Department of Sociology

Faculty of Economics and Business

Adriana Aubert Simon

THE MONDRAGON CORPORATION

The Mondragon Corporation
The Mondragón Corporation (MC, hereinafter) is a cooperative business organization made up of
autonomous and independent cooperatives. It is the largest cooperative business group in the world
in the industrial area, the first business group in the Basque Country, the tenth in Spain and one of
the most successful examples of work cooperatives in history (Mondragon Corporation, 2013). It is
the largest cooperative group in the world (made up of 261 entities: 101 cooperatives; 128
subsidiaries; 8 foundations; 1 mutual society; 13 hedging entities; and 13 international services) and
has an economic activity in the sectors of industry (production of goods and services), finance
(banking activities, social provision, insurance), distribution (companies involved in commercial
distribution) and knowledge (research centres, a university and vocational training). The way in
which each area is organized is characterized by autonomy although all the actions carried out have
a common strategy shared by the group of companies and entities that form it (Redondo, Santa
Cruz, Rotger, 2011).

Although there are many cooperatives, the particularity of the MC lies precisely in its success as a
company that manages to succeed in the capitalist environment through non-capitalist principles,
demonstrating greater resistance to economic crises compared to traditional companies. The MC
competes in international markets using methods of democratic organization and among its
objectives are the creation of work, the human and professional promotion of its workers and the
commitment of development with its social environment.

The Mondragon Cooperatives were founded in 1955 by a priest, José María Arizmendiarreta who,
together with five of his students from a professional school, created an industrial cooperative in the
Basque municipality of Mondragón. Arizmendiarreta's vision was the starting point of a Corporation
that today involves more than 74,335 employees. Since its foundation, the MC has continued to
position itself with the Basque Country, where around 40% of its workers are located and has also
expanded to the rest of Spain as well as internationally, with plants around the world.

Creating jobs
The success of the MC has positioned its cooperatives and subsidiaries throughout Spain as well as
internationally (with subsidiaries in 41 countries on 5 continents), generating jobs at local, national
and global level. This expansion has been possible thanks to the resources and synergies of solidarity
exchanged between cooperatives since its inception. In the 1990s, the internationalization of the
group became one of its main strategic objectives, approved by all the group's cooperatives in the
4th Cooperative Congress. Similarly, in the 8th Cooperative Congress of 2003, "social expansion" was
approved in order to disseminate the principles of the group through all its subsidiaries (Flecha,
Ngai, 2014).

This creation of jobs has led to significant economic improvement both locally, nationally and
globally. For example, the Gross Domestic Product (GDP) per capita of Oñati, one of the
municipalities of the Basque Country where a significant part of the group's cooperatives are
concentrated, in 2016 almost doubled Spain's GDP per capita, positioning itself above the GDP per
capita of the Basque Country, Gipuzkoa and the Region of Alto Deba. The data relating to Oñati's
personal income is also higher than in other enclaves and doubles the numbers in Spain.
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 Department of Sociology
Faculty of Economics and Business
Adriana Aubert Simon

2016 GDP Per head. (€) Index (C.A. of Euskadi=100)

Oñati 44.401 135
Alto Deba 36.920 113
Guipúzcoa 33.081 101
Basque Country 32.771 119
Spain 24.000
Source: own elaboration based on data from EUSTAT, INE and Datos Macro.

In 2018, Oñati had the lowest unemployment rate compared to its Region, Province and
Autonomous Community, both in reference to those over 45 years of age (which is also 5 times
lower than the Spanish rate), long-term unemployed and those in the range between the ages of 16
and 64.

Unemployment Long-term
Unemployment
rate unemployment
2018 rate
(over 45 years rate
(16 – 64 years old)
old)
Oñati 5,8 % 6.71 % 2.74 %
Alto Deba 8,8 % 8.58 % 4.22 %
Guipuzcoa 10.07 % 10.23 % 4.98 %
Basque Country 11.73 % 11.59 % 6.16 %
Spain 23.70 % 32,9 % 12.3 %
Source: own elaboration based on data from EUSTAT, INE and Datos Macro.

Although the creation of jobs of the MC is greater in the Basque Country, it also extends to all
regions of Spain and, significantly, to Catalonia (6,837), Galicia (4,252) and Navarre (4,104).

Occupation by geographical area (2014)

Nº of Nº of Nº of
C.A. occupancy C.A. occupancy C.A. occupancy
Basque Country 31779 Balearic islands 2118 Cantabria 720
Catalonia 6837 Castile-Leon 2030 Castile-La Mancha 688
Galicia 4252 Valency 1663 La Rioja 550
Navarra 4104 Aragon 1384 Extremadura 237
Madrid 2466 Asturias 874 Canary islands 146
Andalusia 2127 Murcia 724
Source: Own elaboration based on data of "distribution of the employee": http://www.mondragon-corporation.com

Regarding the creation of jobs on a global scale, there are 11,312 workers in the group's industrial
area who are located in factories and subsidiaries abroad. Thanks to the MC Internationalization
Model based on multilocation (in which new companies open abroad without closing the parent
companies in their place of origin), it has been shown that global cooperatives had a higher net
growth in jobs than local cooperatives, both in the parent cooperative and in its subsidiary during
the period analysed (1996 - 2006) (Luzarraga, Aranzadi, Irizar, 2007).

Copyright of the authors. Reproduction, storage, use in calculation template or transmission in any way will not be allowed:
electronic, mechanical, photocopied, recorded or by any other procedure, without the permission of the authors.
 Department of Sociology
Faculty of Economics and Business
Adriana Aubert Simon

Reduction of poverty and inequality rates

A second aspect to highlight about the social impact of the MC is the significant difference in
inequality and poverty rates between the regions where cooperatives are concentrated mainly due
to the job creation it has promoted. The municipalities of Mondragón and Oñati are two of the areas
of Europe with the lowest rates of poverty and social exclusion, and two of the least unequal regions
in Europe according to the GINIindex. In 2018,the Gini index of the Basque Country was 26,7, the
lowest compared to the different EU countries (within Europe of 18)and far from the Spanish index
(34,1).

GINI Index (2018)

Basque Country 26.7 Austria 30.8
Belgium 27.2 Luxembourg 30.9
Finland 27.3 France 32.4
Netherlands 28.1 Italy 32.7
United Kingdom
Denmark 28.2 33.1
Sweden 30.0 Greece 33.4
Ireland 30.6 Portugal 33.5
EU–28 30.7 Spain 34.1
Source: Eustat (Comparative indicators of poverty, precariedad and
unequality in European Union countries (1) (%).

These data reveal the egalitarian remuneration policy according to which the wage difference
between the person who has the highest salary in the cooperative and the one with the lowest is 1
to 6. The fact that the salary of 97% of workers is between 1 and 3.5 is reflected in a more equitable
distribution of wealth in the Region of Alto Deba (Burgués et al., 2013; Cancelo, 1999).

Basic principles
A fundamental foundational point is that the economy must be at the service of people and not the
other way around. The decision-making of the MC and its cooperatives is done through democratic
procedures where members have participation in capital, results and management (Flecha, Santa
Cruz, 2011; Forcadell, 2005). The democratic procedures established in the group are representative
and, through them, each member can participate in compliance with the condition of "one person,
one vote" without making distinctions for reasons of seniority, accumulated capital or professional
category.

The Basic Principles of Cooperative Experience of the group were approved in the 1st Cooperative
Congress held in 1987 and are still in force today. For example, the principle of intercooperation or
the principle of remuneration solidarity that conceives that the remuneration range of cooperatives
must be lower than that of the market. Some of these solidarity mechanisms are the relocation of
personnel in times of crisis, the flexible work schedule, financial measures or the reconversion of
results.

At the 2014 Co-operative Congress, all the group's cooperatives approved the document
"Mondragón del futuro" in which cooperative values and principles, as well as the instruments of
solidarity, were reaffirmed.

Copyright of the authors. Reproduction, storage, use in calculation template or transmission in any way will not be allowed:
electronic, mechanical, photocopied, recorded or by any other procedure, without the permission of the authors.
 Department of Sociology
Faculty of Economics and Business
Adriana Aubert Simon

Questions to be developed by the student

1. What factors do you think have led the MC, as a cooperative business organization, to be the
first business group in the Basque Country, the tenth in Spain and one of the most successful
examples of work cooperatives in history?

The main thing that they have done in order to have such success is doing things right. Their
interests went beyond any company’s and their procedures and management focused on the
actual market’s and employees needs.

To start with, as it was mentioned above, the Mondragon Cooperative is immersed in the
capitalist system but that hasn’t stop them to act in the market in a non-capitalist way,
meaning that they reinforce the commitment to their social environment, to the creation of
jobs and to the promotion of equality and reduction poverty where the activity is produced.

2. What is the relationship between this success and the fact that in the area where the MC is
most established it has a GDP that almost doubles that of Spain, the lowest unemployment
rate and the lowest rates of poverty and social exclusion?

The relationship between all these factors is the increase of jobs that the MC produces. The
consequences of said action is the disminution of the unemployment rate which is also
related to the purchasing power, meaning that the poverty rate also decreases, and the
social exclusion as well.

3. What are the main features that differentiate the MC from a non-cooperative multinational
company?

The main features that differentiate the coopertive from a multinational is the fact that they
have a democratic organization above all and that means that each partner has a vote
whatever the amount capital hold or the seniority. Another quality is that they serve to their
clients and their main goal isn’t making profits out the activity but to cover different
markets’s needs.

Their internationalization modal respects other companies abroad because they locate their
company is a foreign country but they don’t close the parent company, this way the growth
of the company increases.

4. What do you think would be the main barriers that prevent the expansion of the MC as a
work cooperative?

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electronic, mechanical, photocopied, recorded or by any other procedure, without the permission of the authors.
 Department of Sociology
Faculty of Economics and Business
Adriana Aubert Simon

Maybe other multinationals that are located near the MC and therefore their respective
competition. A barrier could also be capitalism that doesn’t allow them to finally expand as
they wish because other companies take other methods to act in the market based on
capitalism and therefore leaving the cooperative in disadvantage.

References

Antón, F. J.; Colinas, J. A.; Iruarrizaga, R. (2013). The unequality in the distribution of income in euskadi (1986-
2012). http://www.ogasun.ejgv.euskadi.eus/r51-
19220/es/contenidos/informacion/estudios_publicaciones_dep/es_publica/adjuntos/ikerketak-Ekonomiaz-
2013-II.pdf
Basterrechea, And.; Albizu, E. (2011). Management training as a source of lost competitive advantage: The
Mondragon Cooperative Group case, Economic and Industrial Democracy,32 (2), 199-222.
Burgués, A., Martin, S.; Santa Cruz, I. (2013). The Relationship Between Transformative Cooperatives and
Social Inequalities In Los Territories, Scripta Nova. Electronic Journal of Geography and Social Science, XVII
(427/4).
Cancelo, A. (1999). Mondragón Corporación Cooperativa:History of an experience. International journal of
vasco studies, 44(2), 323-357.
Eustat - Instituto Vasco de Estadística. (2012). Encuesta de innovación tecnológica (EIT) of the C.A. de
Euskadi.http://www.eustat.eus/elementos/ele0011300/not0011371_c.pdf
Flecha, R.; Ngai, P. (2014). The challenge for Mondragon: Searching for the cooperative values in times of
internationalization, Organization, 21(5), 666-682.
Flecha, R.; Santa Cruz, I. (2011). The Mondragon case. 33(1), 17-43.
Forcadell, F. (2005). Democracy, cooperation and business success:the case of Mondragon Cooperativa
Corporacio, Journal of Business Ethics,56, 255-274.
Luzarraga, J.M.; Aranzadi, D.; Irizar, I. (2007). Understanding Mondragon globalization process: local job
creation through multi-localization Facing globalization threats to community stability. Community Wealth.
http://community-wealth.org/sites/clone.community-wealth.org/files/downloads/paper-luzarraga-et-al.pdf
Mondragon Corporation (2013) Corporate Profile. (http://www.mondragon-corporation.com/wp-
content/themes/mondragon/docs/MONDRAGON-CorporativeProfile.pdf).
Redondo, G.; Santa Cruz, And.; Rotger J. (2011). Why Mondragon? What works in overcoming inequalities.
Qualitative Inquiry, 17 (3), 277-283.

Copyright of the authors. Reproduction, storage, use in calculation template or transmission in any way will not be allowed:
electronic, mechanical, photocopied, recorded or by any other procedure, without the permission of the authors.
 Department of Sociology
Faculty of Economics and Business
Adriana Aubert Simon

Delivery of the practice Case Study Mondragón:

Answer the questions to be developed, put your name in the name of the file, and upload it to the Virtual
Campus in PDF format in the corresponding task before the date indicated in the same task.

Copyright of the authors. Reproduction, storage, use in calculation template or transmission in any way will not be allowed:
electronic, mechanical, photocopied, recorded or by any other procedure, without the permission of the authors.