NY TIMES: MONDRAGON DOES IT BETTER

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If this crisis is teaching us anything in relation to our economic organization, it teaches us that alternative models are needed. Where to look?

Well, we’ve been quite persistent in maintaining that new ways of structuring ownership and governance of companies should be explored. Worker-centered enterprises so far turned to deal better with crisis situations. There is clear evidence for that.

We have previously discussed the opinion by Christopher Marquis in Forbes, outlined the results of a study by Rutgers School of Management, and summed the op-ed in NYT all indicating that employee ownership seem to be the better way of doing business, especially in crisis.

Peter S. Goodman recently visited Basque country in Spain. In a piece for NY Times, he praises the positive developments during these grim times within more than hundred Mondragon co-operatives. Below, we share with you the most relevant outtakes.

“Mondragón stands out as a genuinely large enterprise. Its cooperatives employ more than 70,000 people in Spain, making it one of the nation’s largest sources of paychecks. They have annual revenues of more than 12 billion euros ($14.5 billion). 

[…]

Many large businesses have distributed much of their earnings to shareholders in the form of dividends and purchases of their own shares, which lift stock prices. When the pandemic arrived, many lacked the reserves to weather a downturn, prompting managers to furlough and fire workers to cut costs.

Cooperatives have been expressly created to prevent such outcomes. They typically require that managers plow the bulk of their profits back into the company to prevent layoffs in times of duress.

“We have the philosophy of not firing people,” said Antton Tomasena, the Erreka Group’s chief executive. “We wanted people to not have too many worries.”

[…]

The system proved robust during the global financial crisis of 2008, followed by the so-called sovereign debt crisis across Europe. Joblessness soared beyond 26 percent in Spain. But in Mondragón, the cooperatives apportioned the pain through wage cuts and advance payments on future hours. Unemployment barely budged.

[…]

During the spring [of 2020], as many of Mondragón’s customers had to shut their factories because of the pandemic, orders for parts plunged. Production at Mondragón factories plunged to 25 percent of capacity. The cooperatives responded with the 5 percent cut in pay. No one was happy about it, but opposition was limited.

Since then, nearly all the cooperatives are back to nearly full capacity, as partners pay back the hours for which they were compensated when factories were shut down. Over all, the cooperatives expect to be profitable for the year.
[…]
For most multinational companies adapting to the pandemic, the interests of shareholders and employees typically diverge. Executives have continued to cash in on stock-based compensation buoyed by public bailouts even at companies that have resorted to layoffs.

At Mondragón, workers know that, as owners, they stand to benefit from sacrifices that strengthen their businesses.

“This is more than a job,” said Joana Ibarretxe Cano, a production manager at the Erreka Group, whose factory was closed for all of April. “This is being part of a team.”

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