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Changing America’s Corporate CultureSpencer Shick

PVS 101May 4, 2009

The American poor do not wish to be poor, searching for their next meal or place of

shelter. These people would quite obviously rather be living in a two-story house with every bill

paid on time, but for some Americans this cannot occur. Quite logically, most poor believe that

if they get a job and work hard, they will make enough money to lift themselves from poverty.

Do not most people believe the same thing? Getting a job and earning a wage will afford us the

opportunity to buy items necessary for a decent life…right? However, many people are

working, yet somehow they are still stuck in the doldrums of poverty. In twenty-first century

America, work does not always work! People who work hard and strive to provide an adequate

life for themselves and their family are not receiving enough income to meet their needs. The

low wages some American workers earn do not allow them to pay every bill on time, or buy new

shoes for their children when needed.

In The Working Poor, David Shipler describes the paycheck that one woman, Christie,

receives and tells how quickly her paltry wage disappears. “The eighth was payday, and her

entire $330 check disappeared in a flash. First, there was what she called a $3 “tax” to cash her

check, just one of several such fees for money orders and the like - a penalty for having no

checking account. Immediately, $172 went for rent, including a $10 late fee which she was

always charged because she never had enough to pay by the first of the month. Then, because it

was October and she had started to plan for Christmas, she paid $31.47 at a store for presents she

had put on layaway, another $10 for gasoline, $40 to buy shoes for her two kids, $5 for a pair of

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corduroy pants at a second hand shop, another $5 for a shirt, $10 for bell-bottom pants and $47

biweekly for car insurance. The $330 was gone.”1 Christie worked in a day care facility, taking

care of other people’s children, a very important job to society, yet her income of approximately

$600 per month was not enough to provide for herself and her children.2 Shipler tells many

stories of working people in similar situations all across America. He describes how these

peoples’ paychecks do not cover the necessities of life; much less leave any cash left over for fun

or recreational spending.

Christie and others in society making nearly $5 per hour, while laboring hard in the

American workforce, are struggling under the difficulties of very low wages. However, this

poverty takes place in a society in which some executives or higher paid employees make several

hundred times the amount of the lowest paid worker. This has created a huge disparity in income

between the upper and lower class which is only growing wider. This income disparity and the

accompanying very low quality of life for the poor are indicative of a flawed system. Surely a

system of economics and corporate practice that allows for and perpetuates extreme poverty is

fundamentally wrong in some ways. While Adam Smith’s invisible hand theory and classical

economics’ theory of incentives (which should control the market and spread wealth efficiently

and effectively) make sense in theory, in actuality this economic system does not provide for or

help the poor in any significant way. Therefore, something must be done to change the way in

which our economy operates and alter the corporate culture of America.

I will discuss different ways of operating societies, running businesses and compensating

workers that are already occurring around the globe. I will examine the Mondragon cooperative

1 David Shipler, The Working Poor (New York: Vintage Books, 2004), p.42.

2 Ibid.

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movement occurring in Spain and discuss the ways in which it contributes to a thriving

community, while also being a successful corporate economy. Secondly, I will discuss the

practices and philosophy of Bridgeway Capital Management, located in Houston, Texas, and the

unique way in which their pay system is structured. I will then make suggestions based on

elements from these two cultures that could be implemented in America, because in a society of

ever-increasing wealth in the face of obvious poverty, something must be done to increase the

quality of life for America’s working poor. Possibly, modern America can borrow elements of

other societies and companies to create a corporate structure and vision which affords an

adequate life for all its employees.

The Mondragon Movement

The Mondragon movement, which began in the Basque region of Spain, arose from the

highly industrialized workers of the Union Cerrajera steel mill of Mondragon. “From its

beginnings in the 1940’s as a training school for apprentices, the Mondragon cooperatives have

become the world’s most significant cooperative system and industrialized market economy.”3

Mondragon Corporacion Cooperativa, also known as MCC, is a system of cooperatively owned

and operated businesses which exist with a democratic structure.4 Mondragon is based on the

idea that business structure be shared among the cooperative group; each person has a stake in

the management and control of the company. The co-ops are owned by the workers and

operated in such a way that one worker receives one vote in making decisions no matter how

much of the capital owned. These entities are all operated under a cooperative entrepreneurial

3 Roy Morrison, We Build The Road as We Travel (Philadelphia: New Society Publishers, 1991), p. 2-3.

4 Francisco Forcadell. “Democracy, Cooperation and Business Success.” Journal of Business Ethics 56 (2005): p. 255.

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system which values the community’s growth as equal to, if not better than, the individual’s

prosperity.

The Mondragon Cooperative movement is based upon ten principles from which all

participants are to subscribe. “The principles are not legalisms or ideological statements, but an

articulation of cooperative and participatory values that have developed over the forty years of

the Mondragon experiment. The principles affirm the freedom and empowerment of working

people and at the same time provide limits.”5 The ten cooperative principles are exhaustive and

brilliant in their makeup, but I will highlight eight which I feel best serve to show the makeup of

Mondragon. These elements also show how a business (known as a co-op in Mondragon) and a

society can be run in order to value each human being and afford each worker an adequate

standard of living.

1. Open Admission: Mondragon is open to anyone who agrees to the basic principles of

the co-op, without discrimination based on ethnicity, religious or political beliefs or

gender.

2. Democratic organization: The system “is based upon the equality of owner-workers.

The cooperative is democratically controlled on the basis of one member, one vote.”

3. Self-Management: “Cooperation involves both collective effort and individual

responsibility.” Mondragon emphasizes the development of individuals along with,

not against, others. “Democratic control means participation in management and the

ongoing development of the skills needed for self-management.” Cooperators are to

5 Morrison, We Build, p. 10.

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be empowered and use their management skills to better the co-op and information

regarding the entirety of business operations is to be transparent.

4. Pay Solidarity: “The co-ops will practice both external and internal pay solidarity.

Internally, the total pay differential between the lowest- and the highest-paid member

shall not exceed a factor of one to six.”

5. Group cooperation: Mondragon is not isolated. Individual co-ops interact with each

other in groups; co-op groups interact with each other; Mondragon interacts with

other societies in the global marketplace.

6. Social Transformation: Since Mondragon is committed to a greater cooperative

mission, they have already transformed their society in many positive ways.

However, they do much more for the good of society than just offer fair wages to

workers and work for the overall good. Co-ops invest the major portion of their

operational profits back into the Basque community. This money is used in many

ways including new job development, a social security fund based on solidarity and

responsibility, developing language and culture and many other practices.

7. Universal Nature: “The co-ops proclaim their solidarity with all who labor for

economic democracy, peace, justice, human dignity and development in Europe and

elsewhere, particularly with the peoples of the Third World.”

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8. Education: Common to most societies, the Mondragon mindset is committed to

putting many resources and a firm emphasis on proper education and professional

training.6

When reading these principles, we notice elements that are present in America’s Western

Society. An emphasis on education, interaction with other societies, reinvesting locally, and to

some degree, an equality of opportunity are factors of American society that are also present in

the Mondragon movement. However, there are also immense differences between the principles

of the Mondragon worker cooperative movement and the principles of United States society. For

example, in American society, how often do we witness the development of the community

valued above the development of the individual? Where can we find a firm that will not let the

highest paid worker make more than six times that of the lowest paid worker? Which American

companies invest a large portion of their bottom line profits into the community instead of

paying them to wealthy stock-holders?

Overall, the Mondragon society is one that is vastly different than that of twenty-first

century America and the globalizing world. The main difference is the fact that the overall goal

of Mondragon is not to accumulate wealth. “The ten Mondragon cooperative principles are the

basis for substituting the values of enduring community development and stability for the

accumulation of wealth.”7 Mondragon bases their society on enduring prosperity for society as a

whole, not on selfish motives.

6 Ibid. p. 11-12.

7 Ibid., p. 65.

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In terms of operating the cooperative businesses, each worker theoretically receives one

vote, but most often decisions are made on a consensus-discussion basis rather than an explicit

vote. Cooperators get together and discuss the issue at hand and work through it until a

consensus is reached. Often, if the group is still divided at the end of discussions, the issue will

be changed or brought up at another time.8 The Mondragon Cooperative Corporation is made up

of three distinct parts: financial, industrial and distribution. There are also various educational

and training centers including the Mondragon Unibersitatea, Mondragon’s University.9 The

continuing theme that Mondragon is not solely money-focused is evident in their balance sheets

and financial statements. Besides economic and business statistics, balance sheets also include

measures of “customer satisfaction, commitment to the environment, and people satisfaction,

among others.”10

Some people may argue that elements of the Mondragon system just would not work well

or that Mondragon could not be successful both economically and in the business environment

globally. However, Mondragon is a very successful, continually growing economy which aptly

provides for its citizens. Mondragon began in the fifties out of a Spanish economy which was

growing greatly, however even as the Spanish economy has contracted, Mondragon has

continued to grow.11 From 1996 to 2002, MCC total assets almost doubled from 8908 to 15337

million Euros. Total investments nearly tripled, profits grew by 150 %, and the workforce more

than doubled. MCC growth and expansion has been very strong and looks to stay that way

8 Ibid., p. 72.

9 Forcadell, “Democracy, Cooperation and Business Success,” p. 256.

10 Ibid., p. 257

11 Morrison, We Build, p. 172.

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because of their stable workforce, reinvestment in the community and an emphasis on education.

To those who say that this model could not work in an increasingly global marketplace and

economy, in 2002, 51% of the Mondragon sales came from exports.12

Because the cooperative system is invested in creating new jobs, measuring employment

levels is generally a good measure of overall economic health. “Economic surpluses and

positive cash flows are usually translated into new jobs for new cooperators.”13 While

Mondragon does go through recessions just like every other economy of the world, recessions

mean a reduction in the number of jobs being created, rather than massive layoffs or business

closings. Due in part to its employment policies which provide great job security and

empowerment of workers, Mondragon’s success is beginning to gain world recognition. In

2003, MCC was ranked one of the ten best firms to work for in Europe, by Fortune magazine.

Several MCC companies have won ISO (International Organization for Standardization)

certificates which are awarded to the top firms around the world when considering quality

management in their products or services.14 ISO awards are very prestigious internationally and

for Mondragon companies to be winning these awards shows how successful the Mondragon

experiment has been.

Bridgeway Capital Management

In recent years, the media has given increased attention to the inflated salaries that many

corporate-level employees are making while sometimes the lowest paid workers in the company

12 Forcadell, “Democracy, Cooperation and Business Success,” p. 256.

13 Morrison, We Build, p. 172.

14 Forcadell, “Democracy, Cooperation and Business Success,” p. 256.

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are making several hundred times less than the CEO. Much talk has originated from this

increased attention, yet very little has been done to change the corporate pay structure policies.

One company, Bridgeway Capital Management, does operate in a more fair way. Bridgeway,

founded in 1993 by John Montgomery, is a very unique company. It is a financial firm which

operates out of Houston, Texas. Like many Americans, the CEO Montgomery recognized how

inflated the salaries of corporate individuals had become and decided to start and operate a

business that is focused on compensating its employees fairly and is committed to the

community.15

Therefore, when John Montgomery opened Bridgeway, he decided that no partner can

make more than seven times the lowest paid partner (this includes himself, as CEO). He has also

instituted an Employee Stock Option Program which further assists in fairly compensating his

employees. In addition to this unique pay structure, Bridgeway is an outward-focused company,

as opposed to being inward-focused, meaning that the overall goal is to help the community

more than the individual workers inside the company. To that end, Bridgeway also has a

foundation which gives away half of the company’s profits to the community and other causes

around the world. Their goal each year is to give away one-hundred million dollars, half of their

overall operating profit! Montgomery’s goal was to change the overall mindset of those who

work for Bridgeway. If top people want to make more money, then they must encourage and

help the lower-level people to be more productive. Then, if the overall company improves its’

bottom line, everyone in the company can make more, but more importantly, Bridgeway is able

to contribute more to the community.16

15 Michele Camp, Bridgeway Capital Management. Personal interview. 16 April, 2009.

16 Ibid.

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Montgomery noticed another dynamic created by the inflated top-end salaries: the lower-

ranking workers resent the corporate “bosses” because the lower-paid workers feel that they do

all the work while corporate bosses just oversee. This ill-will creates a bad work environment

which hinders progress of the company and limits worker morale. Because of this, Bridgeway is

a “flat” organization, which means that there are no direct bosses. Each employee is responsible

for holding each other accountable and big decisions are made by committees, not a small

number of high-ranking officials. These policies have helped to create a community-like work

environment which facilitates and encourages relationships and respect among workers. In

addition to the fair monetary aspect of Bridgeway, the work environment also makes everyone

feel valued, unlike many companies around the United States. Employees feel empowered

because they can make a difference in the operations of their company and they have a stake in

the success of the company through the stock option program. Employees also know that they

are an important asset to the success of the firm.17

The Bridgeway Foundation, in charge of giving away huge sums of money every year, is

also run by the employees of Bridgeway Capital Management. While the overall mission of the

foundation is to end genocide, Bridgeway also contributes to many other causes worldwide.

Every employee is on a committee of their choosing and together each committee makes

decisions in giving out money to their cause. The committees that exist are higher education,

lower education, our community, overseas projects, and genocide. Each committee has a budget

and meets monthly to decide how to spend their money and what causes to support. Overall,

17 Ibid.

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Bridgeway is a company which is focused on improving the community within which it operates

and the world, as well as providing fair compensation and a communal work environment.18

Changing America

Clearly, there is a huge problem occurring in America regarding the presence of poor

people who have jobs and work hard to make an adequate life for themselves. Their inability to

pay for necessities of life despite having a job should be a huge concern of the American public.

We must educate and find a way to get all of America to understand the problem at hand and

realize that we can change the current corporate culture. Often Americans get blinded by the

huge economic presence that capitalism has on our culture and focus too closely on the way our

current corporate structure operates. However, we must educate people to the fact that there are

alternatives to exploiting the labor of workers by only paying them $6. Americans must remove

the narrow vision that focuses them on our current practices so that much needed change can

occur. To begin to ameliorate the problem of the working poor in America, we must encourage

people to remove the element of greed from their minds and convince the public to focus more

on others. When this occurs, people will be willing to receive less in their pay check, and

businesses will be able to focus more on community and improving the livelihood of the

marginalized.

A change in the mindset of American citizens will be helped by increased exposure to the

Mondragon experiment and to Bridgeway Capital Management. The Mondragon Cooperative

movement that has occurred in Spain since the 1950s and the operations of Bridgeway Capital

Management which began in 1993 are examples of ways to operate an economy and a business

18 Ibid

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that are both successful and ethical in their treatment of people and the communities around

them. They have proved that it is possible and right to work in a fashion that provides for the

success of the company as well as the success of the community.

In looking for practical ways to change America, we start with elements of Mondragon.

Mondragon does not have goals of merely improving individual wealth, but rather improving the

overall good of society is paramount. “Cooperative entrepreneurship turns the motivation on its

head. Individual aspirations find full satisfaction, not in pursuit of profit, but through a

cooperative harmonized personal and social striving.”19 Most obviously, by implementing a pay

scale similar to that of the Mondragon cooperatives, we could greatly improve the lives of the

poor, low-wage workers. By bringing down the huge salaries of corporate executives and

bringing up the hourly wage earners, many could be lifted from poverty. Empirical studies

would have to be conducted to arrive at exactly what ratio should be used, but a movement away

from corporate wages that are hundreds of times greater than low wage workers would certainly

help. The element of open admission could greatly benefit America in that it would provide true

equality of opportunity in terms of being hired and treated fairly in the work place. Mondragon’s

open admission disallows any discrimination.

If American firms were to move more toward a democratic organizational structure,

meaning that each worker has an equal say, it would be much harder for companies to take

advantage of some people. A cooperative decision making system would arrive at better, more

equitable companies which are more likely to advocate justice for all. When those who have

been poor are given a voice in the American company, they will better know how to assist and

work for justice in this world. Finally, while some American companies do work for social 19 Morrison, We Build, p.109.

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justice and community gain, the MCC emphasis on social transformation is unparalleled. How

much would our community gain if every company contributed part of their bottom line profits

to community development? There is so much to learn from the extremely successful

Mondragon cooperative system. “The corporate culture of MCC has the aim of overcoming the

capital-labor confrontation, making people joint owners of the firm and therefore sharing in the

firm’s decision making as well as in the profits.”20 Implementing elements of Mondragon

Cooperative Corporation into America would greatly improve the way we interact economically.

America needs more corporate leadership like John Montgomery. Montgomery, the CEO

of Bridgeway Capital Management has envisioned and implemented a corporate culture that is

very similar to that of Mondragon and is worker-focused. Bridgeway’s “flat” organization,

coupled with its 7 to 1 pay ratio is an example for all businesses as an ethical way of running a

business while also being profitable. It is easy to see how empowering workers and encouraging

them in a Bridgeway-like environment would greatly improve the morale of workers, and

coupling that with Bridgeway’s pay structure is a great model for other American businesses. If

more companies adopted corporate culture similar to Bridgeway, many poor would be helped.

The most impressive aspect of Bridgeway, to me, is the generosity they employ in giving

away half of their yearly profits. These profits are not a paltry sum; Bridgeway aims to give

away 100 million dollars every year. If every company in America were to give away a portion

of their profits, not even necessarily fifty percent, the amount of money being put toward socially

just activities in the world would increase exponentially. When talking with Michele Camp, an

employee of Bridgeway, she noted that people do not work at Bridgeway to “get rich.” She

makes a more than an acceptable wage, but she will not become a millionaire working at 20 Forcadell, “Democracy, Cooperation and Business Success,” p. 257.

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Bridgeway. However, employees love their work environment and are very happy being able to

care for themselves while also contributing to society on a huge level.21

All of these ideas would serve to help eliminate the working poverty that is present in

American society today. The Mondragon movement in Spain and the Bridgeway corporate

practices show how socially conscious business and economic behavior can occur along side

being successful and making a profit. Poverty taking place among people working hard to make

a living does not have to occur and it should not occur. Changing the ways in which America

operates economically and corporately can and should be done, but it cannot occur unless the

mindset of many people changes. When American citizens see that there are other ways, such as

Mondragon and Bridgeway, to treat workers and stand up to the overwhelming dominance of

capitalism as we know it, the working poor in America will begin to see progress.

Works Cited

Camp/Bridgeway Capital Management, Michele. Personal interview. 16 Apr. 2009.

21 Camp, Interview.

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Forcadell, Francisco Javier. "Democracy, Cooperation and Business Success: The

     Case of Mondragon Corporacion Cooperativa." Journal of Business Ethics 56.3

     (2005): 255-274.

Morrison, Roy. We Build the Road as We Travel. Philadelphia: New Society

     Publishers, 1991.

Shipler, David K. The Working Poor. New York: Vintage Books, 2004.