Canadian Worker Cooperative Federation



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Canadian Worker Cooperative Federation

Fédération Canadienne des Coopératives de Travail

The Worker Co-operative Movements in Italy, Mondragon and France:
Context, Success Factors and Lessons

By Hazel Corcoran and David Wilson

Canadian Worker Co-operative Federation
May 31, 2010
Funding for the research and drafting of this paper was generously provided by the Canadian Social Economy Research Partnerships, based at the University of Victoria and supported by the Social Sciences and Humanities Research Council.

The Worker Co-operative Movements in Italy, Mondragon and France:

Context, Success Factors and Lessons
By Hazel Corcoran and David Wilson
Abstract
The objective of this paper is to analyze the public policy environment, capitalization environment, availability of federation support, and the context for the worker co-op movements in each of Italy, Mondragon (Spain) and France. These three countries or regions have the largest, most dynamic worker co-op movements in the world. To grow a large worker co-op movement, a system of supports is required to enable the transfer of appropriate knowledge to many people, in addition to having access to worker coop-friendly sources of capital. Although there were some success factors in each region which could not be easily replicated in other places and although there were significant differences among regions, there were many common elements contributing to the success of the worker co-op movement in all three places. These were: (1) sufficient capital accessible to worker co-ops; (2) technical assistance provided to worker co-ops in the start-up phase; (3) a mandatory indivisible reserve, at least for those “mostly mutual” worker co-ops which were able to receive government support; (4) significant federation and consortia structures which support, guide, direct, and help educate the worker co-operatives; (5) significant concentrations by industry; (6) a strong sense of solidarity and inter-cooperation; and (7) scale: having achieved a size and strength to enable the worker co-op movements to be taken seriously by governments, the broader co-operative sector, etc.
Acknowledgments
This research project would not have been possible without the financial contribution of the Canadian Social Economy Research Partnerships, based at the University of Victoria and supported by the Social Sciences and Humanities Research Council. We are grateful for CSERP’s sponsorship. We would like to thank Alain Bridault (CWCF Board President) and Peter Hough (CWCF Financial Officer) for their editing and substantive contributions. We would also like to acknowledge the important contribution of Bruno Roelants, Secretary General of the international worker co-op federation (CICOPA) whose input helped to guide this project. Any errors in this report are ours.


Authors’ biographies

Hazel Corcoran has been Executive Director of the Canadian Worker Co-operative Federation since 1995.  Through CWCF, she also coordinates the CoopZone Co-op Developers' Network.  She has also served the co-operative movement on various boards of directors, including currently serving on the Board of First Calgary Savings & Credit Union.  


David Wilson is the CWCF's Communications and Member Services Manager. Previously he worked for a community economic development organisation in Calgary. He graduated from the University of Calgary with degrees in Accounting and Psychology


About CSERP
The Canadian Social Economy Research Partnerships (CSERP)  is a collaborative effort of six regional research centres across Canada, their community partners, and the national facilitating research hub.
CSERP reaches out to practitioners, to researchers and to civil society, and undertakes research as needed in order to understand and promote the Social Economy tradition within Canada, and as a subject of academic enquiry within universities.

Table of Contents

1) Introduction 4


2) Italy, with focus on the Emilia Romagna region 6

                1. Size, industry sectors and general description of the WC movement 6

                2. Growth trends and rates 7

                3. General legislative and policy environment 7

                  1. Taxation 7

                  2. Indivisible Reserve 8

                  3. Regional Economic Development Agencies 8

                4. Capitalization 9

                5. Mutual support; support by Worker Co-op Federations, other 10

                6. Social / economic / cultural context 10

                7. Analysis 11

3) Mondragon 12



                1. Size, industry sectors and general description of the WC movement 12

                2. Growth trends and rates 12

                3. General legislative and policy environment 14

                4. Capitalization 14

                5. Mutual support; support by Worker Co-op Federations, other 16

                6. Social / economic / cultural context 20

                7. Other factors 22

                  1. Training 22

                  2. Indivisible Reserve 22

                8. Analysis 23

4) France 24



                1. Size, industry sectors and general description of the WC movement 24

                2. Growth trends and rates 25

                3. General legislative and policy environment 26

                4. Capitalization 27

                5. Mutual support; support by Worker Co-op Federations, other 27

                6. Social / economic / cultural context 29

                7. Analysis 31

5) Conclusion: Success Factors in the Three Worker Co-op Movements 32

Bibliography 35


  1. Introduction

The purpose of this research project is to review what has worked to help create large, dynamic worker co-op sectors in other countries, so that the Canadian Worker Co-op Federation (CWCF) can apply the lessons learned to Canada. This would include an analysis of the public policy initiatives and social / cultural context that contributed to the growth.


Growing the worker co-op movement is especially important at a time when the global economy continues to experience significant challenges. As has historically happened in other economic downturns, working people need an alternative, a way to create jobs for themselves. Worker co-ops are an excellent alternative for doing this. Beyond the usefulness of the model in times of recession, a strong worker co-op sector in a region or a country has many advantages. These include increased worker empowerment, lower unemployment, increased job stability, increased social capital; in general workers are on a more equal footing with each other and are more in control of their destiny.
All over the world, one can find isolated examples of successful worker co-ops. However there are only a few places in the world where worker co-op sector as a whole is large and dynamic.
The reasons for the relative paucity of worker co-ops include the fact that in most parts of the world, the model is relatively unknown even among co-operators, and it is challenging to start and successfully run a worker co-op. However, co-ops generally, especially when supported by federations and other support structures, have a higher success rate than small business generally.1
There are many elements which are required for a group of people to develop a worker co-op:


  1. legislation appropriate for worker co-ops;

  2. a sound business idea which will be able to generate surpluses for the co-op within a reasonable time frame;

  3. technical assistance:

a. for organizational development,

b. for business development, and

c. to implement a financial management system;


  1. access to adequate capital;

  2. access to training in all required aspects of running a worker co-op, including its business and its governance.

When one considers that in Canada the worker co-op model is generally not taught in elementary schools, high schools, or universities and that most working people do not have experience in running a business or understanding of worker co-op principles, it is not surprising that the number of worker co-ops in Canada is low. To grow a large worker co-op movement, a system of supports is required to enable the transfer of appropriate knowledge to many people, in addition to having access to worker coop-friendly sources of capital.


In consultation with the international worker co-op confederation (CICOPA), we have chosen to study the Emilia Romagna region of Italy; Mondragon, Spain; and France as the best examples of regions with strong, growing worker co-op sectors. These three places have the largest number of worker co-ops, as well as the fastest growth in the sector, of anywhere in the world.
It should be mentioned that some other countries do have fast growth in the worker co-op sector, e.g. China, Brazil, Argentina, Uruguay, Colombia, South Africa and India. Although the worker co-ops movements in the South American countries have developed more recently than in Europe, they are very dynamic. The Gung Ho worker co-op movement in Shanghai was started in the 1930’s with support from New Zealander Rewi Ally and others; after a period of stagnation and government interference, it has been revived starting in the late 1980’s. In 2006, for the first time China enacted a Co-op Law, which has enabled a new wave of worker co-op development especially in rural areas.2

  1. Italy, with focus on the Emilia Romagna region




                1. Size, industry sectors and general description of the WC movement

Italy leads the world with over 800,000 people working in the co-operative sector, about half of which are in worker or social co-ops.3 As of 2005, there were 7,363 social co-operatives employing over 244,000 people.4 In Emilia Romagna, there are more than 7,500 co-ops, two-thirds of which are worker-owned. Ten percent of the workforce is employed by co-operatives in a region with some of the lowest unemployment rates in Europe.5 Over 80,000 members here are employed in worker co-operatives6, equalling about 6% of the workforce.7


Although it was one of the most devastated and poorest regions in Europe at the end of World War II, Emilia Romagna is now among the most prosperous regions in the world. Its per capita GDP is 25% higher than the average for Italy, and 36% higher than the average for the European Union (EU). It has an enviable recent annual growth rate of 2.2%. The unemployment rate, in 2006, was 3% compared to 8.4% for all of Italy, and an average of 9.1% for the EU. In addition, it has one of the lowest rates of inequality in Europe, with a Gini coefficient of .25, or about half the European average. According to Robert Putnam8, the Emilia Romagna region has one of the highest indexes of social cohesion and social capital in the world, as evidenced by high rates of volunteerism.9
In Emilia Romagna, firms tend to be very small scale.  The region has 420,000 firms – one for every nine men, women and children.  More than half the population are co-op members. Worker co-operatives generate, according to University of Bologna economist Stefano Zamagni, about 30% of the GDP in the region and up to 60% of the GDP in some cities like Imola. In Bologna itself, 15 of the 50 largest businesses are co-ops, and co-ops employ 25,000, or 10% of the labour force.
Of note, providing social services, social co-operatives are the most prevalent type of worker co-operative. With the dissatisfaction of government-delivered health care services and the wariness of having these services in private hands, the solution has been to create social co-operatives. They are seen as more cost effective, innovative, and flexible than government or private services.10 Social co-operatives do not distribute profits to members, but instead re-invest all of it back into the co-operative. Worker co-operatives outside the social co-operatives, on the other hand, provide more jobs.11 According to Tom Webb, the Italian worker co-operatives are predominant in “catering, construction, food service, manufacturing, transportation, maintenance, and processing.”12



                1. Growth trends and rates

In Italy the co-op sector is growing very rapidly. In the largest federation of social co-ops, between 2003 and 2008, there was an increase of 30% both in the number of co-ops and the number of workers.13





                1. General legislative and policy environment

Public policy in Italy is very enabling of co-op development and maintenance. In Italian public policy, support for co-operatives starts at the highest level; it is enshrined in the Constitution. Article 45 of the Constitution states that “the Republic recognises the social function of co-operation with mutual character and without private speculation purposes. The law promotes and favours its growth with the most appropriate means, and ensures, with appropriate controls, its character and purposes.”14

i. Taxation

Profits in Italian co-ops are exempt from tax as long as they are re-invested in the co-operative. The requirement under the current Italian law is that at least 30% of the annual net profit must be allocated to an indivisible reserve.15 John Logue noted that the Basevi Law of 1947 gives this 40% tax advantage because co-operatives are seen as a public good that is available to future workers.

ii. Indivisible Reserve

These profits only receive this tax-free treatment when they are placed into a co-op’s indivisible reserve. If the co-op is sold, money in the indivisible reserve cannot be accessed by members or investors in the case of the privatization of the co-op. In the event a co-op ceases to be a going concern, the indivisible reserve is donated to a federation or another co-operative.

It must be noted, however that under a new law passed in 2004, in order to receive the tax benefits, cooperatives must qualify as “mainly mutual co-ops,” or co-ops with a “mutual purpose,” as opposed to other co-ops which are more focused on profit-making. According to Antonio Fici, in order to meet the definition of a mutual co-operative, member labour costs must exceed 50% of the total labour costs. Those co-operatives not meeting this definition are unable to take advantage of tax savings.16

Indivisible reserves help worker co-operatives overcome undercapitalization difficulties, in the long-term. In profitable co-operatives this reserve over the years can become quite substantial, even dwarfing membership fees. These indivisible reserves can provide liquidity, in addition to being a much-needed source of capitalization for the co-operative’s development and growth.  For example, Bilanciai Co-op, which started in 1963, has membership fee accounts of $1 million (US$) and indivisible reserves of $12 million.  The indivisible reserves are universally seen as an advantage, guaranteeing employment for multiple generations, rather than property to be “privatized” by the current group of members. Here’s how Bolognesi from Cooperativa Ceramiche d’Imola, and a third generation co-op member, summed it up: “Part of our mission is intergenerational mutuality.  What we see here is the fruit of generations of work.  We receive wealth from past generations, and we create it for future generations of members.  Our objective isn’t just to generate jobs for this generation but also for future generations.”17
iii. Regional Economic Development Agencies
Co-operatives receive assistance from the Italian government's regional economic development agencies in the areas of “research and development, education and training, workplace safety, technology transfer, marketing and distribution, and exporting,” among others.18 “One example of the regional government’s role is its support of the service needs of small and very small businesses and the growing links between firms. The regional economic development agency established a network of retail service centres. Business services that are typically difficult for small businesses to afford are provided at the service centres, including sales and marketing expertise, research and analysis, advanced research and testing, quality certification and under/post-graduate and vocation education programs. The services are provided to groups of related businesses rather than single firms to create economies of scale and keep the services affordable. All relevant stakeholders participated in establishing the centres, including business associations, chambers of commerce, local administrations, trade unions and universities.”19 These regional economic development agencies create and develop business clusters, which help create synergies and economies of scale.20 In these clusters, co-operatives, along with small businesses, partner to bid on larger contracts.21 This is most apparent in the Emilia Romagna region.



                1. Capitalization

In addition to the tax benefits available to the vast majority of co-ops in Italy, there are several other ways that the state supports capitalization of co-operatives in Italy. The Italian government in 1985 established a co-operative fund through the Marcora Act to help create worker co-operatives. As a way of protecting jobs, this fund could be used to convert private firms, who were going through bankruptcy, moving overseas, or who were being sold by retiring owners, into worker co-operatives.22 The Italian government provides a subsidy up to three times the amount of workers’ investment in converting an existing business into a worker co-operative.23

Perhaps most significantly, since 1992, three percent of a co-op’s profits have been placed into co-operative development funds. These funds are used to help create new co-operatives, develop existing ones, and to convert private firms into worker co-operatives. The three largest co-operative federations in Italy each have their own fund. The largest of these is Legacoop’s Coopfond which has a capitalization of $340 million (US$). From 1994 to 2001 alone, Coopfond invested $101 million to help create 7,300 jobs.24 In addition, Daniel Côté and Martine Vézina note that co-operative development funds are also used to create training programs, as well as being used to further research into co-operatives.25

To further raise capital, there are no limits as to the amount that investors can be remunerated. Since 1992, worker co-operatives have been able to issue equity instruments, bonds, and hybrids of the two to further raise capital. Investors are unable though to control more than one-third of the votes in a member assembly.26




                1. Mutual support; support by Worker Co-op Federations, other co-op associations

The Basevi Law mandated that co-operatives had to join a federation. These federations are now well endowed (membership fees are 0.4% of a co-operative’s annual sales) and have members throughout all of Italy. The result is undeniable political influence.27 They are also able to offer an array of valuable member services in the areas of tax, accounting, legal, financial, and training to meet their members’ needs.28


At a workshop at the 2009 Eastern Conference for Workplace Democracy, Erbin Crowell described what he learned on a study tour to Emilia Romagna. He observed a remarkable solidarity among co-ops of all different sectors. He stated, “What drives co-op development in Italy is: as soon as a new co-op starts, ALL of the co-ops start buying from that co-op.” This cross-sector co-operative solidarity (worker, consumer, producer, financial) was also noted by Bruno Roelants, General Secretary of CICOPA, in an interview with him in January 2010. Roelants believes that the cross-sectoral co-op solidarity is what has driven the favourable policy environment and the great strength of the movement in Italy. The strong ethic of mutual aid can only be nurtured in a strong system of informal networks and formal federations such as one finds in Italy.


                1. Social / economic / cultural context

Each of the three co-operative federations is affiliated with different political parties. The Association of Cooperatives, the smallest federation in Italy, is linked with the Social Democrats.29 In the Emilia Romagna region there are two federations who support different political parties. The League of Cooperatives (The Lega), the largest federation in Italy, is linked with the “Red” leftist party, while the Confederation of Cooperatives is linked with the Catholic “White” centre right party.30 The political affiliation is so strong that these political parties actually appoint officials in these co-operative federations. With this, despite being politically divided, the federations have full access to the government.31





                1. Analysis

In Italy, the most striking success factors for the worker co-op movement are: first, the many different types of support notably the 3% co-op development funds, the technical assistance, the special help for private firms converting to worker co-ops, and the mandated federation structures. Secondly, there is the mandatory indivisible reserve including tax breaks in “mostly mutual” co-ops. Lastly, the principle of co-operation among co-operatives is truly lived out in Italy. With all of these foundations in place, it is not surprising to see the large size and rapid growth in the movement in Italy.


3) Mondragon

a. Size, industry sectors and general description of the WC movement


Like Italy, Spain has promotion of the co-operative model in its constitution.32 There are an estimated 18,000 worker co-operatives that employ 300,000 in Spain.33 This sector has grown 30% over the last five years.34

b. Growth trends and rates


The Mondragon Cooperative Corporation has grown from its initial 25 workers in 1956.35 From the mid-1960s to the mid 1970s, Mondragon grew by about 1,000 workers per year.36 From 1986 to 1996, Mondragon grew from 19,669 workers to 30,63437. Sales in 1997 were $5 billion euros.38 There are 256 businesses under the umbrella of the Mondragon conglomerate.39 As of 2009 Mondragon employed 92,773 workers with sales of $33 billion euros.40 This accounts for 25% of the total sales and 15% of all workers in the worker co-operative sector in Spain.41 Mondragon is the largest business group in the Basque region and is the seventh largest business in Spain in terms of both sales and the number of workers.42 Unlike corporations, Mondragon's strategic plan includes job creation goals.43 In 2003 Mondragon was ranked by Fortune magazine as one of the top ten places to work in Europe.44 Overall Mondragon has outperformed most private business firms in Spain in almost all respects.45
Mondragon has four main business components: finance, industry, retail, and knowledge. In 2009, Mondragon's own bank, the Caja Laboral Popular, had 16.8 billion euros in loans outstanding. (Note that the Caja is explained in detail in next section d, below: Capitalization.”) The default rate on these loans on these loans was 2.9%, almost 50% lower than the rest of the banking sector in Spain. In 2009, the Caja was voted as providing the best customer service among financial institutions in Spain.46
The industry component of Mondragon's business in 2008 had sales of 6.5 billion euros and employed 40,822 workers. Out of this, 1.8 billion euros were from consumer good sales, such as household appliances and furniture, leisure and sporting equipment. Another 2.0 billion euros was from industrial components (automotive, domestic appliance components, and pipe fittings), 1.3 billion euros from construction, and 1.2 billion euros came from capital goods (automation, machinery, and refrigeration equipment). As of 2008 there were 73 production plants outside Spain, 13 of which were in China.47

The retail arm of Mondragon is the Eroski Group. Retail sales in 2008 for its 2,400 supermarket and 115 hypermarket (big box format) consumer co-operatives was 9.1 billion euros. In 2008 alone, Eroski opened 7 hypermarkets and almost 100 supermarkets. This a fast growing sector in Mondragon, for in 2008 there were over 46,051 workers, compared to 36,400 in just 2006.48 About 9% of workers in Mondragon are not member-owners, many of whom work at Eroski. At Mondragon’s 2009 General Assembly there was a motion passed to try to increase the number of member-owners at Eroski.49


The Knowledge component of Mondragon includes its technology centres that had expenditures of 51 million euros and employed 748 workers in 2008. The University of Mondragon in 2008 had 3,707 students. In addition there are numerous education and training centres for Mondragon employees.50

c. General legislative and policy environment


Mondragon has received no direct government financial support, but has over time received favourable tax rates. The Spanish government taxes co-operative profits at 10%, compared to the corporate tax rate of 28%.51 The rest of this section in this paper will focus on Mondragon's internal success factors.

d. Capitalization


From the beginning, Mondragon has re-invested its profits back into its worker co-operatives. In Mondragon, from 30% to 50% of profits each year go into the co-operative's indivisible reserve fund 52. Ten percent of the profits are donated to education, health, and in the community.53 This 10% donation is mandated by Spanish Co-operative Law.54 The remaining profits are placed into individual members’ capital accounts, based on the number of hours worked and pay grade, which cannot be accessed until retirement.55 The reserve fund, and the member capital accounts, ensure that up to 90% of profits in Mondragon are re-invested back into the worker co-operative to help it grow and employ more people.56
Another way Mondragon generates liquid capital is through Lagun Aro, their insurance and social security service. When worker co-ops were first started in Mondragon, the Spanish government determined that their workers were self-employed. The result of this was that Mondragon workers did not qualify for unemployment insurance, social security, or health care insurance from the Spanish government. In response, Mondragon created their own insurance and social security service, internally paid for by its workers. Some of this money in the meantime was used as patient capital to finance co-operatives.57
Mondragon's inventiveness did not end there. After the start-up of the Mondragon system, the primary founder, Father Jose Maria Arizmendiarrieta (“Arizmendi”) saw that worker co-operatives could not reach their full potential without an adequate amount of capital. His literature review showed that private banks would not sufficiently provide this capital. To get around the problem of capitalization, Arizmendi came up with the idea that Mondragon had to create its own banking system.58
From this realization, in 1959 Mondragon created a co-operative bank named the Caja Laboral Popular. The Caja allowed Mondragon to use its profits to expand existing co-operatives and to create new ones, in addition to providing banking services to members. The Caja is able to provide much needed capital, which in general is one of the major difficulties for worker co-operatives59. Note that “the Caja Laboral Popular (was established) as a credit cooperative with the members being worker cooperatives and other cooperatives (not individual depositors).60
Early on, each co-operative in Mondragon submitted monthly financial statements to the Caja. In this way the Caja could identify when a co-operative was struggling and when assistance was necessary.61 Those co-operatives within Mondragon who received help from the Caja usually accepted a decrease in wages during the financial crisis and sometimes paid a percentage of future profits back to the Caja.62
Eventually the Caja created an entrepreneurial division at Mondragon to provide technical support for new worker co-operatives.63 About 10% of entrepreneurial ideas were further developed by the Caja and 4 or 5 each year become new worker co-operatives.64 In deciding whether to provide funding to a start-up co-operative, Mondragon since the beginning has put as much emphasis on the ability of the members to work together as they have on the feasibility of the business.65 Mondragon believes that the natural bond of friendship is one of the key ingredients for a worker co-operative's success.66
The Caja and each new co-operative worked closely together until the co-op was profitable. Entrepreneurs had to put up double the amount of capital that they received from other investors. The rest was lent to the co-op by the Caja at market interest rates. If the co-op experienced difficulty, the Caja lent money at half the market rate. As a crisis progressed, the Caja lent money at zero percent interest and even resorted to donating money to the co-op.67 The result is that Mondragon has a 90% survival rate for start-up co-operatives, which is significantly higher than the 20% rate for conventional businesses.68 The Caja provided both patient capital and technical assistance, which are the critical ingredients that allow start-up co-operatives to survive and flourish to allow them to reach their full potential. Mondragon's Central Inter-cooperative Fund has now taken over these functions, while the Caja now focuses just on consumer and business banking.69

e. Mutual support; support by Worker Co-op Federations, other co-op associations


Unlike worker co-operatives in Italy, Mondragon has been unable to successfully co-operate with other co-operatives and associations in Spain. The result is that, unlike co-operatives in Italy, Mondragon has not received much direct financial support or assistance from the government.70
However the Mondragon Co-operative Corporation is itself a large co-operative “group” or consortium. Within it, some decisions are quite centralized with regard to, e.g., which co-operatives will receive start-up support. There are many worker co-operatives in Spain. What clearly distinguishes Mondragon is that it is the only group in the country that has “produced an integrated, mutually reinforcing system of organizations, whereas the outside cooperative firms were all small and had no such supporting linkages.”71 One of the advantages of this is the sharing of resources among Mondragon co-operatives. In 1965, Arizmendi created co-operative groups within Mondragon. To utilize resources among the co-operatives more effectively, services like “accounting, advertising, personnel administration, and research” were shared within co-operative groups to achieve significant cost efficiencies.72 There is also a strong focus on inter-cooperation among the members of the Mondragon Co-operative Corporation (“MCC”).
The Mondragon group was reorganized in 1991, getting away from regional structures and more aligned with industry sector. The governing bodies of the Corporation, controlled by the member co-ops, are now called the Standing Committee and the General Council.73 According to Fred Freundlich of Ownership Associates:

“The regional subgroups were mostly dissolved and the individual co-operative enterprises were grouped instead by industrial sector within the MCC’s new structure: three main business groups (Financial, Industrial, and Retail) and, within the Industrial Group, seven different divisions. The MCC as a whole is now managed by a President and his General Council, which is comprised of nine vice-presidents (one per group or division) and the directors of the six MCC Central Departments. MCC officials emphasize that the purpose of the reorganization was most definitely not centralized operational control, but rather, closer coordination of activities within common business sectors, improved economies of scale, and greatly strengthened strategic planning.”74


Notwithstanding the stated purpose of the reorganization, MCC is significantly more centralized than other worker co-operative movements.
An example of the advantage of integration/ centralization has been seen during economic downturns. The Mondragon group does all it can to not lay workers off. Arizmendi believed that one of the tenets of social justice was the right to work.75 In the early 1980s, some co-operatives in Mondragon were experiencing financial difficulties. Unemployment in the Basque region was 25%. Instead of laying people off, Mondragon redeployed workers in the struggling co-operatives to ones that were better off. Struggling co-operatives were reorganized by Mondragon.76 Those who were not redeployed were given income assistance that equalled 80% of their salary. Laid off workers are given the opportunity to retrain.77 With this very few workers lost their jobs, which was in contrast to those working in the private sector.78 The central control structure of Mondragon allowed for this to happen. This would have been unlikely to happen in unorganized and autonomous co-operatives.
Having a centralized structure also has helped Mondragon respond quickly to the increasingly globalized economy. The 1991 restructuring and consolidation process was largely carried out in order for Mondragon to remain competitive. The result was “greater inter-firm solidarity, utilizing sectoral groups and with centralized group functions for development of quality standards and international marketing and investment.”79 Groupings by industrial sector allowed the co-operatives to take advantage of economies of scale, to share technology and research and development, and also to share management expertise. This has been seen as critical in allowing small and medium-sized co-operatives to invest and benefit from research and development, something that is typically only available to larger firms.80
A unique aspect of the Mondragon Group is that it has its own set of co-operative principles, expanding on the International Co-operative Alliance (ICA) principles, as follows:
Mondragon Principles

  1. Open Admission

  2. Democratic Organization

  3. Sovereignty of Labour

  4. Instrumental and Subordinate Nature of Capital

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