Pour une nouvelle mondialisation: Le défi d'innover

14. Institutional Innovation in Mondragon : Context, Shape, and Consequences

14 INSTITUTIONAL INNOVATION IN MONDRAGON Context, Shape, and Consequences Fred Freundlich, Saioa Arando, Monica Gago, Derek C. Jones, and Takao Kato Economic events of recent years have led many to believe that standard model of the firm—the private, investor-owned enterprise—is in crisis. Various models of reformed enterprises have been in use since at least the mid-nineteenth century, and their numbers have increased greatly since the 1970s, but the depth and breadth of the current crisis have awakened even greater interest in the possibility of alternative ways to structure business organizations. One alternative business form is the cooperative enterprise, a business owned by one or more classes of members. Although co-ops do not often receive much attention from the media, popular or business publishers, or the economics and management professions, they are not a marginal economic phenomenon.The International Cooperative Alliance (ICA) estimates that currently over 100 million people are employed by cooperatives worldwide (ICA 2011). In countries as diverse as Kenya and Germany 236฀ Pour฀une฀nouvelle฀mondialisation฀•฀Le฀défi฀d’innover between twenty and twenty-five percent of the entire population are members of cooperatives of one kind or another, while in Québec the figure approaches 70%. Cooperatives come in a variety of forms, however, and most are ‘‘user-owned.’’ In credit unions, for example, the members are generally the depositors; in most consumer cooperatives, members consist of some portion of the customers. The type of cooperative of most interest here, however, is what is known as the producer or worker cooperative (WC), where the member-owners of the firm are the people who work in it. Since World War II, several quite significant worker cooperative movements have developed in Western Europe and elsewhere (Chaves and Monzón 2007), and in Italy and Spain they include leading, national enterprises and involve hundreds of thousands of worker-owners. Along somewhat similar lines in the United States, over 10,000 firms employing roughly 15% of the total work force have introduced a variety of inclusive employee stock ownership programs, mostly since the 1970s (Kruse et al. 2010). While many firms with these employee-stock-ownership arrangements do not approximate worker cooperatives in important respects, a significant portion of them do (Rodgers 2010). Over 2,000 of these companies are majority employeeowned . Mondragon is a large complex of mainly worker cooperatives. In order to understand institutional innovation there, the central topic of this paper, we should first briefly flesh out the concept of worker cooperative enterprise and what differentiates it from a conventional firm.1 One way to do this in summary fashion is to consider the roles of two of the basic elements of any enterprise—labour and capital—known in economics as ‘‘factors of production.’’ The simple, philosophical essence of the cooperative firm is that it reverses the relationship between these two relative to the conventional firm. In the conventional, investor-owned company, ultimate control, by law, rests with the owners of its capital, in a corporation, its stockholders. Capital is primary; labour is an instrument used to meet the corporation’s legal mandate to maximize shareholder value, that is, the value of capital. In the worker cooperative company, these roles are switched. Control, in a cooperative firm, by law, rests with labour, that is, with the organization ’s worker-members, and capital, by contrast, is considered an instrument . Labour is primary; capital is a tool. Labour ‘‘hires’’ capital to meet the business and social goals it defines for the organization. 1. Ownership issues have been debated in philosophy and the social sciences since Antiquity, and particularly since the Industrial Revolution. For further treatment, see Ellerman 1992; Mathews 1999 and Pateman 1995. Institutional฀Innovation฀in฀Mondragon฀•฀Context,฀Shape฀and฀Consequences฀ 237 This role reversal has at least two crucially important implications.First, it means that ultimate control—governance—of the cooperative company is internal and democratic, based on the principle of ‘‘one member–one vote.’’Second, it signifies democratic treatment of financial surplus, that is, profits. The profits earned by a worker cooperative are distributed among its workers-members, not among investors as in the conventional firm.The critical distinction between cooperative and conventional firms regarding both governance and distribution of surplus lies in the philosophical and legal ‘‘source’’ of rights in the firm (Ellerman 1992). Rights in a cooperative firm derive principally from one’s contribution of labour to the...