An in-depth study of the Mondragon Corporation released today (5 April 2017) reveals how a large global business thrives because it’s owned by its workers, caps the gap between the highest and lowest paid, and has built an ecosystem around itself.
Founded 60 years ago in the Basque region of Spain, Mondragon has grown to become the world’s largest worker owned co-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.
The salary ratio between the lowest and highest paid worker is just 1:9 compared to 1:129 for the average FTSE 100 company, creating equality among the workers and allowing wealth to be invested in the creation of co-operatively owned institutions including schools, banks and welfare support for members.
The findings, released in the ‘Humanity at Work’ report by the Young Foundation and with a set of policy implications produced in partnership with Co-operatives UK, have significance for the development of an inclusive UK economy, and demonstrates how businesses can be both competitive in the marketplace and generate social value at large scale.
Key elements of Mondragon’s success
Equality is embedded in working practices. Equity in the organisation is owned by workers, salary ratios do not exceed 1:9 between the lowest and highest paid workers and democratic practices are entrenched in a “one person, one vote” system.
Co-operatives work together to achieve their aims through inter-co-operation. For example, just recently 2,000 workers were relocated to other cooperatives after the collapse of one of their oldest ventures, showing how the relationships between different elements of the ecosystem facilitates the resilience of the overall co-operative group.
Co-operatives provide supporting infrastructure. Different co-operatives provide a network of sustainable infrastructure institutions including schools and a university, banks and welfare support for the benefit of members. This helps underpin Mondragon’s development and growth.
A commitment to and investment in innovation. This has enabled Mondragon to sustain itself, grow and adapt in a changing market place while retaining its core mission. For example, it has its own Innovation model, M4Future, and 15 large technological centres.
Policy implications for the UK
1. Learn from worker owned businesses on corporate governance and pay ratios. As part of its Corporate Governance reform government can learn from the success of Mondragon and document how worker-owned co-operatives in the UK and globally are providing an effective alternative to excessive executive remuneration, while giving workers more of a stake and say in commercially successful businesses.
2. Create a more inclusive economy by supporting a co-operative entrepreneurs’ programme. Government could reduce or abolish employee shareholder tax breaks for high earners and invest the money in local hands-on support for low and middle income earners to own and control their livelihoods through co-operatives.
3. Encourage worker buyouts, a tool to ensure businesses retain social value as part of planned succession. Government could redirect savings from scrapping high earner tax breaks to establish a worker buyout investment fund, which would make worker ownership a viable succession route for more businesses in the UK.
Ed Mayo, Secretary General of Co-operatives UK, the network for the UK’s thousands of co-operatives, said: "Mondragon is more than just a business – it offers inspiration for how we might reimagine our economy. Because it is the workers who own and control Mondragon they have a stake in what it does, a say over its direction and benefit when it does well. And it achieves all this at scale, demonstrating the contribution of worker ownership and fair pay ratios to the running of a large commercial business."
"It has been a great honour to have worked with Mondragon, examining this business which performs highly successfully in some of the world’s most competitive markets. But this isn’t just about business success, Mondragon creates true social benefit too. It provides strong evidence in terms of both policy and practice for building a more inclusive economy. Going forward we will be at the forefront of the influencing and practical implementation of this inspiring model for social change"
Glenys Thornton, CEO, The Young Foundation