New York Times Report on the Mondragon Cooperatives
On December 29, the New York Times ran a 2,000-word report on the Mondragon Cooperatives as part of its series on capitalism during the pandemic. For those unfamiliar with Mondragon, the Times covers the basics: it is a network of 96 enterprises primarily in the Basque region of Spain. Its member enterprises are in industries from manufacturing to engineering to retail, and together they have annual revenues of $14.5 billion and employ 70,000 people. Those workers own the company and govern it on a one-person-one-vote basis.
The result of its employee ownership is that Mondragon has what the Times calls “one defining purpose: protecting workers.” That purpose results in a cap on executive compensation (six times the lowest wage) and a corporate program to avoid layoffs. In good times, companies contribute to an unemployment fund, which they use in bad times to pay idle workers. Those workers eventually repay those hours by working extra when business returns. That system went into effect in the spring of 2020, when production fell to 25% of capacity. Most cooperatives are now back to operating at capacity, and expect to be profitable for the year.
Iñigo Ucín, president of the Mondragón Corporation, attributes this resilience and recovery to two factors: quick decision-making and widespread trust, saying “when you explain the situation very clearly, and when people know that they are the owners of the business, you are able to do these kinds of efforts.” Or, in the words of one worker, “The cooperative system has given us peace of mind.”
The Mondragon cooperatives face the challenges of global business—the original cooperative, a manufacturer primarily of refrigerators formed in 1955, went out of business after the 2008 economic crisis. Mondragon also faces some challenges unique to its ownership structure—it set up factories outside Spain and struggled with how to extend ownership to overseas workers.
Fred Freundlich, a professor of business at Mondragon University, is familiar with both the cooperatives and U.S. employee ownership. He writes, “I'm glad to see the U.S. media reporting on the Mondragon cooperatives and the consequences of over fifty years of widely shared ownership of enterprise. Clearly, many American firms, thousands of them with ESOPs or other arrangements where company employees share broadly in ownership, are also aware of these positive consequences—for the business, the employees and their communities. They tend to better weather storms such as the current one, seeking to innovate, adapt, save jobs and preserve business success, all while fighting inequality rather than feeding it. The cooperation and co-responsibility that these companies pursue will be key not only to their own resilience in a chaotic global market, but to addressing the global challenges humanity faces."