Employees Are Members, Members Are Employees
Today the Mondragon Group consists of 101 cooperatives, all of which are fully owned by their members. The central organization, which has a coordinating role, is also structured as a cooperative. Of the group’s 75,000 employees, about 85 percent are a member of their cooperative. The remaining employees have temporary contracts. Ander explains: “Once you are a member of a cooperative, you have job security. For this reason, there is a selection process. Everyone starts with a temporary contract and if both parties agree, the employee can become a member after one to three years.”
Being a member means that you co-own the cooperative. What does that mean in practice, what are the benefits, and how does it create fair work and decent pay? Ander asserts: “It benefits you in every aspect. From internal decision-making to wage and profit distribution, and from job security to additional employment benefits.”
Ander continues: “Members together form the highest decision-making body within the cooperative. Every member has a vote in the general meeting and the most important decisions are taken there. Examples are the appointment of management, remuneration policy, profit sharing and other strategic business decisions. As co-decision makers, members are directly involved in the business, which increases their motivation and loyalty. What’s more, they also take an interest in the long-term well-being of the cooperative, which of course affects them and their families personally. In that sense direct democracy in the workplace leads to a long-term vision for the cooperative and society at large.”
Membership does not come for free, but requires a capital commitment. Ander: “When you become a member, a capital contribution is required. The cooperatives activities are partly funded with member contributions. The amount varies somewhat per cooperative, but it is on average around €15,000. There are loans available to finance this amount when necessary.” Employees are thus truly invested in their cooperative.
More Pay Through Even Distribution
When it comes to wages, the members ensure that they are fairly allocated. Ander explains: “The wage structure ensures a fair distribution among employees. The gross minimum wage in Spain is around €10,000 euros a year. The lowest paid employee in a Mondragon cooperative receives about one and a half times this amount, about €15,000 euros. As the highest paid employee, a CEO earns up to six times as much. This makes the reward system very attractive for people at the low-end of the wage pyramid.” We can imagine that it motivates employees to know that their work efforts translate into payment of their own salaries and not exuberant salaries and bonuses of their bosses.
Ander continues with some pride: “You will see the same equal distribution when it comes to profit. It is primarily beneficial to those who have done the work. Temporary employees get cash pay-outs, while members increase their invested capital, which they receive as payment when they leave or retire. Other parts of the profit are re-invested in the cooperative and in research and development.”
According to Ander, the additional employment benefits are also excellent. “One of the cooperatives arranges for sickness and retirement payments for the whole group. Our own schools and training programs allow employees to develop themselves further. And once you’re a member of a cooperative, you’re guaranteed a job for life. If your company is in trouble, the group will endeavour to place members with other cooperatives.”
What About the Challenges?
Sounds beautiful, really, but we wonder if everything goes that smoothly. We recall Fagor’s recent bankruptcy, until 2013 one of the largest cooperatives within the Mondragon group. Ander: “Unfortunately, after a number of difficult years, the curtain fell for the division that made household appliances. Around 1,800 members were affected and lost their capital. It shows that as a co-owner, you also carry business risk. Fortunately, the vast majority of employees found employment with other cooperatives. Three years later, only around 90 former Fagor employees are still without a job. Yet they receive unemployment benefits, thanks to the internal insurance.” We’re impressed; that’s what we call solidarity!
A Vision for Long-Term Success
Instead of short-term profit maximization, Mondragon is focused on creating sustainable employment opportunities. Ander: “Mondragon wants to contribute to a better society by providing people with decent work. Now, but also in 5, 50 and 100 years. In addition, we annually donate 10 percent of our profits to charities and associations in the community.” Ander is convinced that the Mondragon model contributes to the Basque success. “The region where most of our cooperatives are located has the lowest unemployment rate in Spain, invests the most in R&D and its wealth is the most equally distributed.” Surely that’s no coincidence.