The Mondragon Cooperatives
The Mondragon Cooperatives in Spain are famous throughout the world as the most successful worker owned firms. The Mondragon has over a hundred cooperatives with 20,000 members, producing refrigerators, washing machines, computerised machine tools, electronic components and automobile parts. The uniqueness of Mondragon lies in its ability to combine democratic control with business efficiency. It ensures continuous employment to its members. 45 percent of the profit is credited to the capital accounts of individual employees, which can be claimed only on retirement. One of the secrets of Mondragon’s success is that no firm is allowed to grow too big. When the size of the individual firm is kept small, there is greater scope for interaction and effective participation by ordinary workers
Omak Wood Products
Omak Wood Products, Washington is a successful employee owned company under ESOP. The employees have borrowed $ 50 million to pay for the buy out of business and to provide for working capital. They decided to set aside 10 percent of their wages until the debt is repaid. The company is performing well.
National Steel Corporation
The National Steel Corporation (NSC) of the USA was a sick unit. While buying shares in NSC the workers entered into an agreement with the company, which provided for the workers’ participation in management. The representatives of the workers and management of NSC meet monthly once regularly, to share information in the decision making process. As a result, NSC, once a losing company has become a producer of cheap and best quality steel products and prompt supplier in the market. Thus, the employees have saved their own fortune and also the fortune of the factory.
There was large scale closing down of coalmines owned by government in England and thousands of miners were retrenched. In the course of privatisation process, Tower Colliery, a prominent coal mine in England was taken over by its retrenched workers. 239 workers contributed $ 8000 each out of their retrenchment compensation and successfully bid reworking the mine again. The amount contributed by the workers was the lion’s share of the total amount needed. The mine is functioning remarkably well. The colliery has signed a $70 million contract to supply coal for another five years.
Precision Tool Production Ltd.
Videoton, the largest Hungarian electronic telecommunications State enterprise employing nearly 20,000 employees, was divided into 21 companies in the privatisation process. Precision Tool Production Ltd. is one among them. Its employees have contributed nearly 85 percent of the capital, from their savings and loans. After the transformation of the company, the employees spent their evenings or weekends working in the factory to meet the demand. Within one year, the employees not only paid back their loans but also were able to purchase the land and buildings and machinery, which were still owned by the state enterprise.
International Freight Transport Company
An international freight transport company of Hungary, formed under privatisation process, struggled to survive. So, the employees decided to start a new company. They contributed 50 percent of the initial capital and the remaining amount was contributed by the parent company. The employees participating in this plan were particularly motivated to preserve their jobs and improve the performance of the company. Their expectations and hard work were crowned with success; they were able to broaden their market share in spite of tough competition and general recession. Within one year, its employees owned 90 percent of the shares.
Chyne Agricultural Cooperative
This agricultural cooperative in Czech Republic has successfully been transformed into a joint stock company with 49 percent of its assets offered to employees in the form of shares. This made it possible to preserve the participatory principles of the cooperatives and motivate the workers.
In the privatisation process, the cooperative Agrokombinat Slusovice was transformed into a series of small and medium sized firms with workers’ share ownership and profit sharing. It led to improved efficiency and diversification of the bio technological and microelectronic production to meet the challenge of international competition. As a result, the firm has managed to attract most of the highly qualified workers.
Silesian Factory Kable
Silesian Factory Kable is a polish firm. Its decision to sell the shares to the employees at a 50 percent discount was quite successful, with 76 percent of the workers taking advantage of this opportunity. According to the management, this has improved the social climate within the firm as well as industrial relations in general, despite a slump in the polish electrochemical industry, which used to absorb Kable’s production.
As a conclusion to this section, illustrative data are provided on the scope and nature of financial participation in three Japanese companies in different sectors.
The company introduced an ESOP in November 1974. In August 1985, 34.8 percent of employees were participating in the plan. The average stake of participants is JPY 1.2 million. In 1984, the company paid the average employee JPY 0.517 million (2.65 months’ regular pay) as a summer bonus, and another JPY 0.548 (2.72 months’ regular pay) as a year-end bonus.
Hoya (Precision Engineering)
The company introduced an ESOP in October 1970. In March 1985, 47 percent of employees were participating in the plan. The average stake of participants is JPY 2 55 million. In 1974, the company (currently one of the top manufacturers of optical instruments in the world) introduced a profit sharing plan with the explicit objective of increasing productivity. Around 40-45 percent of the annual bonus is linked to profits. The bonus represents 6-7 months’ regular pay and is clearly above the industry average both in terms of cash and months of regular pay. Unions support the plan, and there is a very thorough Joint Consultation Committee, which meets once a month and has many ad hoc sub committees. Quarterly profit reports are provided to the Joint Consultation Committee.
The company introduced an ESOP in August 1969. In 1985, 67.6 percent of all employees were participating in the plan. The average stake of participants is JPY 2.36 million. In 1984 the bank paid the average employee JPY 0.915 million (3.25 months’ regular pay) as a summer bonus, and JPY 0.973 million (3.40 months’ regular pay) as a year-end bonus.