The American poor do not wish to be poor, searching for their next meal or place of shelter. These people would quite obviously rather be living in a two-story house with every bill paid on time, but for some Americans this cannot occur. Quite logically, most poor believe that if they get a job and work hard, they will make enough money to lift themselves from poverty. Do not most people believe the same thing? Getting a job and earning a wage will afford us the opportunity to buy items necessary for a decent life…right? However, many people are working, yet somehow they are still stuck in the doldrums of poverty. In twenty-first century America, work does not always work! People who work hard and strive to provide an adequate life for themselves and their family are not receiving enough income to meet their needs. The low wages some American workers earn do not allow them to pay every bill on time, or buy new shoes for their children when needed.
In The Working Poor, David Shipler describes the paycheck that one woman, Christie, receives and tells how quickly her paltry wage disappears. “The eighth was payday, and her entire $330 check disappeared in a flash. First, there was what she called a $3 “tax” to cash her check, just one of several such fees for money orders and the like - a penalty for having no checking account. Immediately, $172 went for rent, including a $10 late fee which she was always charged because she never had enough to pay by the first of the month. Then, because it was October and she had started to plan for Christmas, she paid $31.47 at a store for presents she had put on layaway, another $10 for gasoline, $40 to buy shoes for her two kids, $5 for a pair of corduroy pants at a second hand shop, another $5 for a shirt, $10 for bell-bottom pants and $47 biweekly for car insurance. The $330 was gone.”1 Christie worked in a day care facility, taking care of other people’s children, a very important job to society, yet her income of approximately $600 per month was not enough to provide for herself and her children.2 Shipler tells many stories of working people in similar situations all across America. He describes how these peoples’ paychecks do not cover the necessities of life; much less leave any cash left over for fun or recreational spending.
Christie and others in society making nearly $5 per hour, while laboring hard in the American workforce, are struggling under the difficulties of very low wages. However, this poverty takes place in a society in which some executives or higher paid employees make several hundred times the amount of the lowest paid worker. This has created a huge disparity in income between the upper and lower class which is only growing wider. This income disparity and the accompanying very low quality of life for the poor are indicative of a flawed system. Surely a system of economics and corporate practice that allows for and perpetuates extreme poverty is fundamentally wrong in some ways. While Adam Smith’s invisible hand theory and classical economics’ theory of incentives (which should control the market and spread wealth efficiently and effectively) make sense in theory, in actuality this economic system does not provide for or help the poor in any significant way. Therefore, something must be done to change the way in which our economy operates and alter the corporate culture of America.
I will discuss different ways of operating societies, running businesses and compensating workers that are already occurring around the globe. I will examine the Mondragon cooperative movement occurring in Spain and discuss the ways in which it contributes to a thriving community, while also being a successful corporate economy. Secondly, I will discuss the practices and philosophy of Bridgeway Capital Management, located in Houston, Texas, and the unique way in which their pay system is structured. I will then make suggestions based on elements from these two cultures that could be implemented in America, because in a society of ever-increasing wealth in the face of obvious poverty, something must be done to increase the quality of life for America’s working poor. Possibly, modern America can borrow elements of other societies and companies to create a corporate structure and vision which affords an adequate life for all its employees.
The Mondragon Movement
The Mondragon movement, which began in the Basque region of Spain, arose from the highly industrialized workers of the Union Cerrajera steel mill of Mondragon. “From its beginnings in the 1940’s as a training school for apprentices, the Mondragon cooperatives have become the world’s most significant cooperative system and industrialized market economy.”3Mondragon Corporacion Cooperativa, also known as MCC, is a system of cooperatively owned and operated businesses which exist with a democratic structure.4 Mondragon is based on the idea that business structure be shared among the cooperative group; each person has a stake in the management and control of the company. The co-ops are owned by the workers and operated in such a way that one worker receives one vote in making decisions no matter how much of the capital owned. These entities are all operated under a cooperative entrepreneurial system which values the community’s growth as equal to, if not better than, the individual’s prosperity.
The Mondragon Cooperative movement is based upon ten principles from which all participants are to subscribe. “The principles are not legalisms or ideological statements, but an articulation of cooperative and participatory values that have developed over the forty years of the Mondragon experiment. The principles affirm the freedom and empowerment of working people and at the same time provide limits.”5 The ten cooperative principles are exhaustive and brilliant in their makeup, but I will highlight eight which I feel best serve to show the makeup of Mondragon. These elements also show how a business (known as a co-op in Mondragon) and a society can be run in order to value each human being and afford each worker an adequate standard of living.
Open Admission: Mondragon is open to anyone who agrees to the basic principles of the co-op, without discrimination based on ethnicity, religious or political beliefs or gender.
Democratic organization: The system “is based upon the equality of owner-workers. The cooperative is democratically controlled on the basis of one member, one vote.”
Self-Management: “Cooperation involves both collective effort and individual responsibility.” Mondragon emphasizes the development of individuals along with, not against, others. “Democratic control means participation in management and the ongoing development of the skills needed for self-management.” Cooperators are to be empowered and use their management skills to better the co-op and information regarding the entirety of business operations is to be transparent.
Pay Solidarity: “The co-ops will practice both external and internal pay solidarity. Internally, the total pay differential between the lowest- and the highest-paid member shall not exceed a factor of one to six.”
Group cooperation: Mondragon is not isolated. Individual co-ops interact with each other in groups; co-op groups interact with each other; Mondragon interacts with other societies in the global marketplace.
Social Transformation: Since Mondragon is committed to a greater cooperative mission, they have already transformed their society in many positive ways. However, they do much more for the good of society than just offer fair wages to workers and work for the overall good. Co-ops invest the major portion of their operational profits back into the Basque community. This money is used in many ways including new job development, a social security fund based on solidarity and responsibility, developing language and culture and many other practices.
Universal Nature: “The co-ops proclaim their solidarity with all who labor for economic democracy, peace, justice, human dignity and development in Europe and elsewhere, particularly with the peoples of the Third World.”
Education: Common to most societies, the Mondragon mindset is committed to putting many resources and a firm emphasis on proper education and professional training.6
When reading these principles, we notice elements that are present in America’s Western Society. An emphasis on education, interaction with other societies, reinvesting locally, and to some degree, an equality of opportunity are factors of American society that are also present in the Mondragon movement. However, there are also immense differences between the principles of the Mondragon worker cooperative movement and the principles of United States society. For example, in American society, how often do we witness the development of the community valued above the development of the individual? Where can we find a firm that will not let the highest paid worker make more than six times that of the lowest paid worker? Which American companies invest a large portion of their bottom line profits into the community instead of paying them to wealthy stock-holders?
Overall, the Mondragon society is one that is vastly different than that of twenty-first century America and the globalizing world. The main difference is the fact that the overall goal of Mondragon is not to accumulate wealth. “The ten Mondragon cooperative principles are the basis for substituting the values of enduring community development and stability for the accumulation of wealth.”7 Mondragon bases their society on enduring prosperity for society as a whole, not on selfish motives.
In terms of operating the cooperative businesses, each worker theoretically receives one vote, but most often decisions are made on a consensus-discussion basis rather than an explicit vote. Cooperators get together and discuss the issue at hand and work through it until a consensus is reached. Often, if the group is still divided at the end of discussions, the issue will be changed or brought up at another time.8 The Mondragon Cooperative Corporation is made up of three distinct parts: financial, industrial and distribution. There are also various educational and training centers including the Mondragon Unibersitatea, Mondragon’s University.9 The continuing theme that Mondragon is not solely money-focused is evident in their balance sheets and financial statements. Besides economic and business statistics, balance sheets also include measures of “customer satisfaction, commitment to the environment, and people satisfaction, among others.”10
Some people may argue that elements of the Mondragon system just would not work well or that Mondragon could not be successful both economically and in the business environment globally. However, Mondragon is a very successful, continually growing economy which aptly provides for its citizens. Mondragon began in the fifties out of a Spanish economy which was growing greatly, however even as the Spanish economy has contracted, Mondragon has continued to grow.11 From 1996 to 2002, MCC total assets almost doubled from 8908 to 15337 million Euros. Total investments nearly tripled, profits grew by 150 %, and the workforce more than doubled. MCC growth and expansion has been very strong and looks to stay that way because of their stable workforce, reinvestment in the community and an emphasis on education. To those who say that this model could not work in an increasingly global marketplace and economy, in 2002, 51% of the Mondragon sales came from exports.12
Because the cooperative system is invested in creating new jobs, measuring employment levels is generally a good measure of overall economic health. “Economic surpluses and positive cash flows are usually translated into new jobs for new cooperators.”13 While Mondragon does go through recessions just like every other economy of the world, recessions mean a reduction in the number of jobs being created, rather than massive layoffs or business closings. Due in part to its employment policies which provide great job security and empowerment of workers, Mondragon’s success is beginning to gain world recognition. In 2003, MCC was ranked one of the ten best firms to work for in Europe, by Fortune magazine. Several MCC companies have won ISO (International Organization for Standardization) certificates which are awarded to the top firms around the world when considering quality management in their products or services.14 ISO awards are very prestigious internationally and for Mondragon companies to be winning these awards shows how successful the Mondragon experiment has been.
In recent years, the media has given increased attention to the inflated salaries that many corporate-level employees are making while sometimes the lowest paid workers in the company are making several hundred times less than the CEO. Much talk has originated from this increased attention, yet very little has been done to change the corporate pay structure policies. One company, Bridgeway Capital Management, does operate in a more fair way. Bridgeway, founded in 1993 by John Montgomery, is a very unique company. It is a financial firm which operates out of Houston, Texas. Like many Americans, the CEO Montgomery recognized how inflated the salaries of corporate individuals had become and decided to start and operate a business that is focused on compensating its employees fairly and is committed to the community.15
Therefore, when John Montgomery opened Bridgeway, he decided that no partner can make more than seven times the lowest paid partner (this includes himself, as CEO). He has also instituted an Employee Stock Option Program which further assists in fairly compensating his employees. In addition to this unique pay structure, Bridgeway is an outward-focused company, as opposed to being inward-focused, meaning that the overall goal is to help the community more than the individual workers inside the company. To that end, Bridgeway also has a foundation which gives away half of the company’s profits to the community and other causes around the world. Their goal each year is to give away one-hundred million dollars, half of their overall operating profit! Montgomery’s goal was to change the overall mindset of those who work for Bridgeway. If top people want to make more money, then they must encourage and help the lower-level people to be more productive. Then, if the overall company improves its’ bottom line, everyone in the company can make more, but more importantly, Bridgeway is able to contribute more to the community.16
Montgomery noticed another dynamic created by the inflated top-end salaries: the lower-ranking workers resent the corporate “bosses” because the lower-paid workers feel that they do all the work while corporate bosses just oversee. This ill-will creates a bad work environment which hinders progress of the company and limits worker morale. Because of this, Bridgeway is a “flat” organization, which means that there are no direct bosses. Each employee is responsible for holding each other accountable and big decisions are made by committees, not a small number of high-ranking officials. These policies have helped to create a community-like work environment which facilitates and encourages relationships and respect among workers. In addition to the fair monetary aspect of Bridgeway, the work environment also makes everyone feel valued, unlike many companies around the United States. Employees feel empowered because they can make a difference in the operations of their company and they have a stake in the success of the company through the stock option program. Employees also know that they are an important asset to the success of the firm.17
The Bridgeway Foundation, in charge of giving away huge sums of money every year, is also run by the employees of Bridgeway Capital Management. While the overall mission of the foundation is to end genocide, Bridgeway also contributes to many other causes worldwide. Every employee is on a committee of their choosing and together each committee makes decisions in giving out money to their cause. The committees that exist are higher education, lower education, our community, overseas projects, and genocide. Each committee has a budget and meets monthly to decide how to spend their money and what causes to support. Overall, Bridgeway is a company which is focused on improving the community within which it operates and the world, as well as providing fair compensation and a communal work environment.18
Clearly, there is a huge problem occurring in America regarding the presence of poor people who have jobs and work hard to make an adequate life for themselves. Their inability to pay for necessities of life despite having a job should be a huge concern of the American public. We must educate and find a way to get all of America to understand the problem at hand and realize that we can change the current corporate culture. Often Americans get blinded by the huge economic presence that capitalism has on our culture and focus too closely on the way our current corporate structure operates. However, we must educate people to the fact that there are alternatives to exploiting the labor of workers by only paying them $6. Americans must remove the narrow vision that focuses them on our current practices so that much needed change can occur. To begin to ameliorate the problem of the working poor in America, we must encourage people to remove the element of greed from their minds and convince the public to focus more on others. When this occurs, people will be willing to receive less in their pay check, and businesses will be able to focus more on community and improving the livelihood of the marginalized.
A change in the mindset of American citizens will be helped by increased exposure to the Mondragon experiment and to Bridgeway Capital Management. The Mondragon Cooperative movement that has occurred in Spain since the 1950s and the operations of Bridgeway Capital Management which began in 1993 are examples of ways to operate an economy and a business that are both successful and ethical in their treatment of people and the communities around them. They have proved that it is possible and right to work in a fashion that provides for the success of the company as well as the success of the community.
In looking for practical ways to change America, we start with elements of Mondragon. Mondragon does not have goals of merely improving individual wealth, but rather improving the overall good of society is paramount. “Cooperative entrepreneurship turns the motivation on its head. Individual aspirations find full satisfaction, not in pursuit of profit, but through a cooperative harmonized personal and social striving.”19 Most obviously, by implementing a pay scale similar to that of the Mondragon cooperatives, we could greatly improve the lives of the poor, low-wage workers. By bringing down the huge salaries of corporate executives and bringing up the hourly wage earners, many could be lifted from poverty. Empirical studies would have to be conducted to arrive at exactly what ratio should be used, but a movement away from corporate wages that are hundreds of times greater than low wage workers would certainly help. The element of open admission could greatly benefit America in that it would provide true equality of opportunity in terms of being hired and treated fairly in the work place. Mondragon’s open admission disallows any discrimination.
If American firms were to move more toward a democratic organizational structure, meaning that each worker has an equal say, it would be much harder for companies to take advantage of some people. A cooperative decision making system would arrive at better, more equitable companies which are more likely to advocate justice for all. When those who have been poor are given a voice in the American company, they will better know how to assist and work for justice in this world. Finally, while some American companies do work for social justice and community gain, the MCC emphasis on social transformation is unparalleled. How much would our community gain if every company contributed part of their bottom line profits to community development? There is so much to learn from the extremely successful Mondragon cooperative system. “The corporate culture of MCC has the aim of overcoming the capital-labor confrontation, making people joint owners of the firm and therefore sharing in the firm’s decision making as well as in the profits.”20 Implementing elements of Mondragon Cooperative Corporation into America would greatly improve the way we interact economically.
America needs more corporate leadership like John Montgomery. Montgomery, the CEO of Bridgeway Capital Management has envisioned and implemented a corporate culture that is very similar to that of Mondragon and is worker-focused. Bridgeway’s “flat” organization, coupled with its 7 to 1 pay ratio is an example for all businesses as an ethical way of running a business while also being profitable. It is easy to see how empowering workers and encouraging them in a Bridgeway-like environment would greatly improve the morale of workers, and coupling that with Bridgeway’s pay structure is a great model for other American businesses. If more companies adopted corporate culture similar to Bridgeway, many poor would be helped.
The most impressive aspect of Bridgeway, to me, is the generosity they employ in giving away half of their yearly profits. These profits are not a paltry sum; Bridgeway aims to give away 100 million dollars every year. If every company in America were to give away a portion of their profits, not even necessarily fifty percent, the amount of money being put toward socially just activities in the world would increase exponentially. When talking with Michele Camp, an employee of Bridgeway, she noted that people do not work at Bridgeway to “get rich.” She makes a more than an acceptable wage, but she will not become a millionaire working at Bridgeway. However, employees love their work environment and are very happy being able to care for themselves while also contributing to society on a huge level.21
All of these ideas would serve to help eliminate the working poverty that is present in American society today. The Mondragon movement in Spain and the Bridgeway corporate practices show how socially conscious business and economic behavior can occur along side being successful and making a profit. Poverty taking place among people working hard to make a living does not have to occur and it should not occur. Changing the ways in which America operates economically and corporately can and should be done, but it cannot occur unless the mindset of many people changes. When American citizens see that there are other ways, such as Mondragon and Bridgeway, to treat workers and stand up to the overwhelming dominance of capitalism as we know it, the working poor in America will begin to see progress.
Camp/Bridgeway Capital Management, Michele. Personal interview. 16 Apr. 2009.
Forcadell, Francisco Javier. "Democracy, Cooperation and Business Success: The
Case of Mondragon Corporacion Cooperativa." Journal of Business Ethics 56.3
Morrison, Roy. We Build the Road as We Travel. Philadelphia: New Society
Shipler, David K. The Working Poor. New York: Vintage Books, 2004.
1 David Shipler, The Working Poor (New York: Vintage Books, 2004), p.42.
3 Roy Morrison, We Build The Road as We Travel (Philadelphia: New Society Publishers, 1991), p. 2-3.
4 Francisco Forcadell. “Democracy, Cooperation and Business Success.” Journal of Business Ethics 56 (2005): p. 255.
5 Morrison, We Build, p. 10.
6 Ibid. p. 11-12.
7 Ibid., p. 65.
8 Ibid., p. 72.
9 Forcadell, “Democracy, Cooperation and Business Success,” p. 256.
10 Ibid., p. 257
11 Morrison, We Build, p. 172.
12 Forcadell, “Democracy, Cooperation and Business Success,” p. 256.
13 Morrison, We Build, p. 172.
14 Forcadell, “Democracy, Cooperation and Business Success,” p. 256.
15 Michele Camp, Bridgeway Capital Management. Personal interview. 16 April, 2009.
19 Morrison, We Build, p.109.
20 Forcadell, “Democracy, Cooperation and Business Success,” p. 257.