January 10th, 2018
Comparison of Mondragon Cooperative Corporation and Microsoft
MCC is the standard example for effective organization through cooperative principles. Unlike capitalistic investor-owned firms such as Microsoft, cooperative firms such as MCC encourage participatory and democratic decision-making within the entity (Forcadell 2005). MCC comprises more than 100 distinct cooperatives and over 150 business, which have joined voluntarily to form a corporation that operates in more than 65 countries and employs more than 85,000 people (Forcadell 2005, p. 255; Devaro 2011). It operates in a democratic fashion with democracy in the organization being conceptualized as “one worker one vote regardless of the share of the capital owned” (Forcadell 2005, p. 255). It was started in 1956, and from its headquarters in Spain, the organization has grown to operate a multilevel network of training centers, finance services, retail businesses and production businesses (Devaro 2011).
To achieve efficiency with such multiple businesses, MCC developed a distinct model of management that integrates aspects of cooperative principles, and modern management practices (Forcadell 2005, p. 256). For instance, MCC has various governing bodies such as Congress, General Assembly, governing Council, and divisions that ensure effective coordination of activities throughout the corporation (Devaro 2011). However, unlike capitalist entities, such governing bodies are not based on the financial contribution and sharing framework (e.g. holding company vs. subsidiaries), but on an agreement among members to share areas of management necessary for effective coordination of operations (Fordacell 2005). Such a set-up implies that the cooperatives and established management systems are the owners of the corporation rather than the corporation owning them as would be the case of a parent company and its subsidiaries (Fordacell 2005). Additionally, absolute authority over the cooperative’s assets is vested in the members, who vote for their desired candidates to occupy the positions in the governing bodies or vie to be voted into such governing bodies (Devaro 2011).
Another core characteristic of the MCC is its concern for its employees. Employees are shareholders in the entity and get to share in the profit distributions in addition to receiving their regular salaries (Fordacell 2005). The arrangement to have employees as joint owners prevents capital-labor conflicts, which would occur in cases where the employee and shareholder interests conflict. Due to such an employee concern, the MCC has established a corporate culture that promotes values such as cooperation, commitment to management, social responsibility and fair distribution of wealth (Fordacell 2005, p. 257). Commitment arises since employees envisage that their work goes towards enhancing their outcomes since a better performance would better their share of the corporation’s profits.
Various significant differences thus exist between Microsoft and MCC. One of such differences for instance regards the issue of businesses that comprise the respective entities. While Microsoft controls component businesses based on the financial investment it has made on those businesses via acquisition (Microsoft Corporation 2011), in MCC the component businesses act independently with management being shared based on a voluntary agreement. Similarly, while in MCC, each member has equal voting rights, in Microsoft the voting rights are distributed according to the number of shares that one holds. In this respect, a minority group such as the founder members, who own substantial amounts of capital (Microsoft Corporation 2011), have a greater influence on the running of the business compared to minority shareholders (Rivlin 2011). Although Microsoft also offers its employees a chance to own the organization through the employee stock purchase plan (Microsoft Corporation 2011), individual employees lack the capacity to buy substantial amounts of stock to influence the decisions the entity enters into (Anil Hira 2008).
The cost-cutting approaches targeted at the labor providers in Microsoft also differentiate it from MCC. For instance, Microsoft has consistently shifted some of its operations to offshore low wage countries thus resulting into the loss of jobs (Terris 2005; Ferrel & Fraedrich 2011). On the contrary, MCC engages a multitude of individuals in the areas it conducts business thus helping in creating employment rather than eliminating them (Flessati 1982).
Despite such differences, some similarities can be noted between Microsoft and MCC. One of these is that both entities engage in significant social responsibility programs within the communities they conduct business in. Microsoft has for instance engaged in various philanthropic activities that for instance seek to enhance access to education facilities in some of its market (Microsoft Corporation 2011). Similarly, MCC engages in education promotion activities that better the labor supply in the regions it conducts business (Fordacell 2005; Flessati 1982). Go to part four here.