If you have a social mission, go into business
An interview with Frederick Freundlich about working at Mondragon, participating in a cooperative, and building social companies.
Elle Griffin: What do you do for work?
Frederick Freundlich: I'm a professor at Mondragon University in the business school, but I'm mainly on loan to the Faculty of Humanities and Education where there is an institute called Lanki Institute for cooperative research and development.
Elle: As you know, I’ve been writing a series on Mondragon and my goal is to make this model better known internationally because it has not proliferated very well. You look at Karl Marx's movement, which went so insanely far that people are still trying to bring that back today. But there's another model, one that worked far better, that nobody is talking about. Why isn’t this more popular? How can we replicate this model internationally?
Fred: Most people who go into business, I imagine, don't do it with a social vision. They go into business to live a good material life and be the leader of an organization. On the other hand, you have activists—people who are interested in social change and are concerned about an equitable society, sustainability, social justice—who see business as the enemy. They don't see it as an avenue through which to pursue their goals.
One of my favorite speeches was by a Mondragon manager. It was after the financial crisis—in the midst of what was called Occupy in the US and what was called Los Indignados here. He was talking to an auditorium full of university students rallied by Los Indignados and he asked them: “What do you want to do after graduation? How many of you are going to go into social movements?”—maybe 200 hands go up. He asks how many are going into education, social work, electoral politics, public policy, law—dozens and dozens of hands go up in each case. At the end he asks “How many of you are going into business?”—maybe three hands go up.
He paused, then said: “If what we want is an economy based on democracy, human rights, and sustainability, then we're going to have to create businesses based on democracy, human rights, and sustainability. All of the things you want to do are very important to democracy and sustainability—of course they are—but if a good number of you don’t go into business to pursue these values, then we won’t have an economy based on these values. Period. No matter how much we legislate, no matter how much we educate, and so on.”
That was a very powerful moment.
The people who go into business tend not to go into it for social reasons, and the people who have social motivations tend not to go into business.
We have a culture that doesn't push us towards a social, equitable form of business. There are certainly businesses out there that do. There are quite decent conventional businesses, and, of course there are co-ops, and there are employee-owned businesses that do share these values, but they're a very small minority.
Elle: I read José María Ormaetxea’s biography, a disciple of José María Arizmendiarrieta and an early Mondragon entrepreneur, and he said that it doesn't have to be done through the cooperative movement—economic development alone is enough of a goal. When we look at things globally, I agree. There are so many countries in the world that just need an economy, plain and simple, and don’t even have one. They need wealth, and companies and jobs will create that no matter how they are structured.
But in the countries that do have an economy, I would love to see them become even better ones. We need to better distribute the wealth we’ve created more equitably. In America, inequality has returned to the same levels as 1919. It feels like it’s high time to make these changes. And how should we make them? Do we need change happening from the government down, from business owners up? How do we get more founders into this model? How do we create more social entrepreneurs?
Fred: All of the above. Government, policy, and legislation can certainly help, and has helped since the 1970s with the creation of the employee-stock ownership plan (ESOP)—which is controversial in many cooperative circles but that's another discussion. There are a good number of companies in the United States—some 6,000 to 7,000—with very substantial worker ownership, where all of the people in the workforce own 30% to 40% of the company or more. In thousands of cases, they own the majority. It is legislation and public policy that promoted the creation of these companies.
But at the same time, there's going to have to be a grassroots upwelling of interest in these business types. I mean, if you think about the 33.2 million businesses in the United States, the employee-owned ones are only a few drops in the bucket. To get the story out we need to communicate broadly, but how can we get that message out? I don't know.
Elle: That’s partly my problem to fix, as a journalist, to help get the word out, but I want to get it into business people's consciousness as well, because it shouldn't have to be a social movement. It should also be a business movement.
Fred: It should be all of the above. I think there needs to be more talk in the education sector starting at a very early age. But there needs to be a lot of thought given to what goes into curriculum and teaching about the economy in the United States in general, and that has become a very polarizing issue. It’s hard, but my personal view is that if we're going to get through the next century as a species with civilization intact, then cooperation is going to have to be a very important part of that. If we continue to compete as companies, individuals, nations, as we have been doing, then our prospects are a bit grim.
Elle: I’m curious about some of the problems you mentioned in the US. Some would say those are problems of democracy—that there are too many of us with too many versions of what we want to do and that’s why we can’t agree. So I'm curious, as someone who works at Mondragon, is it difficult finding consensus? I mean, you're dealing with democracy at a smaller scale than a giant country like the US, but what is democracy like within the company?
Fred: It's all perfect, and we have no problems.
Elle: I knew it!
Fred: No, no, of course it's full of all the challenges you can imagine. The difference is that most people, most of the time, still believe it’s a better arrangement for everyone involved, that our enterprises be cooperatives.
Democracy is complicated. It's full of disagreement and debate. Sometimes it's slow. It requires a lot of work. You can run a cooperative in a significantly cooperative way during work hours, but to really make it authentically participatory and democratic in a well-informed way, requires more time than just nine-to-five. Democracy is hard. It’s better for everyone in a dozen different ways—politically, economically, socially—but it’s hard. It takes a lot of work, period.
And today, here at Mondragon and certainly to a significant degree in the world, our culture's principal value is leisure. I mean, people generally say: ‘democracy is a value’, and I believe them, sure; ‘fairness is a value,’ yes; ‘work is value,’ yes. These things are true, but I believe they are secondary. Our dominant values as cultures are leisure, material wellbeing, and individualism, and that has almost as significant an effect in Mondragon as anywhere else.
So we have people here with competing values: People who think that an enterprise that offers democratic accountability and distributes profits broadly among everyone in the enterprise and in the community is a very good thing, but also people who might not want to work that hard outside of office hours to achieve it because they also value leisure, maybe more than workplace democracy. They value their own time and wellbeing.
This isn’t a bad thing, not at all. But there are downsides of our entertainment-oriented culture that I think we’re all familiar with, and one of these downsides relates to how the importance of entertainment in our culture detracts substantially from the importance of revitalizing and re-inventing democracy and pursuing it with energy and creativity in the economy, in business.
And there is agreement about the things that matter. People hate forced equality, but they also hate gross inequality that they think is undeserved and self-serving. I would guess that most frontline people in most companies, here and elsewhere, think the CEO should make more money than they do. A CEO has more responsibility, more education and experience, more headaches. How much more should the CEO make than the average worker? My guess is that most people might say 10 times or 20 times more, but I would bet that very few think the CEO should make 100 times more or 1,000 times more. They think it's gross. I think it's absurd, and unfair and abusive.
Elle: I agree. Is there still a lot of growth happening within Mondragon cooperatives? Are you still starting 10 new cooperatives a year like the company was at the beginning?
Fred: Yes and no, but mostly no. We just inaugurated a new project at the university which is a combination of technical assistance, business assistance, and incubator space for people who want to create new companies. It's a cut or two above a conventional business incubator or accelerator, and some new companies are created that way.
But most existing co-ops create new businesses inside their co-op. It's less expensive this way. There are many co-ops that are in mature industries and are looking to open businesses in emerging sectors so they can gradually transfer part of their workforce and their resources, or maybe most of them, to an emerging sector, and gradually leave the mature sector behind.
For example, environmental protection investments are going to be required to get to net zero and sustainability in the next decade, so new business units are being created within existing co-ops to do that. An auto parts co-op, as an illustration, created a unit to sell a substance that detoxifies contaminated soil. It might sound like that should be a totally separate company. I don’t know what has happened to it in recent years, if it’s still in the parent co-op, but it was created as a new business unit in an existing co-op that makes auto parts, not as a separate co-op.
It's also very expensive to create new manufacturing jobs anywhere in the West. It costs, on average, €300,000 or more per job here in the Basque Country. No one expects worker members to go create a new factory and shell out €300,000 per worker. But new activities can be created within existing co-ops using existing structures, knowledge, people, and all kinds of physical assets. It often makes creation of the new business much easier.
Elle: Is Mondragon as a company still growing and gaining new workers??
Fred: Again, yes and no. Most co-ops grow year-on-year most of the time. But Mondragon’s workforce also can decline because, from time to time, co-ops have left the system. Every co-op is a member of the Mondragon Corporation voluntarily and they can choose whether they want to be part of the Mondragon Corporation or not. The General Assembly of each co-op had to vote and say, “yes, we want to be part of Mondragon.”
Mondragon was created in the 50s, grew in the 60s, and there was always lots of discussion about how they would organize themselves. Then, in 1991 they said, ‘We need to reorganize. We're going to reorganize by industrial sector, and we're going to have some central bodies for governance and management.” Each co-op had to vote whether they wanted to be part of that new Mondragon structure or not. They had already been affiliated in one way or another and almost all of them decided to join, but at different points along the way some have left. They said, ‘We disagree with Mondragon about this, that, or the other thing, and so we're leaving.’
One of the most successful companies in Mondragon was a bus manufacturer who left Mondragon in 2008. It’s still a co-op, it’s still quite successful, but it left. And there's a group right next to the town of Mondragon called Ulma, with 8 or 9 cooperatives that were in Mondragon for years, then they were out for years, back in for years, and then, about 18 months ago, they decided they to leave again. So the number of workers affiliated with Mondragon might drop by several thousand workers overnight, even though co-ops as a whole are growing.
One key question is: How big is too big? American democracy consists of 335 million people and 535 people in Congress, how effective is that democracy? There's lots of debate you can have about that, but similarly, how many cooperatives should we have in this network? How big is too big for what Mondragon calls “intercooperation,” that is, cooperation among co-ops? The Ulma group says, “we have nine co-ops, 6,000 workers, and we have our own investment fund with tens of millions of euros, that's big enough. We don't need to be part of Mondragon. We have all the same values, all the same institutions, and so on.”
It is an important debate to have. How big is too big? Also, how small is too small for intercooperation? For co-ops to help each other out substantially, especially during hard times? If a co-op group is as big as Mondragon, are there creative ways to revitalize governance and intercooperation so that all its member co-ops identify strongly with the group? Key people here are thinking about these things.
Elle: “How big is too big” is a key question when it comes to democracy. Especially when we think about how many people we want involved in the decision-making process. At Mondragon, how involved are workers in the democracy?
Fred: Workers have a wide variety of interests and motivations. Generally, workers have a significant interest in whom they elect onto their Governing Council, which acts as a kind of board of directors who appoint the CEO. The degree they get involved in Governing Council decisions is highly varied and depends on what is happening in their co-op. Policies and practices that involve people in strategic or major decisions take a lot of time and preparation and facilitation. Some co-ops do it very well, some co-ops do it okay, and some top co-ops don't do it well at all. So there's a wide variety of how much cooperatives get their worker-members involved, and also how much workers want to be involved.
Most, I think, believe that democracy is vital—they want to have the structural right to vote on decisions they think are important. But at times, many leave a significant number of these decisions to “the experts.” Becoming informed well enough to participate authentically in a complex, technical decision is very difficult and often tedious. Many members do get involved, at least to some degree. They make an effort. Others make less of an effort or none. Many co-ops make significant efforts to bolster participation. Others make less of an effort. And these things change over time.
In addition to the Governing Council, there's also something called the Social Council which is elected by work area and tends to deal with more local issues to the work area. It is generally seen in the co-ops as the workers' voice. If the Governing Council is considering a major decision, they always check with the Social Council because they know that the Social Council has its finger on the pulse of what's going on broadly in the company, what people think and feel.
Elle: So workers can choose how active they want to be?
Fred: If you want to be active, you can certainly be active. If you are not interested, you can also just do your job. Some not insignificant percentage are barely involved at all now, even in day-to-day work decisions. Many are, but many others are not. It is a process that requires constant energy and creativity, and a thick skin on the part of leadership. All this while competing successfully in international markets that have none of these concerns at all.
But, again, the fact that there are democratic structures is crucial, even if people don't participate very much. One question we used to ask people all the time was: “If 40% of you don't go to the General Assembly, do you even care that our company is a cooperative?” They still say yes. Having the possibility to go to the General Assembly and say yes or no to something that's important to them is crucial. But not everything is important to them. And, again, while many co-ops invest a great deal in information-sharing, communication and pro-participation training—with varying degress of success—other co-ops invest less. And it evolves in both directions as the years go by.
Elle: So as long as the cooperative is running well, workers generally trust the people at the top to do their jobs. But if it’s not, they want to be able to vote?
Fred: If I, John Doe worker-member, trust the people on my governing council, particularly the president of the Governing Council, to ensure accountability, to ensure that there is real debate on the social implications of business decisions, to work closely with management, then the cooperative seems genuine and authentic to me. I think there is substantial underlying trust in leadership, but I also think it varies a lot from co-op to co-op and over time. Worker-members often do want to participate in the big decisions, or the decisions that are perceived as being big decisions to them. Otherwise, if an issue doesn’t affect their day-to-day, week-to-week work, then they are content to let managers and elected representatives make many decisions.
Elle: There is an internal debate about Mondragon subsidiaries—some of them are not cooperatives. How is Mondragon expanding the model in their subsidiaries outside the Basque Country?
Fred: It's very easy for critics and even myself here in the university environment, to say, “shouldn't we be trying to make these enterprises into co-ops or at least find ways to share ownership in them?” It's very easy to say, but it's very hard to do in… Brazil, Turkey, India, Slovakia. Different countries have different cultures and different legal and financial systems.
You can't just create a worker co-op in Mexico, for example, because there's no worker co-op legal structure in Mexican law, or there wasn’t until very recently, I’m not sure. And there are subsidiaries in China where the workforce turnover is 60% or 70% a year, not because the working conditions are horrible, but because people leave work for the Chinese New Year vacation and they find a similar job closer to their hometown, and so they don't come back. They don’t feel a sense of ownership in their work the way that many Mondragon worker-owners in the Basque Country do. Of course, the company has to make a serious and culturally very attuned effort to try to generate a sense of belonging, social cohesion, and a sense of co-ownership, but that is no easy task, especially under real competitive pressure in international markets.
That said, I still think it will be very important for Mondragon, for its co-ops, to figure out how to begin sharing ownership in a significant way with overseas subsidiaries in the next several years. Otherwise, problems will arise—it's going to become too socially incoherent. Many different scenarios are possible, but many think that some individual co-op in the group is just going to have to take the risk and figure out how to do it in an overseas subsidiary. Some governing council president and CEO will say, “we're going to show that this can be done.” And then they will have to develop a highly tuned campaign to inform and persuade the workforce in whatever country it might be. If one co-op takes the leap, I think it will be easier for others to follow.
Elle: I’m also curious about what it’s like to work at Mondragon in practice. Workers at Mondragon start out making the same entry-level pay as many corporations around the world, but as they move up in the organization and take on more responsibility, their pay raises don’t go up by as much as they do in other corporations. The highest-paid positions make only 6x the lowest paid positions. Is that a competitive disadvantage for attracting workers?
Fred: Well workers also get profit sharing. On average, a worker might earn a month or a month-and-a-half of their salary per year in profit sharing, though it varies a lot from year to year. But yes, senior managers at cooperatives tend to make significantly less than senior managers in conventional companies, particularly at the very top.
Have we lost people because of that? We have, but I don't think it's ever been a crisis in any particular company. I, John Doe worker-member, make a perfectly fine middle-class income. I don't need a third house or a big boat or whatever. I live in a community where friendships and social trust are greater than average, and my work is more satisfying because it's in this kind of environment. That is more than enough for many people. Sure, it’s a complicated issue, there is intense competition among companies for the best technical and creative talent, and pay is part of the picture, but I doubt it will be a crisis-level problem for Mondragon companies.
Elle: Ormaetxea said something similar in his biography. He said: “We live a simple life, just like everyone else in the towns and villages where we live. We have not lined our own pockets; all we have enriched is our experience and our memories. But we all have the great fortune of being good friends with the other people who live in these towns, whom José María Marixmendiarrieta called on to earn wellbeing in a solidary, not a solitary way.”
Fred: Absolutely. If I had grown up here, I would also have close friends from my hometown, which is very cool. I’m fairly close friends with people who grew up in my wife's hometown—my wife's group of childhood friends—but I'm closer to people at work than I am to people in the town where I live. I certainly spend much more time with them.
There’s this thing here called the “cuadrilla,” here. It’s basically a group of friends. Your first cuadrilla is the people you grew up with as a child, and most of those friendships remain significantly intact throughout a person's life. Then you have your “work cuadrilla,” or if you move to another place, you can have a cuadrilla in that town. Cuadrillas are this notion of cohesive friendship relationships. People get together frequently, do stuff together frequently. They are much stronger here than in my experience in the US.
Still, we do create more wellbeing for our workers than traditional companies. We have relatively low inequality, relatively greater collaborative work styles, and that leads to less stress and maybe even lower heart disease—though the statistics are complicated to do. In the regions where most Mondragon co-ops are located, crime is very low, poverty is very low, inequality is very low. We even started a study that began to look at cardiovascular disease, which, if you hold everything else constant, is related to stress. So if your work situation is systematically less stressful because it's a cooperative, then cardiovascular disease is going to be lower.
Elle: What were you comparing?
Fred: We compared census districts. There are something like 321 census districts in the Basque Country, and we took the census districts with the highest percentage of workers in cooperatives and compared their rates of heart disease to others. It gets really complicated regarding data collection and analysis, and it isn’t ready to be published in a public health journal, but there was enough data there to suggest that something is happening in that regard, and it makes perfect sense. If co-ops lead to less stress overall and there are many of them in a relatively small area, they will contribute to better public health.
Elle: I wanted to ask you about that. Is it less stressful to work at Mondragon cooperatives than at other companies? Because in the books that I read about the early days of Mondragon, everyone seemed to working crazy over time—Ormaetxea even called off his honeymoon to come back and help with the company. Maybe that’s because they were in startup mode and they were fighting to make their companies successful. Now, when I was writing my first essay about Mondragon, I couldn’t get ahold of my sources at Mondragon for a month and when they got back to me they said, “sorry, we were on vacation.” Even today as I research future articles, fact-checking and approvals don’t come back until months later.
Fred: That's widespread in southern Europe. It took me a couple of years to figure out that August is vacation for almost everyone. It’s changing somewhat, but it is very different from the US in that way. But stress, competitive pressure, will differ by sector and probably by company size. Many of the co-ops in the group are in really highly competitive sectors, international sectors, where stress is relatively high, whereas smaller companies whose competitors are more local or regional and might be less stressful to work in.
But if you compare while holding other things more or less constant—things like company size, sector, internationalization—I am convinced that working for a cooperative is less stressful overall. There is a lot of good data to support this idea. Still, many, many things affect stress in an organization and in a community; it’s hard to untangle all the factors that come into play and then draw a clear picture.
This is not to say that there is no stress, because while you have more rights in a cooperative you also have more responsibilities. You have a responsibility to inform yourself and to discuss these things with your coworkers and make sometimes difficult decisions. So it's not free of stress by any means, but overall, there are factors that generate more stress and there are factors that generate less stress and I think the factors that generate less stress tip the balance in our favor.
Elle: Does anybody work remotely?
Fred: Sure, people work remotely, but they're usually 30 miles from work. I mean, there are salespeople and technical people who are traveling all the time, and they may stay in Croatia or in India, wherever they happen to be working. But the bulk of people go to the same physical place almost every day.
Elle: Do you think that's important? Being part of the same geographic area?
Fred: Yes, social cohesion is just so so so important. There are lots of conventional businesses that take all kinds of measures to generate social cohesion and trust in the company, and it's one of the most powerful explanatory factors for good workplaces. Trust. I can trust my coworkers, my managers, they're going to do the right thing and they're reliable.
Elle: Do people get fired?
Fred: Rarely—not as often as they should be [laughs]. I think there's a lot of social discipline. The work ethic is strong. The pressure to collaborate is strong. One of the worst insults in Basque culture, in this part of the world, is “lazy.” That's an insult anywhere but a very strong work ethic is valued in the Basque Country. So you should do your job, and you should do it well. If you are not pulling your weight, you will notice it in how you are treated. In more extreme cases, you’ll be ostracized.
I don't pull as much of my weight as I should, but I'm not a total laggard. Social pressure will motivate me to contribute more than I would, more than I would want to, and I remain a member of a group in more or less good standing. They might say, “Fred doesn't contribute as much as he should, but you know, when push comes to shove, he's there.” But there are total laggards who never pull their weight, and they often feel social pressure and strong social criticism—often unspoken, but very real. The conversations will be superficial and edgy. They will not be invited to go have coffee or go out for beer after work, and so on. Cooperatives tend to create a culture where people are all expected to do their share.
Elle: Thank you so much, Fred!
This is a continuation of my exploration of Mondragon, the world’s largest group of worker cooperatives, as well as part of my research into a project I’m working on about the future of capitalism. I hope you enjoyed our conversation.
Thank you for reading,
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Elle, your series on Mondragón is feeding into my interest in alternative political communities — and in community models in general. Thank you, Fred, for your honest and knowledgeable answers. I’m reading the Wythes’ book Making Mondragón, and Mondragón is more inspiring to me for the honesty and detail with which Fred and the Wythes report about it.
I spent last year teaching at a public magnet school that involves students in project-based learning. When it went well, it was the best way to learn I’ve ever seen. Students were motivated and held each other accountable. The product was outstanding because it actually helped the greater community, not just the student, the classroom, or even the school. When it went poorly, my co-teachers and I could often trace it to the individualism and passivity in which our students’ earlier, traditional schooling had nurtured them.
So much of the challenge for Mondragón reminds me of last year at school. Democracy—unless we want to reduce it to mere voting—takes work. It also involves a willingness to find what Adams and Jefferson called public happiness — a joy in the debates and work that people do together. The tradition of republican virtue (Jefferson and earlier) looked askance at a polity’s excessive working and spending because it kept people away from a common public life. Aristotle thought the best democracies were ones in which people had time to participate in public functions, and in which the polity paid poor people to avoid their absence in public matters that would impoverish community life.
I just think Mondragon is on to something vital that challenges our priorities. It has certainly challenged my perception of what effective social work can be. Reading this series is like attending that speech Fred speaks of at the outset of the interview: it’s eyeopening.
Thanks for your comments, Bryce and Elle. ... If you're interested in more recent academic writing, let me know. ... I agree about what conventional schooling (and other institutions) inculcate in young people and our fellow citizens and co-workers... mostly (though not entirely) passivity and individualism at school, at work and in civil society, more active interest in entertainment and material comfort. ... Sometimes facilitated democractic practices and exercises (aware of these issues) can overcome them, sometimes not, as you observe, Bryce. Mondragon is both inspiring and sobering in this sense. The cooperative democratic structures (and intercooperating institutions) are crucial to an alternative to investor-driven capitalism, but they are not a guarantee. They create space, opportunities for egalitarian collaboration. ... Very interesting, your comments about "republican virtue" and finding satisfaction even joy in civic or cooperative spaces and activities. (Hopefully we can keep some of them from becoming toxic in today's media environment.) I recommend David Ellerman's (2021) "Neo-Abolitionism: Abolishing Human Rentals in Favor of Workplace Democracy". He is one of the leading contemporary thinkers (and practitioners) in this realm. I think I remember him writing about republican virtue over the years, among many other related topics. https://www.ellerman.org/ ... And Chris Mackin's "Defining employee ownership: four meanings and two models" (2024) Journal of Participation and Employee Ownership. I think it's open access. ... That speech by the Mondragon managers was, yes, very much a high point. If we want an economy based on democracy, human rights and sustainability, then that is how we have to structure organizations that provide goods and services. ... Many on the left talk about public ownership. While there is surely some role for it in a complex, diverse political economy, public ownership, well, in Ellerman-ian terms is when the State rents the workers instead of investors. To my mind, in general, not a good approach, especially if we are talking about republican virtue, membership (vs. "employment") and the assumption of rights and responsibility; participatory, human-scale democracy, collboration and social cohesion and the like. Thanks, again, Elle for getting this rolling.