INTENTIONAL COMMUNITY, COOPERATIVE
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The MONDRAGON Corporation is a corporation and federation of worker cooperatives based in the Basque region of Spain. And it is the most successful economic experiment ever done. Founded in the town of Mondragón in 1956, its origin is linked to the activity of a modest technical college and a small workshop producing 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 2010 it was providing employment for 83,859 people working in 256 companies in four areas of activity: Finance, Industry, Retail and Knowledge. The MONDRAGON Co-operatives operate in accordance with a business model based on People and the Sovereignty of Labour, which has made it possible to develop highly participative companies rooted in solidarity, with a strong social dimension but without neglecting business excellence. The Co-operatives are owned by their worker-members and power is based on the principle of one person, one vote. The determining factor in the creation of the Co-operatives that today make up the MONDRAGON Corporation, was the arrival in 1941 of a young Catholic priest José Mª Arizmendiarrieta in Mondragón, a town with a population of 7,000 that was suffering the painful consequences of the aftermath of the Spanish Civil War: poverty, hunger, exile and tension. He decided to do all he could to promote coexistence and come up with formulas to create employment based on solidarity. In 1943 he set up a Technical College that was open to anyone, and which would become, with the passing of time, a seedbed for managers, engineers and skilled labour for local companies and, above all, for the co-operatives.
Before setting up the first co-operative, Arizmendiarrieta spent a number of years educating young people about a form of humanism based on solidarity and participation, in harmony with Catholic Social Teaching, and the importance of acquiring the necessary technical knowledge. In 1955, he selected five of these young people who were working at the Unión Cerrajera company (Usatorre, Larrañaga, Gorroñogoitia, Ormaechea and Ortubay) to set up Talleres Ulgor (an acrostic from their surnames), known today as Fagor Electrodomésticos, the pioneering company of the Experience and industrial embryo of the Corporation.
The first fifteen years were characterised by an enormous dynamism. It was a time when, taking advantage of the autarky of the market and the awakening of the Spanish economy, many co-operatives were set up. During those years, also with the encouragement of Don José María, two bodies were set up that were to play a key role in the development of MONDRAGON -Caja Laboral (1959) and the Social Welfare Body Lagun Aro (1966)- and the first local group was created, Ularco, the embryo of the industrial co-operative associativism which has been so important in the Corporation’s history. In 1969 Eroski was set up, as a result of the merger of ten small local consumer co-operatives.
Over the period from 1970 to 1990 the dynamism of previous years continued, with a strong increase in turnover, the launch of new Co-operatives promoted by Caja Laboral’s Business Division, the promotion of co-operative associativism with the forming of local groups, and the setting up of the Ikerlan Research Centre in 1974
With big changes on the horizon like Spain joining the European Economic Community, scheduled for 1986, it was decided to take an important step in the organisational area, by setting up the Mondragon Co-operative Group in 1984, the forerunner to the current Corporation. In-service training for managers was also strengthened with the creation of Otalora, which was to dedicate itself to training and co-operative dissemination. The Group had 23,130 workers at the end of 1990.
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.
In October 2009, the United Steelworkers announced an agreement with Mondragon to create worker cooperatives in the United States.
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.
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.
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.
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.
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
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.
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.
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, the ratios are further diminished because Spain uses a progressive tax rate, so those with higher wages pay higher taxes.
Areas of activity
The Corporation’s companies operate in four different areas: Finance, Industry, Retail, and Knowledge, with the latter something that characteristically makes Mondragon stand out as a business group. In terms of figures, in 2010 the Corporation posted a Total Turnover (total revenues) of 14,8 billion euros, roughly 20 billion USD, and employed 100,000 workers, making it Spain's fourth largest industrial and seventh largest financial group.
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.
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.
In capital goods, MONDRAGON posted a turnover of 976 million euros in 2009, and is the leading Spanish manufacturer of chip removing (Danobat Group) 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.
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.
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.
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.
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.
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.
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.
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