Cooperatives

Introduction

WHAT IS A COOPERATIVE?
It is a business organization with which members benefit to
achieve their business interests. It consists of an autonomous
association of people united voluntarily with the objective of
developing a business or economic activity using a company for it.
It is based on the principle of mutual aid, for the achievement of
the general objectives of the group of members and to improve the
conditions of all the partners as well.

The Mondragon Corporation is a group of cooperatives and

companies originally from the Basque Country and currently
spread throughout the rest of Spain and the five continents. It is
the first Basque business group and the tenth in Spain, as well as
the largest cooperative group in the world.
 MONDRAGON
PAST
● It was founded by José María
Arizmendiarrieta in 1956.
● In 1969, as a result of the merger of nine
local consumer cooperatives, Eroski was
constituted, the most important company
of the Corporation in the field of
Distribution.
● 1970-1990 It is expressed in the strong
increase in business volume, the
launching of new Cooperatives promoted
by the Business Division of Caja Laboral,
the strengthening of cooperative
associations with the configuration of
regional groups, and the establishment of
the Ikerlan Research Center in 1974.
PRESENT
● The Mondragon Corporation is currently
composed of 102 cooperatives, 140
production subsidiaries, 8 foundations, 1
mutual, 10 coverage entities and 7
international services.
● In 2016, 70% of total sales came from
international business that employed
12,000 workers.
● In 2016, Mondragon's sales abroad
reached 3573 million euros, 70% of
total sales.
● The Mondragon Corporation is strongly
internationalized and has a presence in
the five continents.
 Principles
Its business philosophy is contained in its Corporate Values:
Cooperation, 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.
it is divided into four areas: Finance, Industry,
Distribution/Retail and Knowledge.

The social, cultural and economic change that occurred with

the cooperative experience of Mondragón, allows us to
distinguish, from the conceptual point of view, four central
aspects:
• A social collective to be transformed;
• An innovative idea, behind which a leader is distinguished;
• Your drivers, who administer and / or carry out the change process,
• the effective management of the change.
 Principles

This guiding line of action has demanded, will always demand, a permanent effort in the search for equilibria,
evidently unstable, between attributes apparently paradoxical of the cooperative business reality, such as:
• Efficiency and democracy
• The economic and the social
• Equality of people and hierarchical organization
• Particular interest (of individuals and companies) and general interest
• Identification with the cooperative model and cooperation with other models business

From the tension inherent in these paradoxes of the cooperative business culture and the need to adapt to the
changing reality, a constant organizational innovation stems from the history of this experience, which affects
each cooperative, its whole and the relationships with the outside:
• looking for business efficiency in changing markets
• discovering formulas for resolving conflicts in a framework of cooperation, no confrontation
• Experiencing their own management styles, consistent with the Corporate Core Principles
 Principles
The Basic Principles constitute the starting point of all the ideological construction and are nourished by
the own experience decanted by the course of the years and of others outside of whose family a part is
formed, such as that of universal cooperativism. All this results in that common elements can be found
with other cooperative realities, but also specificities that give MCC a personality differentiated. They are
the following:
1. Free Membership
2. Democratic organization
3. Sovereignty of labour
4. The instrumental and subordinated character of capital
5. Self-management
6. Pay solidarity
7. Inter-cooperation
8. Social transformation
9. Universalism
10. Education
 Economic aspects
There is certain agreement that, to open R Legal difficulties in the destination
up the possibility for workers to become
members, a company must be profitable. countries.
It is difficult (but not impossible) to identify
a group of people in the host country to I In most countries, cooperative
legislation is not as developed as it is in
invest capital and trust the economic the Basque Country, and these
viability of a project at its initial phase.
In the case of the industrial cooperatives, S countries often define labor
cooperatives in different legal terms.
the small number of these types of For this reason, a labor cooperative as
cooperatives around the world was an defined by the Basque Cooperative
additional risk to expanding as a worker
cooperative. It is difficult to find partners
K Law (1993) cannot be constituted as
such in other countries if no legal
that want to establish cooperative definition for such a corporation exists.
alliances within the industrial sector at an
international level. S

The lack of a cooperative culture.
The cooperative culture in the Basque
Country has existed for more than a
century. The 1884 constitution of the
Sociedad Cooperativa de Obreros de
Barakaldo (Labor Cooperative Society of
Baracaldo) was the beginning of modern
Basque cooperativism (Altuna, 2008);
beginning that year, the emergence of
many other industrial cooperatives
provided the basis for very vibrant
cooperativism in the area. The cultural
explanation assumes that it may be very
difficult to transfer the model to other
parts of the world, thus creating a risk to
expanding a cooperative at the
international level.
Control over investments
We identified resistance to internationalization
R among members of the cooperative as
stemming from a desire to protect their
investments.
I Interviewees questioned whether, if total self-
government was granted to a newly created
cooperative, the existing cooperative
members might lose control over the capital
S that they had invested. Their reluctance was
often connected to members’ cultural
perspectives insofar as they did not expect
workers from other regions to be as
K committed as they were to the company in the
Basque Country. Another element for this to
happen was the impact of a period of high
economic growth on undermining
S commitment to cooperativism, as it may
weaken solidarity ties among workers.

In the wake of the 2008 financial crisis, Fagor
Electrodomésticos, the largest of the industrial
cooperatives, failed, eliminating the jobs of 1,800 worker-
owners in 2013.
The cause of the failure was a “perfect storm” of three
related issues. First, immediately prior to the recession,
Fagor Electrodomésticos had expanded by buying a
competitor in the household white goods sector; it
financed the acquisition by taking on major debt. Second,
the number of its Asian competitors was growing every
day. And third, just as the cooperative’s expanded
capacity came on line, the recession hit and the bottom
fell out of the market.
Because of the principle of
“intercooperation” among the Mondragon
cooperative enterprises — that is, the
idea of connectedness and reciprocity
among all the participants in the
system — most the employees were
relocated to other cooperatives. Some
were offered employment in CATA
Electrodomésticos, the private sector
enterprise that took over the assets of
Fagor Electrodomésticos. Some took
early retirement, and a handful took a
compensation package to leave the
system. Some received unemployment
benefits from Lagun Aro, the social
welfare cooperative. By the time of 2017,
only 60 former employees (three
percent) remained unplaced.
EXAMPLES
New report highlights lessons from Mondragon - Key elements of Mondragon’s
the world’s largest worker co-op success

1. Equality is embedded in
An in-depth study of the Mondragon Corporation released working practices.
(in 5 April 2017) revealed how a large global business thrives 2. Co-operatives work
together to achieve their
because it’s owned by its workers, caps the gap between the
aims through inter-co-
highest and lowest paid, and has built an ecosystem around operation.
itself 3. Co-operatives provide
supporting
infrastructure
Founded 60 years ago in the Basque region of Spain, Mondragon
4. A commitment to and
has grown to become the world’s largest worker owned co- investment in innovation.
operative. It is made up 260 individual co-ops, employs 75,000
people in 35 countries and has annual revenues of over €12
billion - equivalent to those of that of Kellogg’s or Visa.
 Preston changed its fortunes
Inspired by Mondragon the council set up a
framework organisation called the Preston
Cooperative Development Network (PCDN).
The PCDN encourages business people to
create worker-owned co-operatives, and helps
them to network. The Preston Model is work in
progress, yet the council has achieved a lot in
relatively little time.
 Conclusions
Mondragon as a cooperative has faced many problems because of the lack of knowledge about cooperatives,
and still, it is a big corporate recognize in the European continent. We need to start researching for the models
of corporation that can be helpful, and open up our barriers and maybe even change our legislations to accept
that different forms of corporations can be successful in our country.
The main risks Mondragon has challenged are related to economic and legal aspects, such as the risks that
ordinary corporations have to faced to. But, it is more difficult for a cooperative because of the lack of this type of
culture around the world.
We can do better and realize that cooperatives may help in many aspects because of its main objectives.

Mondragón Corporación Cooperativa is in a good moment of its history, with a accumulated baggage that allows
it to contemplate the future with an acceptable dose of optimism.
He knows, however, that the stage to come will take place in a framework characterized by the breadth of the
markets, the result of the growing and unstoppable phenomenon of internationalization, which will force an even
more active position in this field, since it will play the future of almost all businesses.
Our companies will have to grow in size until they reach the proper sizing, never as a result of the will of the
leaders, but rather of the characteristics of the markets in which they act.
 Conclusions
Collaboration agreements will be an instrument for sharing complementary capabilities that will add to the
search for the goals of those who collaborate. Our specificity, of which we are proud, is not an obstacle to
working with others, before it should be a stimulus to develop meeting spaces.
We believe we can contribute things to others, but at the same time we are sure that there is much we can
learn. As has already been said, sharing knowledge is another way of distributing wealth.
Employment, its creation, will continue to be a pole of preferential attention, set as an objective of
communication to society so that in this way the degree of demand in its completion is reinforced. The
intensification of business promotion in all levels of the organization, as well as the development of existing
activities or creation ex novo, will serve as an instrument for generating employment. The concentration in a
limited geographical area, where the university, engineering, consulting and Ikerlan are already located, of
twenty other business technology centers, will create a density of thought that, in addition to helping business
progress, will have a powerful influence on the configuration of the environment Social.
The wickers to build the future exist and the assurance that craftsmen will not be lacking to weave them is
extracted in equal parts of our history and of faith in future generations.