The Mondragon Corporacion Cooperativa: An interview with Juan M. Sinde, Chief Executive Deputy.

The Mondragon Corporacion Cooperativa (MCC) is a cooperative in the Basque region of Spain which includes over 150 individual companies and has over 66,000 worker/owners. In 2002 it had total sales of 9.23 billion euros ($8.8 billion) and 15.3 billion euros ($14.6 billion) in total assets. After the Spanish Civil War the Basque region of Spain was economically and social depressed. Inspired by a local priest's teachings on the principles of Catholic social thought, five graduates of a school of industrial skills (which the priest had started) founded the Mondragon cooperative based on these principles. MCC lists 10 basic principles that form the core of their vision and mission: Open Admission (non-discrimination); Democratic Organization; Sovereignty of Labor; Subordinate Nature of Capital; Participatory Management; Payment Solidarity; Inter-cooperation; Social Transformation; Universality; and Education. MCC has three basic business divisions and two research and training centers. The largest division is the Industrial Group, which includes: Household Appliances; Construction; Machine Tools; Industrial Equipment; Automotive Parts; and Engineering Capital Goods. The Distribution Group consists of retail stores and agricultural distribution. The Financial Group includes Banking, Insurance and Social Welfare. Caja Laboral, MCC's bank, had 322 branches in 2002 and had administered assets of 8.5 billion euros ($8.1 billion) and an operating profit of 125 million euros ($119 million).

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Juan M. Sinde is Chief Executive Deputy, responsible for retail banking business, and a member of the Executive Committee of Caja Laboral, the bank for the Mondragon Corporacion Cooperativa. He has a Master's in Engineering from the University of the Basque Country. He is also active in many Catholic and cultural associations in the Basque Country. He is married and has two children.

Q: The Mondragon Corporacion Cooperativa (MCC) is a very different type of business organization compared to what is typically encountered at a business school. What were the motivations for the founding of MCC?

A: After the Spanish Civil War the Basque region was very isolated and very under-developed economically. If there are no jobs you will have a large migration out of the region, which makes it harder for the region to develop, as well as keeping the Basque culture alive. Thus to avoid the migration of people from the Mondragon Area we needed to establish new businesses. A Priest, Fr. Jose Maria Arizmendiarrieta inspired five engineers to establish MCC to create new businesses by putting into practice Catholic Social Thought. The key was to emphasize the dignity of the human person in the design of new companies.

Q: In terms of developing a distinct mission or ethical framework, how helpful was it to be able to "start from scratch"?

A: Very. I should mention, however, that different forms of cooperatives have played an important role throughout Basque history, so it was not an alien idea. But, to answer your question, new companies do not have to overcome old ways and an entrenched corporate culture. In fact, conventional companies that converted into cooperatives have suffered continuous problems because of the lack of understanding of some cooperative values by some workers. Nevertheless, we are trying now to install some of the values (participation of workers in the management decisions, sharing profits, and even ownership of their companies) in PLC companies owned by cooperatives.

Q: Mondragon is quite large, 150 enterprises and over 60,000 worker-owners. How does MCC deal with conflicts between member enterprises? Do any of them compete head-to-head?

A: The cooperatives that are in the same economic activity are included in one Division, led by one Vice-President who deals with those issues and tries to find ways for them to collaborate instead of having them compete. It is thus very rare that they would go head-to-head.

Q: One of the things I found most fascinating about MCC is the way compensation is determined, especially profit-sharing. Could you tell us about this?

A: The salary of each position is decided by a Committee formed with representatives of the Management team and representatives of Social Council (elected by workers to defend their interests as workers). In that Committee the balance between compensation of different jobs is usually reached. A large share of profits is reinvested in the individual cooperative, and a portion goes to MCC to support the various social welfare, community and educational (schools and colleges) activities. As for profit-sharing going to workers, it must be stressed that it is compulsory that all the profit-sharing must be re-invested by everyone in the same company and that money can be taken only when someone leaves the cooperative or retires. The profit assigned to each worker depends basically on his or her salary. The workers do receive a very competitive return (currently about 6-8%) on their invested profits, and they receive that money.

Q: Many cooperatives in the U.S. are agriculturally based or center on "arts and crafts" type production, yet MCC has focused on high tech production from the beginning. Why this emphasis? While it makes MCC more competitive, does it present any challenges?

A: The cooperatives were born a few years after the Spanish Civil War when the Spanish market was closed to foreign companies. The problem was producing and not selling. Fr. Arizmendiarrieta's first step in promoting economic development was the establishment of the "Politechnic" so that the local workers would have the skills to compete. Taking advantages of the skills of local workers because there was a local "Politechnic," the cooperatives set up companies using the technologies they were able to use. The conflicts derived by different levels of skilled workers are above all in the compensation field and are dealt with by the committees I mentioned previously.

Q: One of the most frequent comments I hear about cooperatives is that they do not have adequate disciplinary tools for workers, though they do not put it so bluntly. How does MCC motivate its worker-owners? How does it deal with "slackers?" I know MCC does not lay off workers, but can people get fired?

A: People can be fired although it happens very rarely (mostly due to frauds or lack of loyalty). Discipline problems are handled by a specialized Committee, which is comprised of members of management and the Social Council. They decide the punishments according to the gravity of the disciplinary faults. The "moral" pressure between workers to be responsible and honest with the common company should not be undervalued. Motivation is based in the challenge of the work itself, the profit sharing ... and the threat of the company disappearing if it is not competitive enough.

Q: What pressures does globalization place on MCC? How is MCC dealing with these?

A: We are setting up new plants in other countries (different from the Basque Country) to deal with the competitive problems related to globalization. Sometimes it is not well understood by the members of the companies because they would prefer to invest locally and offer new jobs to the members of their community. Besides that, there is the problem of how to adapt the values of MCC to cultures very different from ours and how to preserve human dignity while insuring that those plants are competitive.

Q: All large organizations have a problem keeping the mission alive. As MCC is more mission-driven than most corporations, how does MCC keep its "spirit" alive?

A: It is not easy. We have a monthly magazine informing all the worker-owners of the activities of different cooperatives and usually it includes different articles trying to keep alive the idea of being different, remembering continuously our specific values, discussing the problems of putting them in practice. Furthermore, there is an annual meeting of representatives of workers of all the cooperatives where at least every four years we discuss our policies, and revise the application of our values.

Interviewed by Charles M.A. Clark

The Peter J. Tobin College of Business, St. John's University