Department of Management Seminar: Professor Imanol Basterretxea, University of the Basque Country Failure sucks, but instructs: Lessons from the bankruptcy of world's largest worker cooperative and 'Coopexit'

The Mondragon Corporation is a federation of 92 cooperatives based in the Basque Country, Spain, employing approximately 70,500 people. Despite its long record of combining business success and democratic governance, recent business failures and the departure of four successful cooperatives from the group offer learning opportunities for other firms and federations.

We have devoted several years to understanding the reasons behind the collapse of Fagor Electrodomésticos, once the world's largest industrial worker cooperative and a flagship of the Mondragon Group. Drawing on in-depth qualitative case studies based on 45 interviews and extensive archival data, our research examines the HRM practices (Basterretxea et al., 2019), and governance and leadership issues (Basterretxea et al., 2022) that contributed to the firm's demise. We also analyse the advantages and limitations of flexicurity measures, wage, schedule and functional flexibility, as well as inter-cooperative relocations, in fostering resilience (Santos & Basterretxea., 2022). Together, these works offer a qualitative understanding of failure as a fertile ground for learning about organisational governance, participation and resilience.

The seminar will focus on how democratic principles and governance bodies can paradoxically inhibit difficult managerial decisions, creating what we describe as a ‘reverse dominance hierarchy' that hampers organisational responsiveness. The discussion also highlights the limits of business literacy and representational democracy in large, internationalized worker cooperatives and explores governance reforms that could strengthen both accountability and participation. Learnings can be valuable, not only for other cooperatives, but also for other organizations (for example, NGOs, universities, certain public institutions) that also rely heavily on employee participation in their governance bodies.

The seminar will also present emerging findings from ongoing research on inter-cooperative governance and Coopexit, the processes through which four highly successful cooperatives left Mondragon. These new insights extend the discussion from intra-firm to inter-firm governance, examining how solidarity, and intercooperation are negotiated when group governance systems generate problems of procedural, distributive and outcome justice.