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Social Enterprise History - Case 2.1 - Mondragon Cooperative Corporation

Social Enterprise History - Case 2.1 - Mondragon Cooperative Corporation

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Published by Rory Ridley Duff
The Mondragon Cooperative Corporation is one of the world's best known (and copied) examples of large scale social enterprise. In the last 50 years, the achievements of this network of cooperative enterprises has attracted attention from all parts of the world.
The Mondragon Cooperative Corporation is one of the world's best known (and copied) examples of large scale social enterprise. In the last 50 years, the achievements of this network of cooperative enterprises has attracted attention from all parts of the world.

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Published by: Rory Ridley Duff on Sep 04, 2009
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Social Enterprise: Key Case Study
Rory Ridley-Duff, 2010Creative Commons 3.0, Attribution No Derivatives 
Case 2.1 - Mondragon Cooperative Corporation (MCC) 
In 1941, a Catholic priest arrived in the town of Mondragon, in the Basque region of Spain. The town wasquite small, with fewer than 10,000 residents, but had a strong industrial tradition through the presence of acompany called the
Unión Cerrajera
. Initially, Father Arizmendi was invited to provide religious instructionfor the company's apprentices. As one student commented "he taught classes in religion and sociology - andreally his religion classes were mainly sociology" (Whyte & Whyte, 1991, p. 33)In the mid 1940s, after the
Unión Cerrajera
refused to provide funding for the education of working classfamilies, Father Arizmendi chartered a parents' association called the
 League for Education.
This organiseddoor to door collections to fund the
 Escueal Politécnica Profesional
- a technical school at which the childrencould receive a technical education. The arrangements for running the school involved the community byallowing four groups of members:
 
(1)
 
anyone expressing a desire to join the
 League for Education
 (2)
 
anyone who paid a subscription to the
 League for Education,
or contributed in kind (e.g. by teaching).(3)
 
sponsors who gave annual contributions towards the running costs of the school(4)
 
honorary members (i.e. organisations, such as local authorities, that had to be represented to meet statutory legalrequirements).
The first graduates from the school became engineers at
Unión Cerrajera
. In 1950, when the companydecided to issue a new block of shares, Father Arizmendi negotiated a meeting so that his new graduatescould ask the company for a chance to invest in their firm. They were refused. The graduates thenapproached the central government in Madrid and lobbied authorities to sanction a state-sponsoredprogramme enabling engineers to purchase shares in their own firm. This too was rejected.The five graduates - Luis Usatorre, Jesús Larrañaga, Alfonso Gorroñogoitia, José Ormaechea and JavierOrtubay - told Father Arizmendi that they were determined to start a new company that embraced the socialand economic teachings they had learnt in his sociology classes. Although the students had a clear politicaloutlook, their immediate concern was to remove barriers to the progression of their careers, and to secureincomes for their families. In their favour, they had a record of involvement in community work and haddeveloped good reputations as the first university educated children of working class families.In 1955, the five engineers took over a bankrupt firm, acquiring a licence that enabled them to buildelectrical and mechanical products for home use. In 1956, they established a constitution that became themodel for over 250 organisations, with more than 100,000 staff that subsequently joined the MondragonCooperative Corporation (MCC). Their organizational arrangements are summarised in Figure 1. AsTurnbull (1994) notes, these unusual arrangements split decision-making into three bodies: (1) a managementcouncil that created operational plans; (2) an elected governing council that represented the views of members as owners of the business; (3) an elected social council that represented the views of members asworkers. The members of the organisation are its workforce.Today, member businesses of the MCC still use this system (although smaller cooperatives do not havesocial councils). The elected bodies comprise members of staff who work in the organisation (or - in the caseof universities, banks, schools and retail stores - mixed groups of workers, consumers and supporters). The
governing council
is elected from a General Assembly of all members. The
social council
is elected torepresent each department and/or stakeholder.
 
Unlike a conventional US/UK company, the MCC is registered as a co-operative (the UK is one of only 4countries in the EU that still has no Co-operative Law). Under these laws, members are legallyself-employed, even when their day-to-day jobs are much the same as "employees" in private companies. Asa result, the MCC also established a welfare organisation that provides social insurance to members and theirfamilies. Secondly, members can purchase a capital stake in their company and receive a share of the profits- indeed, staff are
required 
to purchase capital if they wish to become a member. In 2006, over 80% of "employees" were also members with a final say on key decisions and the leadership of their organisation(ICA, 2009).Each member business has an HRM function, and the director of this is frequently (but not always) electedto the governing council (Ridley-Duff, 2007). Normally, there is one, perhaps two, managers on governingcouncils comprising 7, 9 or 12 people. The HR director attends the social council, but since the late 1970s

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This case study is taken from the book Understanding Social Enterprise: Theory and Practice. For more information see: http://www.roryridleyduff.com/educato...
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