Corporate governance as a key aspect in the failure of worker cooperatives

Abstract

The article analyses governance difficulties at Fagor Electrodomésticos, for decades the world’s largest industrial cooperative, and sheds light on how the cooperative model and governance might have contributed to the firm’s bankruptcy. The case study examines how the cooperative model influenced the speed and quality of decision making. The roles of the main cooperative governing bodies (the General Assembly, Governing Council and Social Council) are evaluated and their limitations to effectively supervise and work with management to make difficult strategic decisions. Several governance improvement measures are proposed in order to help other large cooperatives combine democratic control and economically sound governance.

The Mondragon Case: Companies Addressing Social Impact and Dialogic Methodologies

“…Greenwood et al (1993, p.183), for example, highlight: ‘The Mondragon cooperatives in the Spanish Basque Country are among the most successful examples of industrial democracy in action anywhere and, therefore, are the subject of worldwide attention and discussion’. Consequently, the characteristic of uniqueness is especially significant in the Corporation’s study and is reflected in the studies carried out (as an example: Basterretxea et al, 2020; Bretos et al, 2018; Flecha & Ngai, 2014). Its success has made MC a focus of scientific research, analysing the different fields where the cooperative has an impact.…”

Towards the transformative social economy: Proposal of a system of indicators for cooperative social entrepreneurship

“…By adopting its own political position (Jarrodi et al., 2019), the TSE proposal aims to influence certain practices of the Solidarity Economy that it considers are not transformative (overcoming the care logic of the third sector and creating empowerment processes), but also other non‐transformative practices that appear in traditional cooperativism, basically challenging experiences that have lost their cooperative spirit after giving in to the demands of the market (Betanzos et al., 2016; Basterretxea et al., 2020; Errasti et al., 2016).…”

“…However, our interest in the experiences linked to the TSE proposal lies in its explicit vocation to overcome certain contradictions that have arisen within the Basque cooperative movement. Several de‐cooperativization practices have been identified within the Mondragon Corporation cooperatives, derived from their growth and maturation model, which have led to diverse degeneration processes (Basterretxea et al., 2020; Errasti et al., 2016; Heras‐Saizarbitoria, 2014; Azkarraga, 2007; Sarasua & Udaondo, 2004). To organize the social objectives that are set to overcome the aforementioned contradictions, a system of indicators has been constructed jointly with Olatukoop network, incorporating aspects that define the collective, communitarian and territorial character of the social entrepreneurships which are part of this network.…”

Intercooperation, flexicurity and their impact on workers: The case of Fagor Electrodomésticos

“…FED was part of the Mondragon Group—this group is comprised of close to 264 firms, 98 of which are cooperatives and have 81,507 employees and a total revenue of 12,229 million euro (Mondragon, 2020). Power, authority and ownership in Mondragon are decentralized in a federal or inverted pyramid organizational structure (Basterretxea et al., 2020). This inverted pyramid structure of autonomous cooperatives that cooperate voluntarily has an impact on how flexicurity policies are implemented.…”

“…Salary reductions in cooperatives are easier, researchers argue, since the employer–employee agency relationship is eliminated, therefore avoiding the risk of the principal's opportunism and allowing an internalization process of workers’ objectives into the objective function of a firm (Navarra & Tortia, 2014). The cited scholarly literature focused on Mondragon tends to overlook that the decision and discussion processes of cooperatives voting to reduce their members’ salaries are often painful and conflictual (Basterretxea et al., 2020). Some recent studies point to wage flexibility as a factor to explain lower satisfaction and higher sick absence rates among worker‐owners than among employees without ownership in some large Mondragon cooperatives such as Eroski (Basterretxea & Storey, 2018) and FED (Basterretxea et al., 2019).…”