20 July 2010

Mondragon system for pensions

Does your worker co-operative have a pension scheme? Would you want one and what characteristics would you like it to have?  I did a briefing note for one of the worker co-operative council reps on; Mondragon and what it does for its worker co-operative members. 

I thought I would share this in a blog, so it doesn't languish on my computer:

When worker co-operatives were first started in Mondragon, the Spanish Government determined that their workers were self-employed. As a result workers did not qualify for unemployment insurance, social security or health care insurance.  In response Mondragon created their own insurance and social security service internally (Lagun-Aro1).  Retirement income for Mondragon  workers is therefore comprised of a combination of dividend-like interest and principal from individual capital accounts in their respective co-operatives.

Mondragon  re-invests its profits back into its worker co-operatives. In Mondragon from 30% to 50% of profits each year go into the Co-operatives indivisible reserve funds2. 10% donated to education, health and the community (mandated by Spanish Co-operative Law). The remaining profits are placed in individual members capital accounts, based on the number of hours worked and pay grade. 

Lagun-Aro provides social security for co-op members, including medical insurance, sickness and invalidity benefits, and pensions. Contributions from members are in part deducted from wages, the co-op paying the rest.   The staff are individual members while co-operatives are institutional members and elect representatives to its board.

As of December 2006, Lagun-Aro has: 29,858 active members, 62,173 beneficiaries (partners and children)
7,759 pensioners. Pays out: €135 million in benefits, €185 million in premiums and has €3,626 million in the Fondo Partimonal (Equity Fund) and €275 million Net Revenue (Figures here)

Funds from Lagun-Aro and the Spanish state (minimal) are combined and result in retirees being paid approximately 60% of the best 30 years of pay (adjusted for inflation) per year. A conservative estimate of mean worker pay is estimated to be $2,000 per month or $24,000 per year. Sixty percent (60%) of that pay amounts to $14,400 per year. (Figures from 2004)

2 Indivisible reserve fund: Arizmendi the founder of Mondragon learnt from historical mistakes made by early worker co-operatives (members lost control of the co-operative by selling stakes to outside investors). This is a very similar to our concept of common ownership whereby funds held in the indivisible reserve are not passed to members on the dissolution/sale of a co-operative, but to other co-operatives.  This fund also provides much needed liquid capital.

Info mainly from:
CWNF: The Worker Co-operative Movements in Italy, Mondragon and France  
Mondragon Co-operatives, by Manfred Davidmann
1956-2008 The MONDRAGON Co-operative Experiencie
US visit to Mondragon Blog
Wealth at Work: Employee Ownership and Responsible Accumulation

What options do we have in the UK?
If you know of any good ethical, co-operative pension solutions for worker co-operatives do share.

the Co-operative has what looks like a standard company pensions scheme.
Also spoke to a new pension trust aimed and SME businesses that had a stand at Co-operatives 2010

14 July 2010

American Study Visit:

On Tuesday 12th June members of the Co-operative Charitable Trust (founded by Bob Giel) visited Co-operatives UK.  John Butler did a fascinating presentation on consumer co-operatives and I was asked to talk about worker co-operatives.  So here are the highlights and some of the things I found out in return.

I started off with the headline figures for the Co-operative Economy and how worker co-operatives make up roughly 8% of the UK co-operative economy by number, but less than 0.5% when you look at their turnover.

The size of the UK worker co-operative sector is very small compared to our Spanish, Italian and French cousins (something I will go into in my next post or two). But we are comparable to the US in number, although they do have some worker co-operatives that are larger (one has 1500+ staff!).

Although the US Federation of Worker Co-operatives doesn't collect data to the same extent as Co-operatives UK they estimate there are over 300 democratic workplaces in the United States, employing over 3,500 people and generating over $400 million in annual revenues.

He is a break down of the worker co-operative economy for 2009 (please always send back your annual return to help us keep our data accurate).

Our US visitors were particularly interested in our Worker Co-operative Code of Governance and the flatter more collective management structure in the UK. I focused particularly on some of our larger worker co-operatives like Suma, Edinburgh Bicycle Co-operative and Dulas. To show the different structures, governance models and industry sectors.

I could only find the 5 largest American Worker Co-operatives, but it is interesting to compare and contrast them.  There largest (in turnover) is comparable to Suma and mostly similar industry/size to our co-operatives, when you think how much larger the US is. The big surprise is Bronx based homcare provider with 1500+ workers, far larger than any of our worker co-operatives. I understand our own Sunderland Homecare a UK employee owned business were inspired by them (Sunderland are not usually categorised as a worker co-operative though).

Defiantly worth a deeper look into their governance mode and business; particularly in light of the Conservative Governments interest in public service delivery through Co-operatives.

2005 Revenues
$38 million (£25mm)
$24 million
$22 million
$20 million
$10 million

I finished off with a graph to give a flavour of the industries worker co-operatives operate in. I organised them under the below categories (my own creation). In the future our members will be able to tag and categorise themselves in our new directory hopefully improving the number and depth of our data.

Most of these should be self-explanatory apart from "Creative Arts" that brings together all the music, art, theatre and craft based worker co-operatives.

If you are an American reader I would love any links of info on your larger worker co-operatives, and what makes them successful.  Please leave comments.