3.2 Mondragon Cooperative Corporation (MCC), 3.2.6 Cooperative Policy – Compensation, (Re)Employment and Profit Distribution

Along with democratic governance, egalitarianism is important for cooperative philosophy and it is put into practice through a policy of remunerative solidarity, that is, a relatively compressed compensation scale from 6:1 (SMEs 4.5:1, financial institutions 9:1 or 70% of market). It limits the difference between executive positions and the lowest paid employees.

Also important cooperative policy concerns employment stability and lay-offs. A worker-member cannot be let go for motives related to the company’s economic performance and must be transferred to another coop. If not, they are paid 80% of their wages from Lagun Aro until such a transfer or return to work is possible.

Last but not least, distribution of profit begins with a worker-cooperativist`s internal cooperative account where the initial deposit made is not a year-end disbursed profit, but the cooperativist’s membership fee. In the MCC group this fee currently amounts to $16,000-$17,000 and can be deducted from the worker’s pay-check monthly and / or borrowed and repaid over several years if necessary. 25% of the membership fee is immediately transferred to the co-op’s collective reserve and cannot be recovered by the worker. There are in place schemes for solidarity in profit distribution as well as in loss distribution whenever losses happen. At the end of each fiscal year, after taxes, the co-op divides its surplus into three categories: 1) collective reserves, which amount to 45%; 2) distribution to worker-cooperativists, another 45%; and 3) donations to Non-Profit Organisations, the remaining 10%. Profits disbursed to cooperativists accumulate over the years in their personal internal accounts to which they do not have immediate access and for which they are paid by the co-operatives an annual interest of 7%. The accumulated savings are available to cooperativists only when they retire or leave MCC. These funds (a new concept of property as they are not individually nor collectively owned) can be used for venture capital purposes to finance new businesses of the group.

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