Democracy in Business?

I’ll be going to Spain in July to visit the Mondragon Cooperative Corporation (MCC) and learn about how they run their business.  MCC is the largest Basque business group with 92,000 employees and has, for the most part, been able to withstand the global economic downturn with minimal layoffs.  One article I read in preparation for the trip was Rothschild’s Workers’ Cooperatives and Social Enterprise: A Forgotten Route to Social Equity and Democracy (2009).  The author suggests that if companies were run more democratically (like worker-owned cooperatives), that democratic decision-making would expand to the political arena (despite the ability to vote, many Americans don’t).

A few interesting facts to consider:

1. During the 1950s, for each dollar in federal taxes paid by U.S. households, corporations paid 80 cents.  By the 2000s, for each dollar paid by households, corporations aggregately pay 20 cents. 

2. UC Berkeley estimates that in the next decade, some 14 million white-collar jobs will be outsourced.  Furthermore, the U.S. Dept of Labor estimates that new service-sector jobs that are being created pay 25% to 50% less than the jobs being exported.  

3. The U.S. has gone through eight recessions since World War II.  According to the Economic Policy Institute, economic growth typically is strongest in the 3 years after the trough of a recession with corporate profits typically averaging 14% and wages rising 7%.  However, in the last recession that ended in 2002, the average corporate profit gain was 60% and wages fell by 1.7%.  

During my time working at a medical device company, there was a significant layoff in the fall of 2012, followed by smaller, quiet layoffs.  These layoffs made me feel uncomfortable because of the procurement activity I was supporting (outsourcing) and because of the heavy workloads I knew many of my colleagues had.  The executives were not letting people go due to lack of work, rather they were trying to make shareholders happy by reducing costs while increasing profits, and in turn improve the stock price.  Their lack of transparency about the layoffs and outsourcing activities is very different in comparison to cooperatives’ sharing of information and decision-making.  If workers had the ability to participate in decision-making, I do not believe there would be as many layoffs and disparity in salaries.  With my desire to teach and my feelings about corporations, I left the corporate world and chose to partake in the Mondragon experience.  The idea of an organization that thrives through participatory leadership and management gives me hope that capitalism is not the only way.

Rothschild presented five reasons why the cooperative model has not had a bigger presence in the U.S.:

1. American capitalism and the accumulation of wealth without shame.  The rich do not get embarrassed by the large income disparity between them and the poor.  This explains why executives don’t mind laying off workers while increasing their own pay.

2. Agency heads and deputy directors of public-sector agencies have little incentive to share decision-making authority with civil servants. 

3. The “hierarchal culture of capitalism” has become the norm in the U.S.  When talking with a co-worker and my brother about how executives treat employees, both said they would do the same thing; if one were “smart” enough to become rich, even at the expense of others, then one should do it.

4. Thanks to Taylor’s “scientific management” principles, U.S. companies are known for bureaucratic structures with each manager supervising fewer employees.  Those of us at large companies have experienced the frustrating bureaucratic red tape when trying to get decisions made.

5. In other countries, social democratic or labor parties support the development of workers’ cooperatives, but the U.S. has no such group to support cooperatives. And with capitalism the “norm” in the U.S., many look at democratic cooperatives as a strange idea.

The idea of bringing more democracy into the “economic arena,” which I agree with Rothschild should be a way of life, will not be easy.  Especially with those already in power, where there is no incentive to change.  I hope that by going into teaching and sharing ideas like those in Rothschild’s article and knowledge about organizations like Mondragon, new perspectives can be learned and change can happen. It is in this space of teaching that I find my voice and feel empowered.  In the meantime, I look forward to writing more about Mondragon and sharing what I learn.

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2 Responses to Democracy in Business?

  1. Pam says:

    I am in the long term care industry. As you are do doubt aware the home health care aides are among the lowest paid workers of any industry. Do you think the Mondragon model would work for this sector?

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