9 - 702- 457

R E V : M A R C H 8, 2 0 10

RA M O N CA SA D E S U S- M A SA N E L L

T A RUN K H ANN A

Mondragón Corporación Cooperativa (MCC)

In 2001, Mondragón Corporación Cooperativa’s General Assembly had just approved the 2001–
2004 strategic plan for internationalization. Antonio Cancelo, MCC’s president, was reflecting on the
aggressive goals that the Assembly had just set. As customers and competitors became increasingly
global and as labor costs in Spain rose, it was imperative that MCC become a global corporation. By
2004, 57% of total industrial sales would have to be international, with 57 plants overseas—preferably
in Latin America, Eastern Europe, Asia, and the United States—and an overseas workforce of 6,400
people, 23.2% of the industrial group’s workforce. Cancelo asked himself whether it would be
possible to maintain the democratic management principles on which MCC’s success had been built
while at the same time delivering on those goals. This was Cancelo’s last year as president, and he
knew that MCC’s future viability largely depended on the success of the internationalization
program. As he said:

In an increasingly global economy, the only way to guarantee the survival and growth of
MCC is by internationalizing our activities. Globalization is a growing phenomenon affecting
all businesses, regardless of the sector to which they belong. Companies of all kinds adjust
their strategies to locate their products where there is potential demand. Day after day, we see
ever-larger merger-and-acquisition announcements, and it is more likely that, all of a sudden,
our local competitors become global competitors.1

MCC—a conglomerate of more than 100 industrial cooperatives with products as diverse as
kitchen appliances, elevators, automobile components, sports equipment, machine tools, financial
services, retail distribution, and education—was founded in 1956 by priest-entrepreneur Father José
María Arizmendiarrieta in northern Spain’s Basque country. MCC’s management paradigm was
based on trust, worker ownership, participatory management, democratic organization, and wage
solidarity. The corporation had grown to become one of the main European industrial groups; its
sales exceeded €7 billion and its workforce numbered 55,000. Several of the component cooperatives
regularly received awards for their excellence in quality management, and MCC’s main research arm,
Ikerlan, had collaborated on prominent research and development (R&D) ventures such as the
Columbia space shuttle project for NASA.

In the age of the empowered worker and amid the excitement surrounding the value of human
capital, MCC was the quintessential example of empowerment. It had taken democratization of labor
to an art form and perfected it over the years. Yet, paradoxically, as the worker-empowered
corporation met a global environment where empowerment was a buzzword, clear tensions were
emerging. As MCC increased its global presence by establishing production subsidiaries and
commercial offices abroad, some felt that such international growth came at the expense of job

Professors Ramon Casadesus-Masanell and Tarun Khanna prepared this case. HBS cases are developed solely as the basis for class discussion.
Cases are not intended to serve as endorsements, sources of primary data, or illustrations of effective or ineffective management.

Copyright © 2002, 2005, 2010 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-
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 702-457 Mondragón Corporación Cooperativa (MCC)

creation in the Basque country. Others believed that the implementation of the internationalization
program contradicted some of Mondragón Cooperative’s fundamental principles because, for the
most part, workers in foreign plants were not shareholders, the plants did not have a democratic
organization, labor was not sovereign, and, contrary to MCC’s policy in the Basque country, the
corporation did little in the local community to promote social transformation and education.
According to Cancelo:

We are at a complex crossroad that requires everyone’s effort. We are actively searching for
a management model that will differentiate our international firms from traditional limited
liability companies. Labor must receive a treatment similar to that given in the cooperatives
with participation on capital, results, and management. Our foreign ventures will have to
become involved with the community and the external environment and, to the extent
possible, they will have to contribute to the local communities in which they are immersed.2

Could MCC effectively become a global player while staying true to the principles on which its
past successes had been built?

Historical Context
General Francisco Franco came to power in 1939 after the right-wing Falange party, the military,
and those loyal to the king overcame the Republicans in the Spanish Civil War (1936–1939). Franco
instituted an authoritarian dictatorship that lasted until his death in 1975. His regime tightly
controlled all political associations and social gatherings except the Catholic Church, which had
supported Franco during the war. Franco ruled with absolute power, and his party, the “National
Movement,” was the only party allowed. The dictator repressed all opponents, including a large
share of the intellectual elite, who fled the country. Franco’s government granted state assistance to
the church and fostered the development of strong links among institutions. In the Basque country,
however, the clergy maintained some degree of autonomy. In fact, the Catholic Church was one of
the few places where Basques could meet to discuss workplace-related issues, since unions and most
other forms of organized labor were illegal.

Like Julius Nyeyere of Tanzania, Jawaharlal Nehru of India, and Josef Broz Tito of Yugoslavia,
Franco instated an autarkic economic regime under which Spain endeavored to be self-sufficient,
producing all it needed to survive. Partly as a consequence of this autarky, the 1940s was a decade of
rationing, famine, and misery. Black markets surfaced, and purchasing power regressed to
nineteenth-century levels.

By 1950, it became clear that, in order to subsist, Spain would have to establish normal diplomatic
relations with the rest of the world. Franco began to create contacts with foreign governments, most
notably with the Vatican and the United States, and, in 1955, Spain joined the United Nations.
Nonetheless, 20 years of economic autarky had left the country lagging far behind other European
nations; Spain had a negative balance of payments and a production apparatus that was close to
collapse.

In 1959, Franco’s government implemented a development plan to shrink that gap. To modernize
the Spanish industrial sector, Franco opened the border to foreign direct investment. Income and
education improved, and tourism became the single most important industry. The influx of British,
French, German, and Italian tourists served as an extraordinary economic engine. Moreover, tourists
also exemplified the democratic ideal.

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The 1960s were prosperous, and the Spanish economy grew substantially. Thousands of Spanish
entrepreneurs set up new firms, and the industrial fabric developed at rates never seen before in
Spain. Although Franco’s government progressively liberalized the economy, the political regime
remained as repressive in the 1960s as it had been immediately after the war. Franco even conducted
political executions as late as 1973.

The dictatorship came to an end in 1975 with Franco’s death, and Spanish society successfully
managed a delicate political transition process that culminated in the approval of a constitution in
December 1978. A failed coup d’état in February of 1981 confirmed Spaniards’ commitment to
democracy, under which political parties and workers’ unions gained legal status and political
prisoners were freed.

Spain suffered from harsh economic problems from 1975 through 1985. The government thought
that allowing the world price of oil to affect unemployment would be politically costly at a time when
unions had just been legalized. As a result, the global rise in oil prices did not translate into domestic
increases in energy prices, and Spanish companies did not adapt their production structures to the
new setting. State subsidies and price controls kept energy prices low. To minimize labor protests, the
government also subsidized companies that experienced losses. As a result, the public deficit
increased substantially and commercial surpluses fell. As business margins shrank, production
investment fell, leading to reduced prospects for growth. In addition, the deficit was financed by
appeals to the Bank of Spain, creating strong inflationary pressure. High inflation in turn resulted in
the loss of real income.

Spain adopted its first severe measures aimed at macroeconomic adjustment in 1977 with a
consensus of the major political parties and unions. These measures included: the devaluation of the
peseta (Spain’s currency prior to January 1, 2002), a more restrictive monetary policy, and a
commitment to structural reform. High-energy-usage industries such as shipbuilding and steel
suffered the most. Nevertheless, the measures were not as effective as their sponsors had intended. In
fact, the country’s first socialist government (1982–1986) faced gross domestic product (GDP) growth
of 1.2%, inflation of 14%, a balance of payments deficit of US$4 billion, and 18% unemployment.

In the early 1980s, Spain began negotiations to join the European Economic Community (EEC,
later the European Union, or EU). The government found that communicating the need for
macroeconomic adjustments to workers’ unions was easier when it was discussed in the context of
complying with the requirements for admission to the EEC. After three years of adjustment, the
economy began to expand, and on January 1, 1986, Spain joined the EEC. The economic situation
improved after 1986: the price of oil stabilized at $15 to $27 per barrel, interest rates fell, and the
dollar depreciated slightly.

From 1986 to 1989, the Spanish economy grew substantially (see Exhibit 1). Private investment
grew and output rose by 20% during this period. Spanish income per capita increased from 71.8% to
75.9% of the EEC average, the economy created 1.5 million jobs, and unemployment decreased
significantly. In addition, public deficits and inflation both decreased. In the early 1990s, the
government implemented restrictive economic policies to bring demand in line with supply and calm
an inflationary trend that had begun in 1990. Overall, the years from 1991 to 2001 were expansive,
and Spain made significant progress in every macroeconomic variable. In fact, by 1998, Spain had
satisfied all the requirements (low inflation, low public deficit) to join the monetary union, and on
January 1, 2002, the euro became Spain’s new currency.

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The Basque Country

The Basque country, located in the north of Spain, comprised three provinces: Bizkaia, Gipuzkoa,
and Araba (see Exhibit 2). The province of Nafarroa and the adjacent area of France (French Atlantic
Pyrenees Department—Lapurdi, Nafarroa Behera, and Zuberoa) also had large Basque populations;
the total number of Basques by 2000 was 3 million. The national language was Euskera, which was
completely unrelated to Romance languages such as Spanish, Portuguese, or French. In addition to
their linguistic distinction, many Basques harbored strong feelings of nationalism and believed in
political independence, pushing many business people to leave the Basque country over the years in
search of a more stable political environment. Under Franco’s dictatorship, languages other than
Spanish had been vigorously repressed: Euskera literature was banned, and parents were prosecuted
and fined if their children were caught speaking Euskera. As a consequence, only 25% of Basques
spoke Euskera in 1975. However, the post-Franco constitution emphasized competence in Euskera in
Basque schools, businesses, and the Basque government. Geographically, the Basque country was
mountainous and moist. Its main economic activities included shipbuilding, iron mining, steel
fabrication, and seafaring. Political instability deterred direct investment in the area.3 Although in the
early 1970s the Basque country was the third richest of 17 Spanish regions, it had dropped to sixth by
the late 1990s.

A Brief History of MCC

On a cold and rainy morning in February 1941, Father José María Arizmendiarrieta arrived in
Mondragón, then a small Basque town of 9,000 in the province of Gipuzkoa, assigned to lead the local
parish. The Spanish Civil War had just ended, and Franco’s dictatorship had taken over.

Upon his arrival, Father Arizmendiarrieta found a depressed town with few prospects of future
growth and an economic life dominated by a single firm, the Unión Cerrajera, a large foundry and
metalworking company. However, he was determined to do all he could to transform that
community. Arizmendiarrieta wrote: “Life is like a perfume or an aroma, once it is gone you can
never get it back. Should I not pay attention to how I spend it? . . . Life is for living! . . . Life is for
living not according to the impulses of nature, but according to the rules of science and art.”4

Accordingly, in 1943, Arizmendiarrieta set up a technical school to train young people in basic
engineering skills that they could then apply to the industrial development of the town. That year,
despite opposition from the established order (the Unión Cerrajera and the Town Hall), the Technical
Training School opened.

In 1957, five former students—along with Arizmendiarrieta—set up Ulgor, a labor cooperative

that became the seed of MCC. Ulgor manufactured space-heating stoves and paraffin cooking stoves
and, as a labor cooperative, workers were the only shareholders. The company was immediately
successful, and it quickly enlarged its portfolio to include electrical products and butane-fired
cookers.

Ulgor’s success convinced other groups of entrepreneurs that cooperative principles were
superior, prompting them to embark on similar industrial enterprises. In addition, Ulgor was the
economic engine for the growth of several cooperatives. One such cooperative was Copreci, founded
in 1963, which initially sold most of its output of valves, thermostats, and other components to Ulgor.
While Ulgor expanded, other cooperatives sprang up in the Mondragón area. Comet, for example,
was devoted to the foundry of iron and steel. Arrasate, which began as a manufacturer of lawn

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mowers and stamped blanks, eventually became Spain’s premier machine-tool manufacturer. By
1970, there were 40 cooperatives in the group.

Although these cooperatives were mostly independent, they developed close ties among each
other. In the words of Father Arizmendiarrieta: “It is risky to make each cooperative a closed world.
Intercooperative solidarity is the main resource to forestall the problems that come with growth and
maturity.” As cooperatives, they shared similar management principles and orientations, as well as
similar problems. Because the members of cooperatives were self-employed, they were not
beneficiaries of the Spanish social security system and thus had to make their own provisions for
sickness, injury, and death. Furthermore, growth prospects for cooperatives were substantially lower
than for comparable limited-liability firms; by law, cooperatives could not offer outside lenders
collateral or equity participation. Moreover, the Bank of Spain imposed stringent restrictions on
credit through the Spanish stabilization plan of 1959. Cooperatives thus had to access high-level
managerial expertise and coordinate activities. In addition, the cooperatives could not be flexible in
their employment practices; specifically, because workers were partners, they could not be fired
during an economic downturn. Instead, the workers-partners had to personally assume any losses by
taking pay cuts or, in extreme cases, by contributing capital from their personal savings.5

In 1959, Father Arizmendiarrieta proposed to deal with reduced access to financial resources and
the lack of social security by creating a cooperative bank, Caja Laboral Popular (CLP), and an
insurance cooperative, Lagun Aro, which would offer social security services to the members of the
affiliated cooperatives. The creation of these institutions turned out to be a crucial step that
guaranteed the future growth of the cooperative movement in the Basque country, as well as the
ensuing formation of MCC. According to Father Arizmendiarrieta: “Through CLP, we wanted to
increase the savings rate and, at the same time, channel those savings into productive investments in
the area to modernize the existing industrial plant as well as to promote the establishment of new
industries. The goal was to generate employment.”6

The bank would attract personal savings and then channel those resources toward community
development through cooperativism. In the first few years, the cooperatives gave full support to the
bank by terminating all links with other financial institutions and agreeing to work only with CLP,
even as CLP experienced start-up pains, and by contributing the necessary capital to assure the
bank’s solvency. Initially, all borrowing and lending operations between CLP and the cooperatives
were conducted at market rates. Very soon, CLP became self-financed, and it began to perform its
intended role.

From the beginning, CLP acted as a de facto center for all the cooperatives adhered to the group.
Soon after its creation, CLP instituted a business development division to promote new cooperatives,
consolidate and coordinate the activities of the existing cooperatives, and provide managerial
expertise to troubled cooperatives. In fact, several cooperatives were born of this CLP initiative. The
business division of CLP offered a bundle of services to the affiliated cooperatives:

• Economic studies: Carried out economic studies on the cooperatives, the Basque country,
Spain, and international markets to aid decision making.

• Industrial promotion: Identified new products and activities for existing and new
cooperatives.

• Intervention: Advised the cooperatives in planning and management and helped troubled
cooperatives to recover.

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• Consulting: Advised in areas as diverse as exports, marketing, manufacturing, personnel,

financial, and legal.

• Auditing: Monitored cooperatives and regional clusters, evaluated CLP’s risk in the
associated cooperatives, and studied investment operations proposed by the cooperatives to
CLP.

• Urban planning: Provided urban infrastructure, buildings, and facilities to help the
development of the associated cooperatives.

The cooperatives paid for these services, and CLP and its business development division became
the center of what had originally been a group of disconnected, independent cooperatives. One
example of CLP’s role was technology development. In the beginning, most cooperatives borrowed
product and process technology from foreign firms through licenses and technical assistance
contracts. Most of the technology licenses banned sales activities outside Spanish territory. CLP and
the business development division thought that it was essential to overcome the problem of
technological subordination, since exports were becoming more important. In 1968, Father
Arizmendiarrieta’s Eskola Politeknikoa took the first steps to extend its activities from teaching to
research. With the support of CLP, the Eskola set up an R&D unit to develop the ability to translate
academic research into industry applications. In 1974, the unit created Ikerlan, which became a
pioneer in the field of robotics. From 1976 to 1978, Ikerlan designed and constructed prototypes of
industrial robots and incorporated some of the first microprocessor applications. In 1979 and 1980,
Ikerlan expanded into computer-aided design and manufacture (CAD/CAM) technology and tried to
diffuse this technology among the cooperatives.

CLP’s single most important objective was to generate employment and wealth in the Basque
country. CLP and the business development division aggressively promoted the creation of new
cooperatives, and between 1959 and 1979, the group added 51 new cooperatives. Some of these
cooperatives were created directly by CLP’s business development division, whereas others
represented conversions of existing limited companies that had been on the verge of bankruptcy. A
third group were splits of successful cooperatives, and still others were green-field ventures by a
group of entrepreneurs who did not need financial support from CLP.

Although CLP’s business development division clearly had a positive effect on the individual
cooperatives by providing information, infrastructure, and managerial know-how, other issues
proved difficult for CLP to tackle. The most important concern was the lack of systematic long-term
strategic planning for the individual cooperatives. Most cooperatives were immersed in the day-to-
day management of operations and lacked overall vision and strategic intent. For example, few
cooperatives had the drive to launch new products and create new markets; they brought a relatively
static set of products to market year after year with essentially no variation. While such an approach
had been reasonable in a stable economic environment, the progressive openness of the Spanish
economy in the 1970s meant that the scheme was heading toward failure.

In the mid-1970s, CLP was determined to increase cooperation among cooperatives to coordinate
policies and jointly confront shared problems. The creation of geographic associations of
cooperatives, called geographic clusters, strengthened connections among the individual cooperatives.
These clusters were themselves cooperatives, and their shareholders were the member cooperatives.
Aside from becoming a forum to discuss general management issues, the geographic clusters
instituted a mechanism known as “redistribution of profit,” by which the effect of market downturns
on any given cooperative would be reduced. This mechanism, which was still in place in 2002,
worked as follows: Each cooperative in the cluster contributed up to 70% (depending on the specific

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geographic group) of its net profit to a common pool, and then the cluster redistributed the holdings
so that those cooperatives that had profited least got the largest share.

The corporate model, which had geographic clusters and CLP and the business development
division at the center, worked well (see Exhibit 3). From 1961 to 1980, average profits were 7.6% of
sales, and employment grew at a compound annual growth rate (CAGR) of 10%. The model became
threatened in the early 1980s, however. With national unemployment rates over 20%, many
cooperatives experienced losses. In addition, other problems had not been dealt with properly by
CLP, including workforce inflation, product obsolescence, financial imbalances (dreadfully high
levels of debt), poorly developed commercial networks, and poor managerial skill to conduct
business in an increasingly competitive environment.7 As Javier Mongelos, president of the
cooperative group at the time, explained:

Shutting down cooperatives meant that their worker-shareholders would be broke and
unemployed. Hence, it was hard for CLP to commit not to finance economically inefficient
operations. After all, many of the cooperatives in financial trouble had been created by CLP
itself. On top of this, since CLP was helping highly leveraged cooperatives with considerably
subsidized interest rates, the Spanish Central Bank was tightening its control over the lending
practices of financial institutions. The situation had become unsustainable.8

By the mid-1980s, Spain was immersed in negotiations to join the EEC, a step that would require
the country to progressively lower and eventually eliminate tariffs, quotas, and other instruments
that had shielded Spanish businesses from direct competition with more cost-efficient foreign firms.
To compete effectively against foreign firms, CLP believed that it had to become more efficient. José
Luís Olasolo, vice president of MCC, commented:

The Mondragón group, with its geographic clusters, was a sociological body, not a business
group that could take advantage of economic synergies. We had no joint plans directed to the
overall optimization of resources. We did not coordinate market strategies or sufficiently
exploit economies of scale. As the environment changed, we were forced to respond to market
demands. The geographic clusters did not give us the dimension, organization, or technology
needed to compete effectively. We needed to consolidate our product offerings and increase
focus.9

After six years and three congresses (each lasting several days), the group approved a brand new
model—MCC—in 1991. MCC had its own headquarters, and CLP was one of the divisions
supervised from the center. With this change, CLP effectively committed itself not to help
cooperatives when doing so would be financially unwise. The new model also helped lower the
Spanish Central Bank’s anxieties. For all practical purposes, the relationship between CLP and the
cooperatives became that of an independent bank with autonomous commercial customers (see
Exhibit 4). In addition, sectoral clusters substituted for geographic clusters. The sectoral clusters had
the same objectives and organization as the geographic clusters they replaced. The difference was
that the component cooperatives all belonged to the same economic sector, regardless of their
geographic location.

MCC in 2001
MCC had three main groups: financial, industrial, and distribution. The groups were in turn
divided into divisions. The industrial group had seven divisions: automotive, components,
construction, industrial equipment, household goods, engineering and capital goods, and machine

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tools. Each division was divided into sectoral clusters. For example, in 2001, the construction division
had three sectoral clusters: lifts and elevators, structures and handling, and construction work and
materials (see Exhibit 5).10

Aside from the three main groups, a number of support activities—such as research, training, and
education—were performed by other cooperatives that belonged to MCC. For example, MCC
included a top Spanish engineering university (Mondragón Unibertsitatea), a technical school,
several research institutes, and a management education center.

Ikerlan (one of MCC’s research institutes) was the only Spanish research firm that met NASA’s
technical specifications. The institute conducted research on new product development (such as the
integration of home automation and the Internet, fiber-optic sensors, microsystems, electronic voting
systems, and excavator simulators); new production processes (such as a methodology for the design
of machine tools, automation of the design of transformers and relays, and the design of the internal
logistics chain for the manufacture of shock absorbers); and energy (such as the design of gas
combustion systems or the design of thermal calculation of carriages for the Washington, DC
subway). Beginning in 1986, Ikerlan participated in EU R&D programs such as Esprit (industrial R&D
in IT), Brite (R&D in new materials technologies), Fuse (technological innovation in industrial
products that use electronics), and Eureka (R&D in environmental technologies).

Strategy Making at MCC

MCC crafted strategy at three levels: the center of the corporation, the sectoral cluster, and the
individual cooperative. The center outlined the corporation’s overall strategic direction in a strategic
plan that it elaborated every four years. That plan specified the mission and the corporate values for
the period, which MCC used, along with 10 constitutional principles, to delineate the basic objectives
and the overarching policies that the sectoral clusters would follow (see Exhibit 6). The sectoral
clusters developed their strategic plans in accordance with overarching policies defined by the center.
Finally, each cooperative elaborated its strategic plan (called an operational plan) in agreement with
the prescriptions set by the strategic cluster to which it belonged (see Exhibit 7).

The individual cooperative The individual cooperative had three main governance bodies.
On top of the pyramid sat the general assembly, the supreme authority to express social will. As its
name indicated, the general assembly comprised every worker-shareholder of the cooperative, and it
met once a year. Every worker-shareholder had the right to vote at the assembly, and all votes
counted equally, just as in a parliamentary democracy. The general assembly approved the
operational plan for the year and chose a board of directors (or rector council), a small subset of the
cooperative’s worker-shareholders (3 to 12 members) who supervised management. A board member
sat for four years, and half the members were replaced every two years. The board of directors
elected a general manager and monitored his or her performance periodically. Appointment as general
manager lasted for four years, and the same manager could be reappointed several times. The board
met once a month to monitor the general manager’s performance and to present the operational plan
to the assembly for approval.

Management was free to organize the cooperative as it wished. In fact, the operational side of
many of the cooperatives mimicked that of limited liability corporations: there were departments and
directors for each department or function, and large cooperatives had divisions (or business units)
and divisional managers. If 20% of worker-shareholders generated a petition because they were
dissatisfied with the manager, they could summon the general assembly to dismiss the manager.11

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The general managers of the cooperatives were in charge of individual cooperatives’ day-to-day
strategic management (see Exhibit 8).

The sectoral cluster The governance organs of the sectoral clusters resembled those of the
individual cooperatives. They included a general assembly that was formed by delegates appointed by
the general assembly of the individual cooperatives. The general assembly approved the strategic
guidelines of the sectoral cluster. There was also a sectoral board of directors composed of one member
of each cooperative in the cluster. In addition, there was a management committee composed of all the
general managers of the individual cooperatives. The sectoral board of directors appointed one
member of the management committee as general manager of the cluster. The management
committee also monitored the performance of the general managers of the individual cooperatives.
The sectoral board set common wage guidelines for all the members of the cluster. The board and the
management committee controlled issues that affected all members of the cluster, such as some
marketing activities, purchasing, and a common investment fund.12

Sectoral clusters played an important role in the process of strategy making at MCC. Each cluster
formulated a strategic plan for its cooperatives within the framework established by headquarters.
That strategic plan, which included objectives and contingent plans of action, had to be approved by
the central office (see below). In addition, the plan sought to coordinate functional activities such as
finance, R&D, marketing, and human resource management across its member cooperatives. The
management committee of the cluster was in charge of the cluster’s day-to-day strategic management
and operations (see Exhibit 7). During times of economic recession, worker-shareholders were
transferred from low-performing cooperatives to better-performing ones in the sectoral cluster and, if
necessary, to other MCC cooperatives outside the sectoral cluster. MCC used this mechanism
extensively during the 1980s downturn. In addition, the group redistributed profit among all the
cooperatives in each sectoral cluster.

Headquarters At the highest level were MCC’s central office and the nine divisions. Once
again, the organizational structure resembled that of the individual cooperatives. On top was the
general congress, which comprised approximately 650 delegates who represented all the worker-
shareholders. This council met once a year to discuss and approve the basic objectives and the
general policies presented by the permanent commission, whose functions were mainly administrative.
The general congress provided broad strategic guidance to the entire group, and member
cooperatives had to either comply with the resolutions approved by the general congress or leave
MCC. For example, between 2001 and 2004, one of the congress’s basic objectives was
“internationalization,” and all cooperatives thus had to make a germane effort to become global (see
Exhibit 9). The congress also approved the 10 constitutional principles, by which the cooperatives
had to abide. An example of those principles was payment solidarity, under which the maximum gross
wage differential allowed was 1:6, which became 1:4.3 after taxes.

The general council was the central management and coordination unit at MCC. It was composed
of the president (the CEO of the corporation, Cancelo), nine vice presidents (the directors of the nine
divisions), six officers (the directors of MCC’s six central departments: social management, quality
and technological development, financial management, strategic planning, international operations,
and business promotion), and the general secretary. The general council developed and proposed the
corporation’s basic objectives and the general policies for the permanent commission. It also
controlled the strategic plans of the sectoral clusters and independent cooperatives and made sure
that they followed the basic objectives and general policies. The divisions set the strategic lines that
its component clusters would follow and ensured coherence among the strategic plans that the
clusters developed. The divisions thus had a strategic control function. Each level on MCC’s
hierarchy was prohibited from carrying out tasks assigned to a lower level.13

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Regarding the value of belonging to MCC for individual cooperatives, Cancelo observed:

Visibility is one of the most important reasons. Individual cooperatives are too small to be
taken seriously when they go abroad. Customers, suppliers, and governments treat
cooperatives with great respect when they learn that MCC is a €7 billion proposition. There are
also synergies among cooperatives in the same sectoral cluster; these are the classic
product/market synergies. In addition, there are “horizontal” synergies such as those related
to learning from each other’s experiences, even among cooperatives belonging to different
sectoral clusters. Technology development is yet another benefit. Personnel transfer and
redistribution of profit have been key to the survival of many of our cooperatives in times of
crisis.14

An Example: Irizar
A member of MCC’s industrial equipment division, Irizar was a manufacturer of luxury long- and
medium-distance coach bodies located in Ormaiztegi, a small Gipuzkoan town close to Mondragón.
The company started in 1889 as a manufacturer of wooden carriages and stagecoaches. In 1948, Irizar
began manufacturing metal bodies and, in 1956, signed a collaboration agreement with Orlandi, a
renowned Italian body manufacturer. In 1962, Irizar became a cooperative and joined the Mondragón
Cooperative Group (the predecessor of MCC). After joining Mondragón and gaining increased access
to financial resources, Irizar made a bold move to extend its product line and cover the full product
spectrum from luxury coaches to city buses. Throughout the 1980s, the industry became increasingly
competitive, and by 1991, after a sequence of false moves and misfortunes, Irizar was on the verge of
bankruptcy.

The path toward bankruptcy had devastating consequences, as most worker-shareholders were
losing their personal financial wealth to assume Irizar’s indebtedness. Some worker-shareholders had
already been reassigned to other cooperatives when, as a last resort to save the company, MCC’s
council named a new general manager, Koldo Saratxaga, an executive with vast experience in
managing cooperatives. Saratxaga was well aware of project’s difficulties, but he had saved two other
cooperatives before. Upon his arrival, Saratxaga found a group of demoralized workers. In a general
assembly that lasted more than six hours, Saratxaga presented his immediate plans for Irizar. He
asked worker-shareholders to forget the past, be ready for sacrifices, and assume shared
responsibility from then on.

Under Saratxaga’s management, Irizar’s progress was spectacular. In 1991, the company had sales
of €18.6 million (18% exports), losses of €5.4 million, 275 workers, and an output of 226 coaches per
year; in 2000, its sales were €168 million (65% exports in 45 countries), it employed over 600 workers
in its Ormaiztegi plant alone, and it produced more than 1,000 luxury coaches per year in that plant
only (see Exhibit 10). Throughout the 1990s, Irizar received several prizes for managerial excellence
and product quality. The company became the first luxury coach maker to achieve ISO 9001 and ISO
14001 certifications. Irizar was also the first Spanish company not in a multinational group to receive
the European Quality Prize granted by the European Foundation for Quality Management, the most
prestigious European prize for quality management. In 2000, Irizar was Europe’s second-largest
manufacturer of luxury coaches.

Saratxaga’s new product strategy was simple. Instead of offering a large product selection to a
single geographic market (Spain), he proposed to specialize in a single product segment—the luxury
long- and medium-distance coach bodies—and offer it to multiple geographic markets. The new
strategy contained the seed of internationalization. In addition, the company redesigned its activities.

10

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For example, Irizar developed and acquired engineering skills to tailor the coaches to individual
customer needs and to meet differing regulatory requirements.

The new organizational strategy was as fundamental as the new product strategy. According to
Saratxaga: “This is a project based on the freedom and responsibility of all its participants. Irizar
knows no control or hierarchy. There is personal responsibility and the thrill to share experiences.
This fosters the flow of knowledge within and between self-managed teams.”15

Irizar defined itself as “a project based on people,” and relationship management and trust were
ubiquitous. Trust and relationships were crucial, not only among the workers but also with
customers, suppliers, and complementors. Irizar’s organizational model was founded on the idea that
only those who assumed the business project as their own would truly be trustworthy and motivated.
The company had no hierarchy; there were direct workers and coordinators (not directors), and
strategic decisions were made by as many people as possible. Words such as “employee,” “worker,”
and “wage earner” were not in Irizar’s vocabulary.

The team was the basic unit upon which Irizar’s organization was built. There were teams for all
types of tasks and processes, and most people belonged to several teams simultaneously. Each team
had a nominated leader (not a “boss” or “director”) and a great degree of autonomy. Teams acted as
mini, semi-independent firms, and indeed there were more than 180 teams and 140 leaders. To ensure
their efficiency, teams were reviewed at least once a year. Saratxaga led the “steering team,” and his
fellow steering-team members were called executive coordinators. According to Saratxaga: “Higher-
level posts signify greater responsibility, or greater competency, or a wider range of coordination, but
never represent authority.”16 Irizar had no departments, and its offices and shop-floor spaces had no
physical walls.

Teams had the freedom to organize their activities as they saw fit, including decisions about when
to start and end work and how to perform the job they were supposed to do each day. There was no
punching in and punching out on the shop floor. The only requirement was that synchronization
with other teams be resolved ahead of time through dialogue. Work targets were agreed on through
democratic consensus, and about 80% of Irizar’s personnel contributed to setting annual targets. Inaki
Alonso, a shop-floor person who was also a team leader, observed:

We know who is responsible for the work, and the team can sort out any problems. You don’t
need a supervisor, and having no intermediaries helps communication right along the line. The
skills you acquire through working this way are helpful to you outside work as well. It is all
about relationships and trust. It is better to use your brain, solve your own problems, and to
make that part of your daily routine.17

Most of the workforce owned equity in the enterprise. New personnel received a three-year
probation period and, after positive evaluation by peer team members, they had the right to become
full partners. Irizar’s general assembly met three times a year (most other MCC cooperatives held the
general assembly once a year) and always recorded close to 100% attendance. One decision the
general assembly made was to abolish supplementary payment for overtime. In fact, the pay scale at
Irizar was among the flattest at MCC; its maximum post-tax pay ratio was 1:3.

As a consequence of Irizar’s product strategy under Saratxaga, the company aggressively

expanded internationally. For technological reasons, Irizar decided to open plants in other countries
instead of exporting; coach bodies’ large dimensions made them difficult to ship cheaply. In addition,
the most compelling technology involved building the body directly on the chassis. Thus, exporting
to China, for example, would involve shipping the completed coach (chassis and body) from the
Basque country with the additional weight. By 2001, Irizar had opened plants in Brazil (1998), China

11

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(1995), India (2001), Mexico (1999), and Morocco (1998), and it was commercially active in 65
countries. The countries it chose reflected market opportunities as well as the cost of labor, an
important input in coach-body manufacturing (as opposed to automobile-body production). Brazil
was the world’s largest luxury-coach market, and India and China both had great potential.
International plants were run by executives who had been promoted from inside Irizar.

MCC Goes Global

One of the basic objectives for all of MCC’s cooperatives between 2000 and 2004 was
internationalization. Cancelo explained:

The traditional scheme worked well while business was simple: a few products, stable
customers in a well-defined geographic area, and a well-understood and almost invariable
competitive landscape. However, the world has changed; new, larger competitors are now
fighting for a share of the local market. New, better products are introduced at a faster pace.
New customers and suppliers crop up from countries that a few years ago we would have
never even thought about. Guidance is not to be found in history; invariably, repetition of old
strategies leads to failure.18
a
Jesús M Herrasti, MCC’s director for international operations, mentioned the following reasons
for MCC’s internationalization:

First, our clients are increasingly global and, thus, if we want to satisfy their demands, we
have to enhance our international presence. Second, in the last few years we have seen a
reorganization of international capital markets leading to greater efficiency and access. As a
consequence, there are new business opportunities in diverse geographic areas that we should
not let pass. Third, to stay competitive, MCC’s cooperatives need to locate certain activities
where factor costs are low. For the most part, value-added activities will remain in the Basque
country, but a number of labor-intense activities will be undertaken in other more
advantageous geographic locations. Finally, we cannot close our eyes to the new international
context: media, entertainment, finances, and all kinds of businesses are becoming increasingly
global. As technology improves, physical distances become smaller, and the information and
knowledge that we have of each other is dramatically increased.19

MCC set up an international network of commercial offices to assist its cooperatives in their
international development. It selected countries according to their market potential and economic
and political complexity. In 2001, MCC had commercial offices in the United States, Mexico, Brazil,
Iran, India, and China. In addition, cooperatives that wished to expand internationally had access to
low interest loans (fondos intercooperativos) that MCC provided. And cooperatives shared their
international experiences with one another.

Most of the international operations were strategic alliances, such as equity joint ventures. Few
cooperatives went international alone. According to incoming president Jesús Catania in 2001:

There are several reasons as to why most of our international operations are in the form of
partnerships with local companies in the target geographic area. Perhaps the most important
reason is our natural inclination, or even vocation, to work in partnership. The notion of
partnership is at the very heart of the cooperative spirit. Besides, we look for partners who
have a profound knowledge of local customers, suppliers, competitors, governmental
regulations, culture, etc., and, in addition to sharing the benefits of the association, we also
share risks and uncertainties.20

12

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All MCC companies outside Spain were limited liability companies, not cooperatives. Among
other reasons for this trend, cooperative directors cited the difficulty of exporting the cooperative
model to countries that lacked a tradition of democratic organization. “It is very hard for people in
some of the target countries to grasp the concept of cooperativism where workers are owners and
where decisions are made through mechanisms resembling democratic political institutions,” one
said. In addition, many countries had no law that applied to cooperatives and, thus, cooperatives
could not legally be constituted. Moreover, because equity joint ventures were the main mode of
internationalization and essentially all partners were limited liability companies, the natural legal
form for the joint venture was that of a limited liability company.

Finding individuals willing to leave the Basque country was a challenge for most cooperatives in
the MCC system. As a compromise, nearly all cooperatives sent executives overseas for a limited
period, usually three years. For example, in July 1998, Fabián Berridi from Irizar was sent to Botucatu,
Brazil, to open the first Irizar plant in the Western hemisphere Talking about his experience, Berridi
observed:

From the moment in which Irizar committed to a global strategy, we all knew that someone
would have to assume these kind of responsibilities. Among all of us at Irizar, a few people
were more likely to be asked to lead this effort—because of professional experience, age,
family obligations, and what was expected from them. I was thrilled to have been given the
opportunity to confront this challenge. However, with the exception of the professional
dimension, I miss everything else from the Basque country. Most importantly my family,
friends, summers in Hondarribia, walks with my wife and children in our beautiful Basque
country, family celebrations, watching Euskera TV, listening to Euskera radio …. I could go on
for hours telling you what I miss.21

Some thought that globalization was fundamentally against MCC’s original goal of creating
employment in the Basque country. But, according to Cancelo: “The only way to ensure MCC’s
survival in the Basque country is by being present in the rest of the world. This is a must.” In
addition, a lively debate unfolded within MCC concerning whether the globalization model that the
vast majority of cooperatives adopted, whereby foreign workers were not shareholder-partners, was
consistent with the original basic principles of the Mondragón cooperative experience. Herrasti
concurred:

Our forecast is that, by 2004, one-fourth of the industrial group’s workforce will be in
international plants. If we do not act fast in incorporating these workers to our cooperative
model, we run the risk of winding up with a select nucleus of privileged shareholder-
partners in the Basque country and tens of thousands of wage earners abroad. When we
began our globalization process back in 1996, our main priority was to consolidate our
international presence fast. As we achieve this objective, we need to reflect on how to
implement a management model close, if not identical, to the Mondragón cooperative
benchmark. We are known internationally for the success of our cooperative experience.
We now face the challenge of also being recognized for having implemented a
globalization paradigm coherent with our cooperative principles and values.22

13

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Exhibit 1 Spain’s Economic Indicators

Labor Hourly Industrial

Real GDP Real GDP Population GDP/cap Savings costs Wages Unemploy. CPI Production
% change billion $ millions $ % % change 1995=100 % % change 1995=100
2002e 2.9 na na na na 3.2 na 12.6 3.4 na
2001e 2.9 na 39.92 14,500 22.6 3.6 na 13.2 2.3 na
2000 4.1 568.16 39.47 14,395 22.5 4.1 118.25 14.1 3.4 119.4
1999 4.0 565.45 39.42 14,344 22.3 3.4 115.53 15.9 2.3 114.8
1998 4.3 579.56 39.37 14,721 22.6 2.7 na 18.8 1.8 111.8
1997 3.9 513.49 39.32 13,059 22.6 2.3 109.6 20.8 2 106.1
1996 2.4 561.73 39.27 14,304 22.1 3.2 105.31 22.2 3.6 99.3
1995 2.8 574.75 39.21 14,658 22.3 3.3 100 22.7 4.7 100.0
1994 2.4 491.97 39.15 12,566 20 0.9 95.42 23.7 4.7 95.6
1993 -1.0 428.61 39.09 10,965 20.1 5.5 91.31 22.2 4.6 89.0
1992 0.9 515.66 39.01 13,219 20.1 7.9 85.51 17.9 5.9 93.5
1991 2.5 568.08 38.92 14,596 22 9.7 79.4 15.8 5.9 96.2
1990 3.8 517.44 38.85 13,319 22.6 11.3 73.42 15.7 6.7 96.9
1989 4.8 410.54 38.79 10,584 22.9 8.2 67.52 16.7 6.8 96.9
1988 5.1 353.98 38.72 9,142 23.6 6.7 62.94 19 4.8 92.7
1987 5.5 331.60 38.61 8,588 22.7 6.5 59.13 20 5.2 90.0
1986 3.3 244.14 38.52 6,338 22.7 9.7 54.98 20.5 8.8 86.0
1985 2.3 182.95 38.41 4,763 22 6.1 49.61 20.9 8.8 83.4
1984 1.8 147.17 38.33 3,840 22 5.1 45.06 19.6 11.3 81.8
1983 2.1 143.79 38.16 3,768 20.9 na 40.33 17.4 12.2 81.1
1982 0.9 157.03 37.97 4,136 20.7 na 35.07 15.9 14.4 78.9
1981 0.4 174.91 37.75 4,633 20.3 na 30.25 14 14.6 79.9
1980 1.5 191.40 37.54 5,098 18.8 na 26.82 11.2 15.5 80.5
1979 0.2 199.57 36.99 5,395 20.4 na 22.65 8.5 15.7 80.5
1978 1.8 160.96 36.67 4,389 21.2 na 18.37 6.9 19.8 79.2
1977 3.3 113.95 36.35 3,135 20.8 na 14.56 5.2 24.5 77.4
1976 3.0 106.41 35.97 2,958 21.4 na 11.17 4.7 17.7 73.4
1975 1.1 101.03 35.6 2,838 23.5 na 8.58 3.7 16.9 70.0
1974 5.7 91.66 35.22 2,603 24.6 na 6.66 2.6 15.7 73.3
1973 7.9 73.73 34.86 2,115 25.4 na 5.28 2.5 11.4 68.2
1972 8.1 54.79 34.49 1,589 24.9 na 4.41 3.1 8.3 61.3
1971 5.0 44.96 34.13 1,317 24.7 na 3.78 3.1 8.3 52.9
1970 4.1 37.72 33.78 1,117 24.6 na 3.34 2.4 5.7 49.6
1969 8.9 33.07 33.43 989 24.6 na 2.86 na 2.2 46.3
1968 6.8 29.18 33.08 882 22.8 na 2.61 na 4.9 39.8
1967 4.3 26.08 32.73 797 22.1 na 2.42 na 6.4 36.9
1966 7.1 26.97 32.39 833 22.8 na 2.1 na 6.2 35.8
1965 6.3 23.32 32.06 727 22.6 na 1.81 na 13.2 31.2
1964 na 20.05 31.72 632 na na 1.53 na na 27.3
1963 na 16.08 31.39 512 na na 1.33 na na 24.7
1962 na 13.62 31.07 438 na na 1.09 na na 21.9
1961 na 11.78 30.76 383 na na 0 na na 20.5
1960 na 10.32 30.45 339 na na 0.87 na na 17.3
1959 na 10.03 30.2 332 na na na na na na
1958 na 11.02 29.95 368 na na na na na na
1957 na 11.97 29.7 403 na na na na na na
1956 na 11.08 29.45 376 na na na na na na
1955 na 9.65 29.21 330 na na na na na na
1954 na 8.65 28.95 299 na na na na na na
1953 na na 28.71 na na na na na na na
1952 na na 28.47 na na na na na na na
1951 na na 28.23 na na na na na na na
1950 na na 28.01 na na na na na na na
1949 na na 27.74 na na na na na na na
1948 na na 27.54 na na na na na na na

Source: “Economic Outlook,” Organization for Economic Cooperation and Development.

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Exhibit 2 Mondragón’s Geographical Location

Source: MCC.

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Exhibit 3 The Evolution of MCC

Year Sales Export Workforce Investment Profit

2000 1,175,548 323,544 53,377 122,836 67,371
1999 1,043,893 272,885 46,861 86,838 76,479
1998 889,760 238,647 42,129 70,763 68,907
1997 726,706 208,788 34,397 62,837 52,316
1996 629,898 179,696 30,634 45,152 35,887
1995 558,778 98,514 27,950 31,878 37,886
1994 496,902 79,007 25,990 37,661 33,740
1993 424,233 61,807 25,317 33,903 28,916
1992 397,148 52,073 25,322 37,709 22,597
1991 314,926 55,498 22,802 35,130 27,613
1990 280,291 52,036 22,959 26,268 27,431
1989 253,088 47,220 22,030 21,084 28,150
1988 206,339 41,157 21,204 14,824 11,317
1987 179,345 35,718 20,409 12,169 8,950
1986 158,923 33,008 19,669 11,058 4,239
1985 140,020 31,899 19,161 9,208 -263
1984 121,190 28,192 18,795 7,132 -2,387
1983 110,293 24,080 18,744 5,353 854
1982 96,871 21,316 18,788 4,123 256
1981 84,962 19,766 18,461 5,257 -884
1980 69,064 13,576 17,733 4,844 517
1979 57,189 9,040 18,295 4,638 1,507
1978 43,753 5,837 17,022 3,671 2,138
1977 34,119 4,309 16,504 4,003 2,322
1976 24,833 3,117 15,417 3,579 2,056
1975 19,694 2,347 13,808 2,851 1,442
1974 17,693 1,918 13,310 2,362 1,405
1973 13,206 1,618 11,597 1,292 1,333
1972 10,676 1,291 10,493 729 853
1971 8,164 1,043 9,350 797 302
1970 7,059 786 8,743 992 494
1969 6,348 503 8,081 787 550
1968 4,169 336 6,048 572 266
1967 3,606 101 5,161 461 258
1966 2,892 52 4,866 409 238

Source: Annual reports and Jose Maria Ormaechea, “The Mondragon Cooperative Experience,”
Otalora, 1993.

All units other than workforce in millions of pesetas.

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Exhibit 4 Evolution of CLP

160%
140%
120%
100%
80%
60%
40%
20%
0%

Year
CLP Liabilities/ Total Group Sales
CLP's Investment in Cooperatives/ Total Assets CL

Source: “Breve Resena Histórica,” Mondragón presentation.

Exhibit 5 MCC’s Organizational Structure

Source: MCC annual report, 2000.

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Exhibit 6 Constitutional Principles, Mission, and Corporate Values

Corporate
Constitutional Principles Mission
Values

1. Open admission “Mondragón Corporación Cooperativa (MCC) is a socio- 1. Cooperation

economic and business reality, deeply-rooted in the
2. Democratic organization 2. Participation
Basque Country, created by and for the people, inspired
3. Sovereignty of labor on the Constitutional Principles of our Cooperative 3. Social
4. Instrumental and subordinate Experience, committed with the environment, the responsibility
character of capital competitive improvement, and the creation of 4. Innovation
5. Participatory management employment, that:

6. Payment solidarity • Is sustained on a commitment to solidarity and the

7. Intercooperation use of democratic methods for organization and
8. Social transformation management.
9. Universality
• Promotes people’s participation and integration on
10. Education management, on profit, and on property of its
component firms and engages people in a shared
project of social, managerial, and personal growth.

• Promotes education and innovation by developing

human and technological capabilities.

• Applies an original Management Model to achieve a

position of leadership and to foment Cooperation.”

Source: MCC internal document.

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Exhibit 7 Strategy Making at MCC

Congress
Business Policy

and
General Council
Strategic Control

Divisions

Strategic
Sectoral Clusters
Strategic Management
Planning Operations
Management
Individual Cooperatives

Source: “MCC—Corporate Management Model,” March 1997.

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Exhibit 8 Basic Organizational Structure of a Workers’ Cooperative

Source: Gregory MacLeod, From Mondragón to America (Berkeley, CA: UCCB Press, 1998).

Exhibit 9 General Congress’s General Policy on Internationalization

“Our response to the new global reality will be based on:

- Promoting and extending our presence on international markets from a solid position in
Europe.
- Progressively viewing Europe as the domestic market.
- Promoting the development of international activities such as commercial, operative, and
productive ventures regardless of whether these are done directly or through participations
and strategic alliances with third parties.
- Setting up support centers throughout the world to back and assist the international
ventures.
- Intensifying our efforts to identify new suppliers and consolidating international supply
agreements.
- Making use of our resources and capabilities related to the Cooperative Experience and
knowledge activities in the international projection of our businesses.
- Hiring and educating those individuals needed for the internationalization of our businesses.
- Pursuing relationships with other organizations, business groups, and public institutions and
strengthening joint action through collaboration agreements.”

Source: MCC internal document, 2000.

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Exhibit 10 Irizar’s Performance

Added
International Value/ Return Return
Sales Sales Worker on Sales on Assets Equity
(million €) (million €) (thousand €) Workforce (%) (%) (million €)

1991 18.6 3.2 16.8 225 n.a. n.a. 1.8

1992 23.5 4.6 31.3 290 n.a. n.a. 4.8
1993 25.9 17.5 32.5 280 7.5 12 6.0
1994 41.0 25.2 39.1 403 11 24 10.8
1995 56.4 28.8 54.7 515 16 34 19.8
1996 60.6 31.7 55.9 580 18 35 26.4
1997 64.4 25.5 54.1 570 19 37 38.5
1998 99.2 55.1 67.0 675 20 39 58.9
1999 124.1 76.0 75.0 796 21 41 80.5
2000 153.2 110.9 87.6 843 n.a. n.a. n.a.

Source: Irizar presentation.

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Endnotes

1 Antonio Cancelo, interview with casewriters, November 2001.

2 Ibid.
3 The Economist, November 25, 2000.
4 Father José María Arizmendiarrieta, Aleluya magazine, October 1943.

5 Henk Thomas and Chris Logan, Mondragón: An Economic Analysis (London: George Allen & Unwin, 1982).
6 Father José María Arizmendiarrieta, cited in José María Ormaetxea, Orígenes y Claves del Cooperativismo de
Mondragón, MCC, 1998, p. 260.
7 “Enmarque del Consejo de Grupos,” Mondragón Cooperative Group internal document, April 1982.
8 Javier Mongelos, interview with casewriters, November 2001.
9 Ibid.
10 Thelifts and elevators cluster had a single cooperative, Orona, which manufactured and installed lifts and
escalators. The structures and handling cluster had seven cooperatives: Biurrarena, Ecotècnia, Ecotècnia
Navarra, Caldereria Torres Altamira, Vendaval Promociones Eolicas, Rochman, and Urssa. The construction
work and materials cluster had three cooperatives: Etorki, Lana, and Vicon.
11 There is also a social council that reports to the board of directors and a supervisory audit committee elected
by the general assembly that audits the books and reports directly to the assembly on the financials of the
cooperative. The social council performs the functions of a labor union. Besides having an advisory role
concerning working conditions, it decides on issues such as health benefits and safety. In addition, the social
council acts as a communication channel between management and workers. See Greg MacLeod, From
Mondragón to America: Experiments in Community Economic Development (Berkeley, CA: UCCB Press, 1997).
12 Ibid.
13 Francisco Javier Forcadell Martínez, “Success in the Practical Application of Cooperative Principles at
Spain’s Mondragón Cooperative Corporation,” Strategic Planning (New York, NY: John Wiley & Sons, 2000).
14 Antonio Cancelo, interview with casewriters, November 2001.

15 “Interview with Koldo Saratxaga,” TU Lankide 449, September 2000, pp. 18–19.
16 Quoted in “Irizar, powered by its people,” Aspects of Excellence, 1999 Finalists of European Quality
Awards.
17 Ibid.
18 Antonio Cancelo Alonso, “UnMundo en Cambio: La Respuesta de Mondragón Corporación Cooperativa,”
presentation to the Confederación de Cooperativas de Valencia, Alicante, October 22, 1999.
19 Jesús Ma Herrasti, interview with casewriters, November 2001.

20 Jesús Catania, interview with casewriters, November 2001.

21 “Interview with Mr. Fabián Berridi,” TU Lankide 452, December 2000, p. 20.
a
22 Jesús M Herrasti, interview with casewriters, November 2001.

22

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