Mondragon corporative corporation(MCC)-vs- Malaysia Incorporated (MI): A comparative analysis of the Mondragon’s ten principles

Author: Iloka Benneth Chiemelie
Published: 27th December 2017

1.0 Introduction

Prior to any discussion, it is important to understand what a cooperative is all about as it serves as the main building block for this paper. Schmitter’s (1974) is one of the profound authors when it comes to discussion on what constitutes cooperativesand the author’s view is that a cooperative can be defined as “a system of interest representations that is used to define the constituent units organized into limited number of singular, compulsory, non-competitive, hierarchically ordered and functionally differentiated categories, licensed and/recognized (if not created) by the state and law, and also granted a form of deliberate representational monopoly in the context of its respective categories for exchange to observe certain controls on their selection of leaders and articulation of demands and support for the overall functioning of the unit (Schmitter, 1974: 93-94).”

The above definition is very compact and broad but it can further be broken down by putting into consideration the Williamson’s general model of corporatism. The understanding is that four characteristics are used to typify a corporate stated. They include the nature of the given state, the composition of the economy, the role of democracy and the nature of the firms in the corporate sated. The understanding is that the state has a principal and a dominant function that is used to establish and maintain an order in both the society and the economy, which must be compatible with an essentially market-based economy (Williamson, 1985: 10). The company involved in the cooperative maintains a sort of ownership that is predominantly based on private ownership as the means of production and wage labour (Williamson, 1985: 10). There is at least a circumscription that is used to tailor the role of liberal democratic institutions in the authoritative decision making process – but indeed, there might actually not be any existence of liberal institutions (Williamson, 1985: 10). The organization of products are used for the purpose of undertaking an intermediary role between the state and societal sector, but the task to perform not only the functions but also to open a regulatory agency on behalf of the state (Williamson, 1985: 10).

On its way to success, Mondragon has established ten principles that govern its business and have received worldwide acknowledgement for its businesses success that are based on these principles. From the bases of such understanding, this paper is designed to compare and contrast between these 10 principles and the principles obtainable in Malaysia Incorporated. The reason for choosing Malaysia incorporated is because it has a similar organizational structure with Mondragon and it is formed for a similar purpose, based on similar objectives.

2.0 The Mondragon’s ten business principles: a comparative review with Malaysia incorporated

2.1 Education of employees

Mondragon (2012) presented a review on its business principles that were first developed in 1987. The first of these principles is education. Mondragon cooperative made known that in order to implement its desired business objectives, it is important to dedicate a substantial amount of human and economic resources to different aspects of education as:

1.      Cooperative for all members that have been appointed into the management field;

2.      Professionals with special reference to members that have been appointed into the professional fields; and

3.      Young people in general with the view to promote the emergence of men and women cooperatives that are capable of consolidating and developing the individual experiences that can further be used for economic development.

Muhammad (1995) made known that the Malaysian Inc. is a concept developed for the purpose of bringing about a mutually satisfying relationship between the private and public sector that is based on shared values and a developed sense of common purpose as defined by the interdependence between the public and the private sector as the main components of single entity that is used to defined the whole Malaysian economic system. Muhammad (1995) made known that the sole purpose is to call for both public and private sectors to  re-define, conceptualize and put into operation new patters of thinking and behaviours that will help develop economic gains for both parties. The author also made known that successful implementation of the Malaysia Inc.’s concept is highly dependent on the ability of both sectors to create as well as maintain relationship that are based on the spirit of cooperation, mutual understanding and consensus.

From the above discussions, it can be seen that the two cooperatives are of the same view when it comes to education and training the employees. This principle sis defined by the ethical role of corporations on employees’ development with the view that companies need to reward employees for their commitment by helping advance their skills in their field of practices with necessary educations and trainings, of which the employees are also expected to use for the purpose of advancing their performance in the company (e.g., Hunt &Vitell, 1986; Leidtka, 1991; McDevitt, Giapponi, &Tromley, 2007; Ferrell & Gresham, 1985; Ferrell, &Fraedrich, 1989; Dubinsky &Loken, 1989).

In contrast anyways, the differences between the two cooperatives is that Mondragon is focused on educating the employees for its own personal growth as a company, while the focus of Malaysia Inc. is on educating all employees within the private sector in order to strike a better partnership with the public sector for the continued growth of the economy as a whole. These differences can be reflected on the understanding that Mondragon is private owned corporation while Malaysia Inc. is a government establishment.

2.2 Sovereignty of labour

Mondragon (2012) is of the view that labour is the main forces for transforming nature, society and human being beings, and it doesn’t offer a contract based employment, it grand labour the full sovereignty to operates on its own., considers labour to be the first and foremost recipient of the wealth generated by the company, and manifests its willingness for the purpose of extending job opportunities to all the members of the society.

Muhammad (1995) also made known that the sovereignty of labour is also the main factor for the establishment, which is designed to ensure that workers both in the private and public sectors are well compensated for their contribution in the economy. This view is in line with the ethics of reward based system in organizations in which is confirmed from past literatures that companies should always ensure that employees are dully rewarded for their commitments to the organization (Storey, 1987). It is considered ethical that employees be paid for their contributions to the generation of revenue and this has also been linked to increased motivation (Storey, 1987), which will mean a subsequent increase in the performance of the company for the future.

However, differences also exist in this case as the focus of Mondragon is on ensuring lifetime employment by not offering contract based employment, but the Malaysia Inc. concept doesn’t pledge this as the private sectors are still offered the necessary power to determine how their employees are employed with respect to either contract based, freelance or permanent job employments.

2.3 Instrumental and subordinated nature of capital

This is the third principle of the Mondragon’s business approach, and it is based on the understanding that capital is an instrument that is subordinated to labour, making it necessary for business developments and as such employees merit remuneration that is worthy of their commitment to organizational development and equal opportunity to earn such remunerations irrespective of cultural differences (Mondragon, 2012). The availability of capital is for the continued development of the cooperative and as such doesn’t hinder the open admission principles for more and talented staffs.

Although the concept developed by Malaysia Inc. is in line with the need for employees to be given equal opportunities for growth, rewarded for their performance and treated equally in organizations (Muhammad, 1995), the view is very much different with what is obtainable in the instrumental and subordinated nature of capital as discussed above. This is because the concept doesn’t highlight these views in any form, but leaves it for the respective organizations to decide on how their employees are rewarded as per their performance.  The main reason for these differences is because unlike Mondragon, Malaysian Inc. is not in control of all the units functioning under its system. Thus, while Mondragon can make a specific rule to govern all of its units, only certain rules will govern all the units under Malaysia Inc. with the organizations involved given the power to adopt other measures for their continued growth – which with differ with respect to how generated capitals are used for employees’ development and the approaches adopted in admitting new employees.

The ethical principle governing this behaviour is ethical egoism, which is of the view that people (in this case organizations – which are run by “people”) are programmed to undertake business process for their own self-interest (Reidenbach& Robin, 1990; Jones et al., 2007). Thus, the focus of the business with respect to how money are spent will be on understanding how such expense will ensure enhanced profitability to the business, and as such the management (in the case of private companies in the Malaysia Inc. concept) has the final say on how it wishes to spend its money and use it to develop its workforce.

This is best defined by the theory of solidarity, which is of the view that ethical decision making should be guided by equity, fairness and lack of impartiality (Granovetter, 1995). Thus, employees should be paid as they dully deserve and all the employees should be given equal opportunity to earn as high as possible.

3.4 Democratic organization

The democratic organization as exercised in Mondragon is that all the employees are equal in their right to knowledge, property and self-development. Thus, they are given the power to make decisions and present their own view through voting when it comes to deciding on the way forward (Mondragon, 2012).

This is also similar with what is obtainable in Malaysia Inc. concept as Muhammad (1995) made known that all participating companies are given the equal opportunity to voice out their opinions about any given issue as it relates to new changes and decisions that will affect their performance. Basically, the Malaysian concept is designed to enhance the understanding between private and public companies through a collaborative business approach that allows for equal access to information and knowledge, as well as equal opportunity for development.

In terms of understanding the ethical view surrounding this case, it has been described in literatures as utilitarian moral principles. The view is that an act can only be considered morally acceptable if it provides the greatest net benefits for the society as a whole (Bentham, 1789; Mill, 1957; Brandt, 1979; Rachels, 1999; Schumann, 2001). Thus, it is understood that people within any given system should be given equal opportunity when it comes to making decisions that reflects their personal interest and this is the only way that equality can be assured with respect to benefits as these people will conduct a vote structure to include the views of everybody in the decision making process. Basically, this is the exact same concept adopting in both Mondragon and Malaysia Inc. as discussed above.

4.5 Open admission

The view in this case is that the Mondragon experience is open to all men and women who understand the organization principles and are willing to abide by the settings provided in these principles. Thus, there shall be no discrimination whatsoever when it comes to admitting people into the system (Mondragon, 2012).

This is also the same thing in the Malaysia Inc. concept as membership is open to all private firms that desires to join. The government doesn’t lay down any distinctions with respect to certain requirements that must be provided – thus, allowing all firms that desires to participate in the program the needed opportunity to do so.

This principle is based on the right theory. In accordance with the right theory, human beings have some basic rights that must be respected in all decision making process as: the right to free consent, privacy, freedom of conscience, freedom of speed, and due process (Valentine and Fleischman, 2008; Velasquez, 1998). This approach is best reflected with the due process understanding as it is of the view that individuals should be given due considerations in terms of the opportunity to join the company.

3.6 Participation in management

In live with the democratic view of employees’ development, this principle as developed by Mondragon is of the view that employees should be given equal opportunity to participate in management and their membership should not be narrowed down only staff role. Mondragon (2012) made known that this will involve training employees on the necessary management skills and allow them to undertake certain management decisions especially when it relates to their job undertakings.

This is also in line with the Malaysian Inc. concept and it can actually be used to describe the main purpose of the formation. This is based on the understanding presented by Muhammad (1995) in which it was made known that this is the main principle governing the establishment of the Malaysian Inc. as it is designed to encourage workforce development through combined training and development programs designed for employees from both the private and public sector to work together.

In terms of ethical theories and principles, the best principle that defines this approach is the principle of care (Schumann, 2001; Jones et al., 2007). The principle is of the view that employees need to be well-taken care of by both the organization and fellow colleagues. This will entail training them with necessary skills needed for the advancing their job process.

3.7 Wage solidarity

Solidarity is defined as the principle approach in Mondragon and it is based on the understanding that there should be cohesion on wage allocation, in which the defined and approved remuneration for each employee is based on the employee’s level of performance (Mondragon, 2012). In any case, this is not defined in the Malaysian concept and as such it is different from the view the Malaysia Inc. intends to display. Malaysian Inc. is only committed towards corporation between the public and private sector for the development of the Malaysian economy as discussed earlier. Thus, it doesn’t define any wage view as to what employees should earn or how they should earn it, but instead leaves it for the company to determine how they pay their employees.

This principle is based on the right theory. In accordance with the right theory, human beings have some basic rights that must be respected in all decision making process as: the right to free consent, privacy, freedom of conscience, freedom of speed, and due process (Velasquez, 1998).

3.8 Inter-cooperation

In line with the settings defined by solidarity and equity as a means of gaining competitive advantage, there should be cooperation both within the system and with other cooperatives. This will help equip the employees with needed skills and expertise to undertake their job more perfectly and give them equal bargaining power with respect to rewards through an increase in performance. This is the exact same thing that the Malaysia Inc. is designed to do as discussed earlier – which is to encouraging information and knowledge sharing between then public and private sector for the development of the Malaysian economy. This is in line with the ethic principle of deontology, which is of the view that the goal of any business should be for the continued growth of the people insides – allowing equal opportunity for benefiting from social good wills (Ross, 1987; Ross and Nisbett, 1991).

3.9 Social transformation and universal nature

The view presented in this principle is that the goal of the company extends beyond its personal gain and the gain of the employees down to the society in which it operates in by pledging full commitment with respect to programs that are designed to enhance the social welfare of people and the cooperation of the economies of its operating state with that of other countries for a more sustainable global economy (Mondragon, 2012). Perfectly in line with the Malaysia Inc. as it can get, as Muhammad (1995) made known that the sole purpose of the establishment of for economic development of the Malaysian economy and integrating the economy with that of other countries in order to enhance its competitiveness across the world.

In terms of ethical theories and principles, the best principle that defines this approach is the principle of care (Schumann, 2001; Jones et al., 2007). The company is considered to be ethical only if it is conscious of the impact of its business activities on the society in which it operates, and takes extra care to ensure that the impact is always positive.

3.0 Conclusion

From this analysis, a number of discoveries have been made with respect to the ten principles adopted by Mondragon as compared with the operations of Malaysia Inc. The understanding in this case is that these principles revolves around business ethics that are designed to meet the interest of the stakeholders and puts these interests above the business interest. This is because the company ensure that employees are given equal opportunity in all aspects of the business process, management and rewards. This is very beneficial to the shareholders because it motivated the employees, increased knowledge sharing, reduces employees’ turnover and the overall effect is a subsequent increased in productivity and profitability.

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