Mondragon: democracy at work in the Basque workplace

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Ivar en Floris met Ander bij Mondragon entree

The Spanish Basque Country is the birthplace of the Mondragon Corporation, a group of cooperatives owned by the employees who work for them. These cooperatives range from supermarkets to industrial companies. Income differentials between members are small, and desempleo, or unemployment, in the region is low. That’s remarkable in a country like Spain, where the jobless rate is a major social problem and where the gulf between rich and poor has been growing for decades. So is Mondragon a good example of social sustainability? We’ve decided to find out, but first we have to sail through the dreaded Bay of Biscay, home to some of the Atlantic Ocean’s worst weather.

Basque Country has the lowest unemployment rate, invests the most in research and development, and has the fairest division of wealth of any region of Spain. It’s no coincidence that it’s also home to more Mondragon cooperatives than anywhere else in the country. Ivar Smits Ivar Smits Skipper

Battling the Bay in stages

Floris recaps the weather report: “Two days of fair wind, then depressions.” That means we’ll have to take cover and wait it out on the island of Groix, south of Brittany. We’ve just moored the boat when the wind starts howling through the harbour, the rain lashing the cabin. Three days later, the weather clears, and we set a course for Spain, sailing comfortably with an easterly wind of about ten to fifteen knots. In another three days, we’ve arrived in sunny Bilbao.

A multi-billion-euro corporation in a Basque mountain village

In Bilbao, we notice that the Laboral credit union, the Eroski supermarket chain and the Eroski/Viajes travel agency are all represented here. From the outside, they look like ordinary shops, but they’re actually part of the Mondragon Corporation. In addition to its retail and financial operations, the group has industrial cooperatives that make machinery and car parts for other companies. The group also has its own schools, a university and an R&D laboratory. With an annual turnover of roughly EUR 12 billion, Mondragon is the seventh-largest company in Spain. We then take the bus to the very Basque mountain village the corporation was named after to learn more about this unique organisation.

The brainchild of a priest

We meet up with Communications Director Ander Etxeberria, who has worked for the group for over twenty years. He says, “Mondragon was the brainchild of José María Arizmendiarrieta, a Catholic priest who felt that human dignity and solidarity should be the norm. Like many Basques, he saw work as a way for every individual to help build a better society. Nearly seventy years ago, he set out to tackle inequalities in remuneration, wealth and opportunities for education. The establishment of the Mondragon group was the result, its commercial cooperatives supporting three basic values for all: fair work, a decent wage and access to education.

Staff are members, members are staff

The first business was established in the late 1950s, and then things really took off. There are now 101 cooperatives, all of which are fully owned by their members. The group itself is also a cooperative and plays a coordinating role. The group employs approximately 75,000 staff, of whom about 85 per cent are members of a cooperative, while the rest have a temporary contract. “Once you work for one of the cooperatives, you have job security,” Ander explains. “And it’s precisely because we guarantee long-term employment that we make a selection early on. A new employee first gets a temporary contract. If everyone’s happy, they’re given the chance to become a member after one to three years.”

Advantages for the wider community

It sounds nice, but what’s so special about being a member? And how does membership help create more opportunities for everyone? Ander replies confidently, “It works. From internal decision making to wages and profit distribution, and from job security to employee benefits: the cooperative structure benefits us in every aspect of our work.” 

That’s brilliant, but we have more questions. Ander holds his ground and backs up his claim, saying, “Members make up the highest decision-making body and all have a vote in the general meeting of members. So we make all the most important decisions together. These involve remuneration, profit distribution, the appointment of management and other strategic issues. Participation in decision making fosters staff involvement and loyalty. Not to mention that direct democracy in the workplace promotes a long-term vision of the company.”

Earning more thanks to fair sharing

Ander continues, “Because of the wage structure, profits are divided more fairly among employees. In Spain, the gross minimum wage is about EUR 10,000 a year. Our lowest-paid employee earns about one and a half times that. The CEO can earn no more than six times that amount – that’s less than EUR 100,000. All the other positions are somewhere in between. Obviously, the system is very attractive to people on the lower end of the pay scale.” 

With pride, Ander goes on, “Profits are distributed according to the same principles of fairness. Profits benefit those who have done the work. A large part of the profits are also reinvested in the cooperative, with members building capital they can draw on if they wish to take early retirement or supplement their pension.” He says employee benefits are excellent, too. “One of the cooperatives manages healthcare and retirement for the whole group. And since we have our own schools and training courses, staff can easily continue to develop themselves. Once you work for one of the cooperatives, you’ve got a job for life. If your particular business encounters difficulties, the other cooperatives guarantee your job security.”

What about the challenges?

And when things don’t go so smoothly? We mention the recent bankruptcy of Fagor, which up until 2013 was one of Mondragon’s largest companies. Ander says, “Yes, after a difficult period, the division which made home appliances was forced to fold. 1,800 members were affected, and many lost their capital. As co-owners, staff also have to shoulder company risk. Fortunately, most moved on to work for other cooperatives. Three years later, only a fraction – some ninety colleagues – have yet to find work. But they’re still being paid a wage, thanks to the group’s internal unemployment insurance scheme.”

A successful long-term vision

Mondragon’s main focus is on work and its staff, and that’s reflected in the group’s mission. The key is sustainable employment, not maximising profits in record time. Ander explains, “Mondragon wants to help build a better society by offering quality employment – not just today, but also in five, fifty and 100 years’ time. Plus ten per cent of our profits go to charities and associations in the community.” Ander says he’s convinced that the Mondragon model contributes to the overall success of the region. “Basque Country has the lowest unemployment rate, invests the most in research and development, and has the fairest division of wealth of any region of Spain. It’s no coincidence that it’s also home to more Mondragon cooperatives than anywhere else in the country.”

Young talent takes Basque Country by storm

We drive back to Bilbao with Nico, whom we met on BlaBlaCar, the world’s largest long-distance ride-sharing community. A recent graduate, Nico has just joined a Mondragon cooperative, where he works as an engineer. Although not yet a member, he has high praise for the group’s employment conditions and working atmosphere. Few of his fellow students back in Gijón have found well-paid jobs, he says. Mondragon has an excellent reputation as an employer because of its business model and favourable terms of employment. And that’s attracting young talent, even from outside the region.

A socially sustainable solution

We’re impressed with how Mondragon provides fair work, a decent wage and job security to its staff. It’s proof that the cooperative structure can be successful in a range of sectors and can hold its own in the face of international competition. Mondragon’s democratic structure, relatively small income differentials and internal solidarity make the group a shining example of socially sustainable entrepreneurship with a motto to match: “humanity at work”. A fairer distribution of wealth starts at the source and is not contingent on government tax schemes. That priest certainly was ahead of his time!

Our next mission: emission-free sailing

Now we’re sailing on to Oporto, where we’ll be taking a look on board the Tres Hombres, a sailing cargo ship owned by the Fairtransport shipping company. Captain and co-founder Andreas Lackner will be telling us how he transports cargo emission-free on the seven seas and will be sharing his ideas on how maritime shipping can be made more sustainable. Watch this space!

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