was ostracized from the church, although more recently he has been “discovered” by the Vatican and is even being considered for canonization, meaning that he could become a “saint.”

Founding “presumptive principle”– “Companies are best run when workers are their owners and participate in management decisions”

In 1956, JMA established the first cooperative, according to the principle that companies are best run when workers are their owners and participate in management decisions. Its success proves that JMA was right. Mondragon, based on this principle, has become one of the largest conglomerates of companies in the world.

      • Of its employees, 46% work in the Basque country, 40% in other parts of Spain, and 17% in the rest of the world.
      • The four major areas of involvement include industry (46%), commerce (40%), finance (3%), and services (1.3%).
      • The system of governance is arranged so that the workers (members of the cooperative) own a share of their company, elect their managers (in each company and in the overall cooperative), and participate in all major decisions.
      • The salary range limits the difference between executive positions and the lowest paid employees; the highest paid can never make 6.5 times more than the lowest paid.

In other large companies, this differential is much, much greater, such that the best paid directors and top managers may make 200 times more (in some cases, 1,000 times more) than the average employee of the company. Mondragon companies are more efficient than these other companies.

Neoliberal economists were quick to pounce on news of the collapse of one of Mondragon’s companies

Recently, one of Mondragon’s companies collapsed. Immediately, the conservative and neoliberal economists used that collapse as a means of discrediting the cooperativism movement. The company, Fagor Electrodomesticos, produced electrical material for use in home domestic tasks (e.g., washers). The collapse of the construction industry, a result of the explosion of the housing bubble, directly affected this company, as it sold its products primarily to the Spanish market.

The response of Mondragon, the overall parent company, to that crisis was quite different, however, compared to what other non-cooperative companies have done in similar situations. Mondragon lent 700 million euros to Fagor to help it recover. When recovery eventually looked impossible, only then did Mondragon stop lending money. But then, it relocated 600 of Fagor’s worker-owners to other companies belonging to Mondragon. Universal solidarity among worker-owners made the collapse of Fagor more bearable than it would have been otherwise.

However, labor-relations are becoming strained because worker-owners are favoured over growing numbers of non-owners

There have been some problems, however, that need to be noted. One is that employees who are not owners have increased more rapidly than worker-owners, to a point that in some companies, the first are a much larger group than the second. In the supermarket chains owned by Mondragon, employing 38,420 workers, only a minority (12,260) are worker-owners, which establishes a difference in terms of whom to save in the case of collapse. In the collapse of Fagor, the transfer of employees favored those who were worker-owners, which is expected, but clearly creates a two-tier system that affects labor relations. Those who do not become owners either cannot afford to become owners or choose not to become an owner.

Actually, one of the successes of Mondragon was its ability to create a sense of identity among the workers within the company, encouraging an environment of solidarity and collegiality among them, a feeling that also extended (although to a much lesser degree) to non-worker-owners. The connection felt by the latter group has somewhat weakened, however, exposing a vulnerable point for the cooperative. Otherwise, from a business perspective, Mondragon is an excellent case of matching efficiency with solidarity and democracy.

Vincent Navarro is Professor of Public Policy at the Johns Hopkins University and Pompeu Fabra University.

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