The industrial revolution of the nineteenth country revolutionized the concept of corporations entirely. The means of production came in the hands of few people who controlled and everything. Meanwhile, the labor, which constituted the majority of every corporation, had no say in any decision-making. The rift started between these two Mondragon and Capitalist Corporation stakeholders as labor had a point that they worked hard while their masters earned most of the profit. Labour used to earn just minimal wages.
With the evolution of economic systems and corporations, the organizational structures of corporations became more complex. The shareholders brought multiple parties to the decision-making table, but they were few while working people were more in numbers. Still, they had no power. Another stakeholder was the government. Governments in some countries had left their corporations with complete freedom. In contrast, in other countries, governments tried to control corporations’ production and policies by influencing their decisions and introducing restrictions on them. The economic recession of 1921 occurred due to the mercantile economies where governments controlled everything and completely banned imports. (Cruz, 2017)
However, the working was still at the end of exploitation with more labor and fewer earnings. Karl Marx had already introduced the communist model according to which production must lie in the working class. That was a completely radical proposition. Although in some countries like Russia, the communist revolutions did succeed, further political advancements never let the Marxist model succeed. (George, 2012)
In Post-Keynesian World, corporations were given more freedom, and hence the concept of liberal democracies came into being. Afterward, we witnessed the long-lasting cold war between the communist model and the liberal model. Although the liberal model succeeded with the Russian Federation’s collapse, it still laid the corporate systems evolved in many countries. In countries like Scandinavian countries, the social, economic system model was introduced where governments restricted corporations from labor class exploitation. Governments in those countries also regulated the economic systems by influencing the policies. Differing political ideologies do influence the economy at the macro level. Still, they also influence corporates’ internal organizations by posing several ethical dilemmas for all the stakeholders, including investors, shareholders, management, and labor. (Pereira, 2012)
Typically, in any capitalist organization based on the liberal model, CEOs are the most powerful people in the hierarchy while having complete control from shareholders. In these types of corporations, smaller shareholders do not have any say in decision-making. Board of directors consisting of major shareholders and their installed management usually take all the important decisions. At the same time, the daily basis of decision-making is left for management and CEOs. In these organizations, the working class only gets a minimum share of earnings in terms of their wages. Management usually exploits labor by devoiding them of any decision-making freedom and putting them under stress by taking more work from them. In such organizations, usually less attention is paid towards society’s needs while focusing more on fulfilling the greed of the people sitting upper hierarchy.
Gradually the concept of corporate changed in many countries due to the increasing demands of ending labor exploitation. In social democratic models, although CEOs and major shareholders take the major chunk of the revenue, still the working class earns much better than the working class in a typical capitalist corporation. Also, the working conditions are much better in this system where workers get to have a say in decision-making and are entitled to with-pay-leaves. Not just that, but corporations are also responsible for covering their employees’ medical and not firing them without any appropriate procedures and reasons. Corporations in this model also pay more taxes and contribute more towards social responsibility programs to uplift society. (Dacin, 2011)
This essay will compare the ethical values in light of one typical capitalist organization’s business model with the democratic cooperative corporation named Mondragon. We have chosen the Engro group from Pakistan in the category of the capitalist corporation.
Engro group started their operations in Pakistan in 1968 with the production of Urea. Later on, they developed their operations in other sectors as well, like food. Engro is based on the typical capitalist model where just one group had the major share, and they control all the policies. There are other shareholders present, but they do not have much say in the decision-making and policies of the Engro. Although Pakistan is not a liberal country in economics, still due to poor governance, such corporations do not let government influence any of their policy. Furthermore, such corporations hold massive power to influence the country’s politics and country’s economic policies, the bureaucracy, and politicians. The same happens in the USA, where billionaire people influence the US election by backing the more liberal candidates through the powers of their money. (Engro, 2018)
When we talk about the ethical policies of the Engro, we need first to divide the stakeholders and then assess their policies.
No doubt management plays an important role in running any corporation. If they form successful policies, the corporations get to earn more profit like all the capitalist organizations; the important managerial positions are held by people who either belong to investor groups or installed. So, it can be safe to assume that policies in Engro are influenced by investors who control the means of production.
Shareholders are important part stakeholders of any organization, especially those which are listed in the stock market. However, these massive organizations’ shareholders do not hold any decision-making capacity unless they buy a significant amount of stocks. Only then can they sit to sit in the board of directors. Even then, the major power dynamics stay tilted towards the single major investor.
Government is also an important stakeholder. However, in third-world countries like Pakistan, governments do not possess much control over such capitalist bureaucratic organizations. These organizations do pay taxes, but it seems like peanuts in front of the total revenue. Whenever government tries to change economic policies which might hurt them, so they start blackmailing the government by using their influence.
Labour works as the backbone of any organization, but unfortunately, it receives the most exploitation. In the Engro group, lower management and workers have no say in the decision-making and policymaking. Upper management and HR have complete control over the hiring and firing of workers. So, this system is miles away from being a democratic one. Furthermore, the Engro group does not even seem to give the deserved amounts in pay to reward their employees. This is why the completion in Pakistan is so poor that only a few companies are present in these sectors, and they enjoy the monopoly by keeping the wages low in the sector. The job market is also really saturated, so management knows that nobody is getting them no matter how they exploit their labor.
Occasionally, Engro takes part in societal uplifting programs by donating to few charity organizations and sponsoring some events to uplift society. (Engro, 2018) (UK Essays, 2016)
Mondragon was an experimental corporation established by students in Spain in 1956 based on the inclusive model. This organization follows the cooperative, democratic model where they feel that they have some major ethical responsibilities towards all the stakeholders. Over the years, they have developed themselves as social democratic corporations where employees enjoy many of the rights that the capitalist system workers cannot even imagine. We’ll compare their ethical values about the stakeholders.
Mondragon management consists of representation from all the stakeholders where the main power lies in workers’ hands. Workers have the complete freedom to elect the leadership and management of the company. All the important decisions are taken in the form of a democratic system.
Mondragon emphasizes providing more benefits to their workers rather than shareholders. So, basically, they run the corporation on a societal model.
Mondragon pays regular taxes imposed by the government and cooperates in social welfare programs to coordinate with the government.
The working class is the more prominent class in Mondragon corporation, where they enjoy complete rights. They earn fair wages, and all kinds of exploitations are completely non-existing. No employee can be fired without any reason. Even the job openings are much more as compared to other organizations. Employees enjoy the rights such as paid leaves, medical coverages, and insurances.
Mondragon feels that social responsibility must be upheld. This is why they help society by creating employment opportunities and taking part in other social responsibility programs. (Mondragon, 2020)
In short, this business assignment has shown that Mondragon has burst the myth that corporations on cooperation and democratic model cannot work in the real world. Mondragon generates revenue from selling its products and providing platforms to entrepreneurs and initiating other innovative programs. It is recommended that more companies start cooperating on Mondragon’s model to curb the exploitation of workers.
Cruz, L., 2017. Next steps in organizing alternatives to capitalism: toward a relational research agenda. Dans Management, pp. 322-335.
Dacin, T., 2011. Social Entrepreneurship: A Critique and Future Directions. Organization Science.
Engro, 2018. Buziness Model. [Online]
Available at: https://www.engro.com/integratedreview2017/business-model.html
George, G., 2012. Innovation for Inclusive Growth: Towards a Theoretical Framework and a Research Agenda. Journal of Management Studies.
Mondragon, 2020. About Us. [Online]
Available at: https://www.mondragon-corporation.com/en/about-us/
Pereira, L. C., 2012. Five models of capitalism. Brazilian Journal of Political Economy.
UK Essays, 2016. Organizational Structure Of Engro Foods Marketing Essay. [Online]
Available at: https://www.ukessays.com/essays/marketing/organizational-structure-of-engro-foods-marketing-essay.php